Jianggan Li: US-China Trade Chaos, Vietnam Caught in the Middle & Why Everyone’s Diversifying – E582
"One sentiment is people saying, 'Nah, there's nothing we can do, so might as well just spend some time playing cards, let's relax a little bit and just see what goes.' And some factories are saying, 'Okay, let's just pause for a while.' Some of them actually did pause, which is weird because for a long time many of them were telling me, 'Okay, they can't, they can't afford to pause.' And the second group of people, which I find really interesting, are sharing clips of the Korean War—because that was the first time the communist government of China managed to defend against a much more superior U.S. army in Korea. So they were putting all these clips from back then, saying, 'Yeah, we can eat the bitterness and this.' I have to say, it's funny that you mention that, because from the Chinese perspective, they thought they won the war—while I think most people in America believe they won the Korean War by defending South Korea against North Korea." - Jianggan Li, Founder of Momentum Works
"It's interesting that we're trying to make predictions, but what you potentially see is people form an opinion about a certain development, and they try to act on that opinion—then that forms a trend. One example is that every China e-commerce player was thinking about the U.S. market and thought it was too hard, but when Temu went in, everybody said, 'Okay, if they can go in, why can't I go in?' So now we see that as some of them are shut out of the U.S. markets, they’ll reassess the other markets in a more aggressive way. The question for many of them is still how can they build this? For selling goods, yes, for sure—they have the manufacturing leverage they can play. But for really building long-lasting business models and platforms in different countries, how do they work effectively with the local players? Selling goods is straightforward—you find local distributors or you pay the local tax, etc." - Jianggan Li, Founder of Momentum Works
"No, seriously, most people don't know what to do. I mean, it's just that—in early March, people were still pushing aggressively to relocate some of the manufacturing to Vietnam. So we brought a delegation of Chinese businesses to Ho Chi Minh City, and 50 of them showed up, which is a large group to manage. But a few days later, when that tariff on Vietnam was slapped on, people were just confused—'Mm, what should we do next?'" - Jianggan Li, Founder of Momentum Works
Jianggan Li, Founder of Momentum Works speaks with Jeremy Au to unpack how the US-China trade conflict is reshaping global manufacturing, trust in international trade, and Southeast Asia’s role in the crossfire. They explore why businesses are stuck in limbo, how Vietnam and Cambodia became unintended casualties, and what diversification looks like when no one trusts the rules anymore. The two dive into historical analogies, business strategy, and what Chinese multinationals might do next to weather the storm.
01:01 Tariffs surprised both sides and confused manufacturers: China and the US escalated their trade war with aggressive tariffs, leaving factories unsure whether to pause, relocate, or wait.
02:33 Vietnam and Cambodia were hit despite trying to stay neutral: US tariffs targeting Vietnam shocked businesses who had just begun shifting supply chains there, triggering rapid reassessments.
05:21 China prepared a response toolkit in advance: The central government had studied scenarios and released policies, stimulus packages, and papers to manage the impact without acting impulsively.
13:32 The bond market backlash exposed real risks: Rising interest rates from global uncertainty threaten America’s ability to maintain its debt-fueled spending, raising fears across both sides.
17:52 Diversification became a necessity, not a strategy: Both Chinese exporters and Southeast Asian governments are now exploring more trade partners, not relying solely on China or the US.
24:32 New markets are opening up for cross-border trade: With the US less predictable, Chinese firms are turning to Latin America, the Middle East, and Southeast Asia to grow exports and presence.
30:04 China’s domestic consumption still lags behind: Without boosting local confidence and spending, China’s manufacturing surplus will continue spilling into foreign markets and intensifying competition.
(01:01) Jeremy Au: So, a lot has happened over the past few weeks. I think we had liberation day, we had the tariffs, we had the China matching the tariffs, and now there's a tariff pause.
(01:12) So, lots of different things have happened. So, how are you thinking about all this?
(01:16) Jianggan Li: First, I'm trying recover from hangover because over the last like four weeks, I've been too, no, last six weeks, I've been to seven cities in China, plus Ho Chi Minh City, yeah, in Vietnam. So, obviously this is happening.
(01:27) Well, the whole world is watching these places and we read like the Financial Times, et cetera. Everyone's telling you about, 'okay, they've been speaking to the sellers, they've been speaking to businesses in China, how do they feel?' So, yeah, it's lots of information to unpack and lots of perspectives and lots of drinking as well.
(01:45) And we, we we're talking briefly before this, you were saying that, are this deliberating? Or are they sort of drawing their sorrows? I think, sentiment wise, I think most people don't know what to do. No, seriously. Most people don't know what to do. I mean, it's just, I think
(01:57) in early March and people still (02:00) pushing aggressively to relocate some of the manufacturing to Vietnam. And so, we brought dedication of Chinese businesses to Ho Chi Minh City. I mean, 50 of them showed up. So, which is a large group to manage. But the few days later, I think with that tariff on Vietnam was slapped on and people were just confused.
