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China's imports of U.S. cotton cars and some energy products all plunged in the first two months of the year after President Donald Trump started imposing tariffs and Beijing retaliated. The measures the U.S. and China have imposed on each other over the past six weeks, and the probability of more to come in the months ahead, are creating huge uncertainty and raising costs for businesses. Joining us now is Bob Davis, author of Broken Engagement and former Wall Street Journal senior editor. Thanks so much for joining us. Um, so there's a lot of uncertainty out there. Bringing your vast reporting experience to bear here, what would you observe we can know at this point in terms of the relationship between the two and how this might evolve?

Well, I mean, I think you've already seen, I mean, uh, Trump has put, uh, a number of tariffs on China and I think come April 2nd when he says he's going to introduce his, uh, what he calls reciprocal tariffs, you'll see a lot more. Um, but I think one of the main differences this time compared to Trump one is it's not just targeting China. It's targeting basically any country with a persistent trade surplus with the United States. I mean, this is raw Trump. This is Trump, you know, uh, as he's been for decades. And Trump one, I think he was enormously, uh, influenced by some of the hawkish, uh, advisors that he has. I mean, he was hawkish also on China, don't get me wrong. But, uh, the, uh, singular, uh, you know, um, focus on China, uh, which was, um, which was indicated in Trump one. I, I don't see that this time around. This time around, it's much more broad-based.

Bob, I'm curious. You know, we've had some investors come on, some strategists. They're focused on China and they have this kind of optimistic view, Bob. They'll say, listen, they ultimately think a deal is going to get done between Trump and G. That you're going to see a grand bargain between the U.S. and China. I'm curious, Bob, whether you share that optimism and if there was kind of a grand bargain, a big deal that got done here, what would be the outlines of such a deal as you might see it?

Yeah, I think there'll be a deal of some sort or other. I mean, Trump really, obviously, you know, likes deals, thinks of himself as a deal maker. Xi Jinping wants to reduce as much pressure as he can from the United States. But remember, you know, in the first Trump administration again, they had a deal, right? The phase one deal, um, China didn't live up to it particularly. The Biden administration didn't really try to enforce it, but the tariffs stayed in place. Um, I think what you're seeing is what economists have warned about for decades that once you put tariffs in place, they're hard to remove. So I don't see Trump, you know, eliminating tariffs on a large scale as a result of, you know, any kind of deal. He might hold off on, uh, some tariffs that he was thinking about. Remember in the campaign, he talked about 60% tariffs on China. We're only up to 20%. So, so maybe he won't get up to the 60% mark. Uh, but I think, you know, what if, what a broad deal would be would be something about fentanyl. Be certainly lots on, uh, Chinese purchases of US goods, might even be, you know, some encouragement of Chinese investment in the US. But I don't think, uh, and then maybe some talk about, you know, reforming China's economic policies, but I think that's Xi Jinping's bottom line. His bottom line is to keep China the way it is, uh, and not to make the kind of concessions on economic policy that US, you know, policymakers have been urging for decades.

Um, Bob, I want to ask you about the role of Elon Musk in the U.S.-China relationship as well because there were reports today he was at the Pentagon this morning. Musk is the, that is, and initially reports said he was having a briefing on, um, China and sort of the U.S.'s military strategy toward that country. The administration pushed back and said, no, that's not what it's about. But regardless, he clearly is at the center of a lot of stuff right now. He has a big business in China. How do you think, do you think there's any, um, chance that he would mitigate Trump's approach to that country?

I presume he would be arguing for, you know, a more accommodationist kind of, uh, moderate approach to China given his, um, stake in, uh, in China via Tesla. But remember also, I mean, he has, uh, you know, uh, SpaceX. And SpaceX competes with China. So it's not so clear what his, uh, view on China is. Uh, you know, he has, he has multiple, um, uh, what do you call it? Um, interests, you know, that, that conflict with one another. I mean, one thing to remember also is that Musk has also talked, uh, about Taiwan as essentially a province of China, you know, and that he compared Taiwan to US versus Hawaii. I mean, that is something that if you're in Taiwan, you ought to be really quite concerned about because I think Trump also doesn't say it that way, but has a similar kind of view. So I think, uh, the Taiwan issue is one that will be very different than, uh, what it was in either Trump one or in the Biden administration as well.

Bob, I'm curious, as we hit China, how hard could they hit back and how exactly, Bob, could they hit back specifically at our tech sector?

Oh, there are so many ways they could hit back. I mean, just think about, just think about delaying iPhone shipments, you know, uh, during a holiday season. There, there are just endless, you know, um, levers the Chinese can push. But I think what holds them back from, you know, using what they can do is that they're worried enormously about their economy, right? I mean, their economy is not doing very well and they depend, uh, greatly on foreign investment. And if they were to act against big American companies, I think that would also frighten all foreign investment from other countries. I mean, if you're Samsung and you see China batting around Apple, do you think to yourself, oh, this is great. You know, here's a moment we can pick up market share, or do you think, jeez, we could be next? And I think, I think it's the latter and I think the Chinese are quite aware of that. So that, that would temper, I think, uh, any response that the Chinese have. But if they want to, my God, they can make life miserable for so many, uh, American companies and put on tariffs that would, uh, you know, would enormously affect, you know, the inflation rate in the United States and how people think about, uh, you know, their ability to buy things.

Bob, in your book, you had a number of conversations with, uh, people in past administrations, officials who had had, um, who had grappled with the China relationship. What do you think was the, the best lesson that any of them shared with you that maybe this administration could take away?

You know, I mean, the, the overall lesson was the difficulty of engaging with China. What do you want from China? Deciding for you, for the administration, what it really wants. I mean, uh, administrations would come in saying they're going to be tough on China. It wasn't only Trump. I mean, George W. Bush came in talking about China as a competitor, but then, uh, got sidetracked, uh, understandably, you know, by the finance, global financial crisis. Obama also had some, you know, tough words about China, but there was who was still dealing with the financial crisis, plus wanted China's help on climate. So I think, I guess the overall lesson is to think specifically what is it that you want from China and how do you, um, uh