(02:15) Mm, what should we do next?
(02:17) Jeremy Au: I mean, I think first of all, it was totally unexpected, right? I mean, I think terrorists were expected. I think Vietnam was became some moves beforehand by dropping tariffs on American goods before liberation day. Yeah. But I think the scale was like, order to
(02:29) Jianggan Li: So people really got it by surprise.
(02:31) Yeah. So, what should they do? Vietnam, Cambodia? Yeah. And yeah. So, somehow it's interesting that when the Chinese government decided to, I wouldn't say retaliate, but sort of match up, right? So, I really see like two different sentiments. One, one sentiment is that people saying that, nah, there's nothing we can do.
(02:48) So, might as well just spend some time play cards. Let's relax a little bit. We see what goes and some factories are saying that, okay, let's just post for a while. It's actually solve them really post I, which is weird (03:00) because for a long time, and many of them telling me that, okay, they can't, they can't afford to pause.
(03:03) And the second is that, a second group of people which I find very really interesting that they, they're sharing sort of clips of the Korean war.
(03:13) Jeremy Au: Oh, the Korean war.
(03:14) Jianggan Li: Yeah. Because that was the first time that the communist government of China sort of managed to defend against like a much more superior US army.
(03:21) Yeah. In Korea, instead of them like putting all the clips from back then saying that, yeah, we can eat bit bitterness and we'll see through this.
(03:28) Jeremy Au: I have to say this, that it's funny that you say that, but from a Chinese perspective, they thought they won the war against. I think most people in America think that they won the Korean War by defending South Korea.
(03:40) Yeah. Against South Korea.
(03:41) Jianggan Li: So, people decided to take different narratives, right? Yeah. And, maybe that's how this current conflict or current trade will end, right? I mean, each party takes a narrative. And it tells story to the domestic audience. Their life carries on.
(03:53) I mean, that's what we hope.
(03:54) Jeremy Au: Yeah. No, I just find it funny that both sides claim victory.
(03:57) Jianggan Li: Yeah. Because at this juncture, you don't (04:00) see a clear way for either of them to back down without losing face.
(04:03) Jeremy Au: Yeah, it's definitely been an interesting set because adding Trump has raised tariffs several times, obviously. First, in his first administration.
(04:10) Now, second administration. And he's done it several years. And now, China has kind of retaliated with a matching mirror tit- for- tat mm equivalent tariff. Mm. And then Trump has this escalated further now to, I think it's targeting 125%, 145 now with the,
(04:27) Jianggan Li: with the 20%. Oh, okay. Sorry, I lost track of the number. But above certain number, it doesn't matter anymore.
(04:31) Yeah, because
(04:31) Jeremy Au: nobody has, I was just talking to my friend. Yeah. I was talking to the, there was a group of Swiss entrepreneurs who came to Singapore and was just having this conversation. Yeah. And I was saying like, if you are, imagine you are a manufacturer and somehow you're 50% net margin, which doesn't happen, but, which is very rare.
(04:47) Yeah. Very, very rare. And then if you have a hundred percent tariff, that means effectively, you have no more margin and you're losing money. Yeah. So effectively, a hundred percent tariff. By both sides effectively means that trade is (05:00) effectively loss making for any manufacturer for the, to trade of one another based on the current tariff levels.
(05:06) Jianggan Li: A few of them I spoke to, told me that, okay, they have no choice. They will raise the price. You either accept it or we stop the shipment. Yeah. So as simple as that. Yeah. So, I asked them, I mean, how do you think about for the long term? They said, we don't know.
(05:18) Jeremy Au: You can't think of long term when it changes every day.
(05:20) Right? Yeah.
(05:21) Jianggan Li: I think, I think for the Chinese government point of view, they are probably, ' cause knowing this, how, I mean, local governments are very different. Sometimes they do things on a whim. Yeah. And the central government within launch a policy, they usually have done quite a bit with study and predicted, not predicted, but sort of mapped out different scenarios and each scenario they, how they should respond.
(05:40) So by, I think by responding to Trump with retaliatory tariff, they have probably thought about different scenarios. They probably prepared some tools in a toolbox. I mean, whether it's something that, because remember last year, people were saying that, 'okay, Chinese government was not spending enough of their ammunition to save the market or to sort (06:00) of post domestic consumption.
(06:01) Back then, there was a saying that, okay, maybe there were preparing for something. Maybe that's the thing they're preparing for. I don't know.
(06:07) Jeremy Au: Yeah,. No, I think the tricky part about all of this is like the different layers, right? There's like the Chinese, like kind of like federal or the national government.
(06:16) Yeah. And there's the local governments. Yeah. And then there's the local factories and obviously there's Vietnam, and I would say Cambodia as well. Yeah. They're also part of this and to the side, but you know around there, right? And I think there's an interesting, I on Rubiks too, where everybody's trying to figure out you have a play of another.
(06:33) Maybe let's focus more on the Chinese national government because everybody's like reading the tea leaves and trying to figure out what he is thinking? Yeah. What is he doing? So, it sounds like one is that they have said that they want to do a stimulus package, right? Because of the support their exporters.
(06:48) So, I think that's one. Two, is that Xi Jinping is paying to visit Vietnam and Cambodia and Malaysia. And Malaysia, yeah. As part in about two weeks time. Yes. So, there's gonna be a big move. But I guess the (07:00) question that, but I, I feel like those are like, yeah, there's supposed to support. But I guess the big question is, what do you think his relationship with Donald Trump is gonna be?
(07:07) Is it, are they trying to like, like if Trump raises 120, 140%, will he match and then after that they will negotiate with each other and then bring it down. Like ,how do you think? Yeah. I think ,
(07:17) Jianggan Li: I think this kinda situation, both parties are willing to negotiate. But the question is that, I mean, how do you find a way that they can come down to the negotiation table without losing face?
(07:26) I mean, if you look at the situation in Europe with Russia and Ukraine, I think both parties want to negotiate. I mean, maybe it's not a like yeah, like a good, good sort of parallel but the both parties want to negotiate. But their starting positions are probably very different, right? And if one party shows sort of weakness, right?
(07:42) It sends a very long signal to the other party, right? Yeah. So, the question is then now how, how this is going to play out
(07:48) ? I do think that if you look at some of the narrative from some stakeholders in the US they were saying that. So, I think some advisor Trump was saying that they have successfully sort of isolated China because other people try to negotiate with the US (08:00) and China's not, et cetera, et cetera.
(08:01) But quite often, I think when all this like, uh, like extreme words are, and I do believe that things has have a possibility of settling quickly, but they might not because there are things which are beyond each party's control, right? Yeah. I don't remember many years ago when
(08:19) Didi and Uber,
(08:20) Jeremy Au: Mm.
(08:20) Jianggan Li: like two weeks before the, their merger in the Chinese market. Mm. And both party, I mean, both parties are, rushing up their, they, there were war of words, like each party say, ah, we are winning and we're gonna spend more, et cetera, et cetera, et cetera. But when that happened, they were actually negotiating a deal.
(08:37) It's just on outside. You need to have a better position to get more from a deal.
(08:41) Jeremy Au: Yeah, exactly.
(08:42) Jianggan Li: Yeah. Yeah. Same, same for the Korean War.
(08:44) Jeremy Au: Yeah.
(08:44) Jianggan Li: They spend so many years and each time when they're close to get a deal and there are like aggressive ministry movements.
(08:50) Jeremy Au: Yeah, yeah, yeah.
(08:51) Yeah. So, I think there's the public phase where obviously it's happening on true social, Yes, on Twitter slash X, right? You know? Yeah. (09:00) All
(09:00) Jianggan Li: media,
(09:01) Jeremy Au: All media. I think so Trump is, it's fair that he has said that he wants to negotiate with China. He sees this as part of the deal making process. I think that's relatively clear.
(09:11) I think the issue is that for people, China feels more opaque because, and so everybody's reading and Yes. Yes. China, everybody's trying to interpret like, yeah. And, and you're like, I, I was like reading the news and I was like, is this. Like how many layers of translation did happen already? Is this really signed off by Xi Jinping?
(09:29) 'Cause I know recently they also, they released another research report that was by the, a Chinese ministry that was analyzing trade flows. And what it was, I think it was a good paper actually, was that, and it was written in English. Yeah. And what I was saying was that although, China sells more goods to America, so there's a trade deficit in goods.
(09:46) Yeah. Yeah. But America does sell more services to China. Then China sell services to America. So, there's a services surplus and obviously there's still an overall. Yeah. If you look, net it out, America buys more from (10:00) China than China buys from America. But the auto magnitude is much smaller once you include services as part of it.
(10:06) So, I thought it was a interesting analysis that was done by the Chinese, economists. Yeah. And they wrote it in English. Yeah. So, I thought it was a, good ammunition for all of us in the space to kind of like look at. Some of the factual numbers, but I'm just kind of curious, like, you know.
(10:23) Jianggan Li: Yeah, I, I think a couple of things. First, that paper you, you referred to Yeah. I mean, it was not compiled overnight, right? Yeah. Even though that only have deep seek, we can't compile that paper overnight and get signed off by all the people. So Yeah. So, that was probably one of the toolbox, one of the tools in toolbox, yeah.
(10:35) For them to use in certain situations. And, uh. And overall, I think you probably know that China benefited a lot from the last 20 years and two years, or two or 24, I mean years of WTO membership of global trade of current order. So I think they have, a lot of incentive to, to maintain a current order.
(10:53) I think for the, for the top US companies, they probably benefited as well. Yeah. So they have the incentive to maintain that as well. (11:00) So, if you look from that lens, I think the interests are, are sort of more aligned. The interest of the Chinese government and the interest of American corporates.
(11:06) And, the question is that, the question is that who is really Trump's enemy? What, what is he really going against?
(11:13) Jeremy Au: Well, lots of questions. Right? Well, I think some people are saying that he's pushing to focus on the American swing voter, which is, the rust belt, the people who are doing manufacturing blue collar jobs.
(11:26) But he probably knows
(11:27) Jianggan Li: that blue collar jobs will not come back or rather, I mean, you would take him, I don't know, six, seven years of extreme pain to bring them back. And, by the time there will already be another election, so probably can't think that long term.
(11:39) So I'm just curious. I've seen different interpretations. Yeah. The truth is, I don't know. I've seen interpretations of, uh, a way to reduce the debt, which I think judging from what happened with the, with the bond market it has been going the, the opposite direction. Yeah. And, there's also a interpretation of Trump being religious about reducing the deficit.
(11:59) So (12:00) that could be his reason. But I don't know. I mean, we're not close to pumping up to understand what's going in his mind. And we know that, I think some of his advisors are not accusing each other of certain things. I don't know.
(12:11) Jeremy Au: I think for me, I think Trump comes across as more agile.
(12:14) So, I would say that he, when you read about how he works with his team, he tends to like to have many different people in the room. Yeah. Yeah. And he likes the different voices. Yeah. And he doesn't mind changing his mind based on what people are telling him. So, he likes that, classic people is like, yeah.
(12:28) And then they all disagree with one another, and then he listens to everybody and then he makes a decision. So, I think it's more of that kind of yeah, a little bit more collaborative as within his inner circle. So, I think there's not necessarily an animating philosophy. I think it just comes across to me as like, it's more like, okay, today is what happened, therefore we'll do this tomorrow.
(12:46) Oh, maybe more like, this is what happened yesterday and this I'm gonna do today, right? So, I think it's, it's a little bit more like I would say like iterative as a process. Yeah.
(12:55) Jianggan Li: That was a long time ago. I had lunch chat with some businessman who spent a lot of (13:00) years of hardship in the mall era.
(13:01) Mm. And then afterwards he built a successful business and he was telling me something which I don't necessarily agree even to this day. And he was saying that we run a business, you always make sure that there's conflict amongst the one or two layers below you. I said, why do you do that?
(13:16) He said, to make sure that I always get the right message because if, if there's no conflict, so people might just do whatever I like or whatever they perceive that I like. So, I'm not sure whether that applies to Trump as well, but I don't know. I mean, it's sort of, I dunno, I mean, liberation day, the whole entire thing for me is counterintuitive.
(13:32) Jeremy Au: Yeah, I would say that I think the bond markets and the interest rates going up was backfired, right? So, maybe I'll just kind of like explain it for the benefit of both of us and again, get a sense of it. Right. But I think the big issue we have is that in America, they spend more than they earn in terms of tax revenue, right?
(13:49) Yeah. And so, the way they solve that in the short term is they borrow money, right? Yeah. And that borrow money is based on the bonds market. Mm. And. Those interest rates was pretty low. Mm. And so as a (14:00) result, the amount of repay was pretty low. Mm. And so it made it allow them to continue spending more than they earn from taxes.
(14:06) Mm. But of course now the bond market's starting to seize up. Mm. Because of all of this uncertainty and so forth. Interest rates doesn't go up. Mm. And so the expected interest payments are gonna go up. Yeah. Which makes it harder for them to keep that deficit. Mm. And so it makes the math harder for everybody.
(14:21) So nobody wants that. I think both Republicans and Democrats, if they can agree on one thing, is that they'll want lower interest rates on the bond market, right? And I think that he has gone up because of all risk uncertainty. So, I was reading on X and I think it was interesting but there was people speculating on Twitter
(14:38) about, uh, is China dumping treasuries? Is this China part of the reason? I don't know. So,
(14:44) Jianggan Li: I think the speculation I read was more of the Japanese doing that ' cause there was lots of treasuries as well. Yeah.
(14:49) Jeremy Au: So, no, I think it, I think it's funny because, I believe Joe Lonsdale was like, Hey, is the tides doing this?
(14:54) Question mark. I mean, it's a fair question to ask. Yeah. And then now you're saying maybe it's the Japanese, I guess you asked the (15:00) Japanese maybe they think, the us the hedge funds are doing it, so everybody's, I mean, it could be everybody, right?
(15:05) Jianggan Li: Oh yeah. But China and Japanese hold a lot, right?
(15:07) Yeah. So, even if they like offload a small percentage that impacts the prices quite a lot. So, but yeah. But that sort of gives you something about reality, right? I mean, things are changing fast and you don't know which direction things are changing towards and the things that you think would be sort of very relief and whatever can get reversed the next day.
(15:27) Yeah. And that's what I don't know. I mean, as business people that we kind of hate, right? You can't predict, I mean, of course you can say that we can profit from, I don't know, uncertainty. But the truth is that, I mean, how do you do that when things are so uncertain? When things reverse so fast?
(15:42) Jeremy Au: Yeah. I mean, I think that's the tricky part, right? I mean, even for us, as we are processing our feelings, fast is gonna take us, one week while podcasting come out. Yeah. But then, things have changed by then, right? Yeah. Yeah. So I think it's a very fluid situation.
(15:54) Jianggan Li: We did a vote about, I mean, we publish a vote on research channel and, asking people, I mean, (16:00) specifically about, about tariffs imposed on Vietnam. That was before the Post. Yeah. And to, I was surprised like more than 2000 people voted on that vote. Yeah. And most people are saying, I think the predominant ,no, I mean, there's no predominant but
(16:13) about 34, 35% of the people said, let's wait and see. Maybe we'll get reversed. Yeah. The next week. Yeah. And 25% of the people are saying that, oh, it doesn't matter where we're go now, Trump or Stan, not kind of like, sort of lifelight and give up kind of attitude. Yeah. But, yeah, so I don't know.
(16:30) I mean, th this, this is what, what I often say to people nowadays, and people ask me what, what I think about this, what I think about that. I said, okay, I mean, if, if this may go this way, this is what we potentially do, but how will things go? I don't know.
(16:41) Jeremy Au: Yeah. I get it. I guess maybe one question I have Yeah.
(16:45) Is when you think about all of this, obviously, there's a lot of movement in the short term, but like if you were to make a prediction in one year's time, and obviously. Yeah, we could be horribly wrong, right? Yeah. But I'm just saying like, what do you think is gonna happen? So just so my (17:00) guess, I mean, I'll just toss it out, right?
(17:01) My guess is in one year, Trump and China make a deal. And there's some deal on services, there's some deal on goods. And everybody will continue having a China plus one strategy. Because you never know that this deal may not last. Yeah. And so there will continue to be the rise of Chinese multinational corporations that will expand factories in Southeast Asian.
(17:23) I dunno, Latin or America or wherever it is. And then also I expect Southeast Asia to strike deals with America as well. I, so I think, do you think about that?
(17:31) Jianggan Li: I think the Spanish just now is that, I mean we, we did speak with some government. Players of a few countries, in, in the last few weeks.
(17:40) But the problem is now is that you don't know what to trust, right? Mm. I mean, you can't trust that the sort of the established order the institutions will prevent all these aggressive tactics from happening. So what do we do in the meantime? Diversify, right? I mean, most people, we, I mean from sort of a point of influence that we have spoken to are saying that and (18:00) can't rely on any of the parties and we have to sort of diversify.
(18:02) We have to find ways, we have to, I reach out to more people. Even some exporters we we're talking to, we spoke with quite a few in Vietnam, last two weeks, and they were saying that, we, I mean we try to benefit or do business with both China and the US and we can't rely on any of them.
(18:18) Either of them. So, I think most countries will try to cut that middle ground. Yeah. And, and I think China and the US will continue to continue sort of rally support. Yeah. And so I would think that most countries will play along with either party. Yeah. But, without throwing the full weight, I mean, look at the response from Canada to the US, It's, I mean, of course there's election coming, but, it's quite forceful.
(18:39) Yeah. Yeah. Quite aggressive.
(18:40) Jeremy Au: So, let's talk about that. When you say diversify, it is very generic, right? So, I think one thing obviously I agree with is that if I was an American company, I would diversify away from China as a supplier. Yeah. Because of the potential for more tariffs.
(18:54) But I think you are also meaning something else for diversify. What does it mean for Chinese exporters? What does it mean for them to (19:00) diversify? And what does it mean for, for example, a country like Vietnam or Cambodia to diversify?
(19:05) Jianggan Li: I think, so if you look at, I mean traditionally, I think people in China, so businesses in China, export oriented business, BET commerce, BET sort of, contract manufacturers.
(19:12) They have the belief that the US is the largest market and is, I mean, whichever order they receive from the US is usually the largest for cross border eCommerce. It's the most lucrative. And we think about the effort that you have to explore different markets if you really want to do well in multiple markets.
(19:28) It require a lot more thinking, a lot more sort of navigation, a lot more sort of going through the different rules, different regulations and stuff. And, aside from your top players, it's actually quite hard. I mean, if you own a business, you have like, I don't know, 200 people doing manufacturing traditionally.
(19:42) So, selling to two large customers in the US and when I ask you to diversify. It's hard. But many of them making an effort. Right. So, among the 50 people who went with US to Vietnam, a few of them saying that I don't have anything tangible that I'm doing, but I know I need to diversify.
(19:57) Gotcha. So, I mean, let's, let me (20:00) talk to the business there to see what they think and what we can potentially do. I don't know what we can do, when we talk to the, I thought the businesses in Vietnam, it's interesting. So they acknowledge that, in certain areas like consumer electronics, there's no way that, they can build an industry that's as competitive as China.
(20:15) But, but they think that there are many other industries that, they should, find more to export to China more. So we, we actually went to visit a bird nest farm.
(20:24) Jeremy Au: Oh, a business. Yeah, business
(20:26) Jianggan Li: farm and in part of Homan City that's covered by mangrove. So, so, so, so basically they build houses in the village nearby and the birds will eat in the mangrove forest and, and then come back and they're saying that, okay, I mean, this is, this is the product which we believe are better than the ones you source in Malaysia.
(20:42) Right. But how do we get the brand name out? How do we sell more to China? So, interesting. So, these are the things that they are. And there are also business movements and it's interesting, we talk to individual businesses that they find ways to navigate that sometimes with the solutions that you don't predict, right?
(20:55) Mm. Yeah.
(20:56) Jeremy Au: No, it's interesting because when you look at a country like Vietnam, I think it's, that (21:00) was more of the, one of the more unexpected areas, right? Obviously, we didn't expect Trump and China terrorists to go to a hundred. Yes. Yeah. Percent. So that's one. But other part I think people were surprised by was that Vietnam.
(21:10) Cambodia were impacted so heavily to such a high percentage. Also, ED allows that, dynamic. Also, I think in Malaysia, Indonesia also got very high, around 20 to 30 plus percent as well of tariffs as well. So, I think the whole Southeast Asia, excluding Singapore, Singapore was at the lowest 10%. Yeah, 10%.
(21:27) But of course, we have acknowledged that s Singapore and China, Singapore have acknowledge that Singapore and US have a free agreement. So taking place zero to zero. Yeah. And Singapore buys more from America than America buys from Singapore. Anyway, so let's put this, let's put Singapore aside. So Singapore is like, anyway, yeah.
(21:43) So, okay. It's not great for Singapore, but let's, but I think all these countries all kind of like really got hammered I think by. I think Singapore's expecting a tariff. Yeah. But they were not expecting 10%, but still it's not that, yeah, a 10% is like doable. But I think 20, 30, 40% was (22:00) as way high as a starting position.
(22:01) For the negotiation. I guess when you think about it, do you think like maybe Vietnam is like taking themself, like this is just a negotiating, I think to start and then we negotiate down to 20%? I don't know. I, I dunno what the,
(22:13) Jianggan Li: I I do think they're negotiating, right? So, yeah. So I think, very shortly after announcement, yeah.
(22:18) The General Secretary of the Go is part of Vietnam, Mr. To Lam had a call with Trump. Yeah. I do think that, sort of some positions were traded during that call and, and I think I. I think, I mean, if I were decision maker, I would probably do both, right? I would probably, I mean, first I would try to negotiate.
(22:33) Yeah. And second that, okay, I'll try to diversify because yeah. Because we know that, this came out of nowhere and now becomes a sort of asking position that you need to negotiate, negotiate done, even though you might reach a deal. But would the other party have your full trust afterwards? I'd thought so.
(22:47) Jeremy Au: Yeah. I, I think that's actually the crux of it actually. Yeah. Which is, I think that if you look at it from a deal perspective, yeah. Very important to have an, what they call price anchor, right? So you anchor a very aggressive position so that. When you ne (23:00) then you're just negotiating down from that starting position, right?
(23:02) And then you get a better position than if you, you know. But of course, I think the problem I said is that there's a breaking of trust if the is too aggressive. And I think that's what the sensation I'm getting from a lot of people Yeah. In the region is like, like I think everybody was willing to negotiate with America.
(23:15) Jianggan Li: Yeah. I mean that's a, that's a practical, point, right? You have to negotiate because what's the alternative, right? Yeah. But, uh. But aside from negotiation, you're probably trying something else to, to reduce the risk. Correct. Moving. Correct. And so I think
(23:26) Jeremy Au: in the short term, I think, I think this move does get the current Republican administration what they want.
(23:32) Mm. Which is. Probably a better deal, I think, on average than if they had come in maybe even more. I don't know. I'm just trying to imagine how, if Mitt Romney or John McCain tried to do the same Yeah. Move and the same policy belief, they probably would've done it in a different way. Yeah. And so maybe then the deal that is currently positioned would probably be better for America.
(23:52) I think on the, but I do think that, like you said, I think the problem is that I think an element of trust has been broken. And I think once that's broken, I think that's. Hard to (24:00) repair.
(24:00) Jianggan Li: I mean, you would have relationship that, which on the surface is more cordal, if there's no underlying trust, I mean, I don't know.
(24:06) I think it would be very different compared to, I mean, the system that we have seen Yeah. In the past few decades. Right?
(24:11) Jeremy Au: Yeah. So I think it's interesting 'cause you say like Vietnam is diversifying, one way to diversify is instead of selling. More to the US they would sell more to China.
(24:20) They also probably partner more of Singapore.
(24:22) Jianggan Li: Yeah. I mean for the agricultural products. They wanna sell more to Thailand, they wanna sell more to, to Malaysia. They want to sell more to Singapore. They wanna sell more to Korea.
(24:29) Jeremy Au: Yeah.
(24:29) Jianggan Li: Yeah.
(24:30) Jeremy Au: So I think there's gonna be a big push. So I guess what are the business opportunities?
(24:34) They, they say that in every crisis there's opportunity. So what opportunities is it like, I don't know, like. I, I setting up a Vietnamese but Nest brand in China or Southeast Asia. Yeah. What
(24:43) Jianggan Li: I think one thing that, I might have told you this, that, about a year ago, I was in a dinner with the, some of the.
(24:49) Really successful cross-border e-commerce players in Xinjiang. Yeah. So I bring the average network down for that table. But anyway so, and at the dinner I was asking people, how do you think about Southeast Asia? And the (25:00) response I got from Olands that I don't have time for Southeast Asia, and, even I do, and I look at American angle, so, yeah.
(25:06) So, so now I speak with some of them that say that, okay, maybe like beyond, beyond the US there are other markets I should take. More seriously. Even if you look at TikTok, I mean, nowadays it's going everywhere. So people are saying that, oh, if us gets banned and that you lose, I don't know, half of your international month, sort of ad revenue, you lose, I think 20 or 30% of your sort e-commerce.
(25:26) So is that end of view. But what we have seen in the last few months, launched in six countries, in three or four countries already, but a few other countries in the pipeline in, Europe, right? They're gonna launch in, east Asia, Korea, Japan, and launch in Mexico, and they're gonna launch in Brazil.
(25:41) So, yeah, so, so you see that, previously they were saying that, okay, we need to consider our resources to crack the US market. Now they're saying that, no, I mean, we should diversify. We should look at all these markets and, of course it's tougher to do all this at once but I would probably see more interesting, like flows of business and trade (26:00) amongst all these markets.
(26:01) For this market per se, rather than, okay, now how can I sort of find a way to get into the us?
(26:07) Jeremy Au: Yeah, I think maybe like kind of like putting a subpoint to that would be, I think that if you're an employee willing to work for a Chinese multinational corporation then this is a good opportunity because I think wanna see more Chinese companies move out of China, set up offices in Singapore and Southeast Asia to explore and explore.
(26:25) So I think that's. One opportunity. I think the other opportunity is, I think as a consumer, you're probably gonna see a lot of cheaper goods from China as well. 'cause they open up more products, in Southeast Asia. Yeah. And, and they're gonna see more competition because I think there's a bunch of, obviously in every market there's obviously local, competitors.
(26:43) So for example, in Gojek Yeah. They're discussing with grab to merch. Yeah. But then now, I think Indonesia has the rumors that China's going to launch. Right. Healing in Indonesia as well. So I think that's an interesting, I think, yeah. Competition dynamic. Yeah.
(26:57) Jianggan Li: Yes. Now both my and Didi are launching food (27:00) delivery in Brazil.
(27:00) Jeremy Au: So we're just competing with kind of, a c group as well. Yeah.
(27:05) Jianggan Li: So you see, all these dynamics, it's interesting that we are trying to make predictions. Yeah. But what you potentially see is people forming opinion. Yeah. About certain development.
(27:15) Right. And they are trying to. Act on that opinion. And then, then that forms a trend, right? Yeah. So one example is that, okay, everybody, every China e-commerce player was thinking about US market, and they thought it was too hard. But when, when Teo went in, everybody said, okay, if they can go in, why can't I go in?
(27:29) So now we see, I mean, see if some of them are shut out, shut out of the US markets, they will reassess that the other markets in a, in a more aggressive way. Yeah. The question is. The question, I think for many of them is still that, how can I build this? I mean, for selling goods, yes, for sure.
(27:44) I mean, they have to manufacture sort of leverage that they can play. But for really building like, long-lasting business models, platforms in different countries, how do they work effectively with the local players? I mean, selling goods is straightforward, right? I mean, you find local distributors or you pay the local tax, et cetera.
(27:59) For (28:00) businesses like, and like the food delivery, like right hand, how do you work effectively with the, with the local ecosystem so that, you become someone who, who find a way to benefit the local, the local sort of, upstream and downstream, as well as, the whole ecosystem without taking all the benefits yourself.
(28:14) Jeremy Au: Yeah. And I think that's a tricky part because I think if you are like a local conglomerate of business, you're gonna see a lot more competition from Chinese. Yeah. Exporters and MNCs expanding. So I expect if I was to say one more prediction, but one more year out. Yeah. I expect there'll be a, a growing movement lobbying local governments to.
(28:32) Erect barriers against some Chinese, exporters. Yeah.
(28:35) Jianggan Li: We already see that. We already see that. So last few weeks, I also had a chance to interact with, CEOs and senior executives or few Latin American companies.
(28:43) Jeremy Au: Yeah.
(28:43) Jianggan Li: And, and the, the, the incumbent companies, I think their opinion is fairly sort of.
(28:49) Strong against all this Chinese incursion.
(28:51) Jeremy Au: Yeah, exactly. 'cause they're like, I was barely making a profit. I'm making a small profit five
(28:55) Jianggan Li: that probably making that probably make a decent profit. Least if they are the incumbent. Only like the only (29:00) incumbent. Yeah. Yeah.
(29:00) Jeremy Au: Making like super normal profit. 14 50% And then, but now you see Chinese going after the pie. Yeah.
(29:05) Jianggan Li: Yeah. But the question is that because, because many of the Chinese players, they have endured competition in China. Yeah. So they're willing to endure super low. Yeah. Profit margin to make a business work. Right. And that's what I think solved Indonesian business.
(29:18) So the impact. But of course I think Indonesia has kind of erected enough sort of, yeah, I wanna say barrier, but, has raised the bar of entry. So that the opportunistic players, can't enter so easily, right. I mean, for where we enter, they have to be long term. Right. But how would that, impact, in other countries like Brazil, Mexico and Saudi Arabia, et cetera.
(29:37) And so, so we'll see a lobby and we'll see that some of the businesses from China trying to adapt and I was talking to some business people saying that, hey, your top lieutenant who build a business together with you, now them speaks English and it's kind of hard to expect them to function effectively on the countries.
(29:52) Attract the best sort of talent in those countries. So. I think you need to find a different way and which way? I don't know. I mean, there are a few (30:00) examples you can look at, but, how do you figure out your own path and you have to figure out yourself.
(30:03) Jeremy Au: Yeah. And last question here is there's only one way that China stops doing an incursion, or like globally on the export markets.
(30:11) And I think a lot of us economists are pushing for China to switch to a domestic consumption economies that are export led economy. Do you think that's ever gonna happen? Oh, you think it's just not gonna happen? I mean, it's kind of curious.
(30:22) Jianggan Li: No, I think something needs to be done to boost the consumer confidence.
(30:25) I did speak with lots of consumers in China. I mean, since the pandemic, right? Uh. So the confidence has not been good. So many things have to be done. So that, I think first it abs absorbs some of the manufacturing capacity. Mm. And second is that, how would I say, when your manufacturing is very competitive and, you, you naturally try to spill over and one or another.
(30:47) So, so the question is. I don't think that, a strong domestic consumption would prevent Chinese businesses from spilling out, spilling out, and, and finding, finding other opportunities. The question is that how do they find (31:00) ways to work with, we talk about globalization, right? The ideal scenario is that you do what you are best at.
(31:04) Yeah, I do what I'm best at, and we, we'll find a way to work together, right? So how do they find that way to work together, knowing that in manufacturing, in many, many. Areas of manufacturing just simply can't build the economies of skills that China has.
(31:16) Jeremy Au: Yeah. I mean, I think the tricky part is that, and I think nobody's against China doing more manufacturing.
(31:21) But I think the sensation is kind of like what happened to the, the Japanese, right? What happened to the Germans when they became manufacturing powerhouses back then? Was more like. Okay. How do you make sure that you're doing what you're best at? Mm. But you also have a domestic consumption that's sufficient to absorb, I don't know, 50 to 80% of your own manufacturing capacity so that when you, so it doesn't
(31:42) Jianggan Li: become like rest of the bottom.
(31:43) Yeah, it doesn't become a rest of the bottom in every single market because
(31:46) Jeremy Au: then otherwise, if we keep pursuing the strategy and it goes on steroids. Then the concern that Indonesia and Vietnam is gonna have is, to some extent is I have a manufacturing class and it's gonna get hollowed out the same way I was hollowed out in (32:00) Ohio, in America.
(32:01) Or Michigan. Like those blue collar jobs are gonna disappear and then there's gonna be a bunch of consumers, a bunch of white collar folks are doing services, and then they'll both buy stuff from. Chinese manufacturers and there's no more blue collar. Mm. And that's not a very sustainable society to have.
(32:16) I think that's what people are gonna have. So, mm. Anyway. Sounds like we don't have the answers, but maybe we can do that next time around and let's talk about Yeah. That, that's a horrific
(32:22) Jianggan Li: topic. Yeah. But
(32:22) Jeremy Au: it's like, what would it take for the Chinese economy to become, domestic consumption oriented, which is, I think if like all this trade staff, all this all short term.
(32:30) I think that's really the magic question is if somebody pulls the trigger on. We are gonna orientate towards domestic consumption. I think that will be the true turning of the chapter of the China story.
(32:40) Jianggan Li: I would say that, stabilizing property market is, is imperative for that to happen. Yeah.
(32:45) Jeremy Au: But you don't know when it's gonna happen as well. Yeah. Yeah. On that note, cool. We'll just tune in for the next time we do this. Okay. All right. See you.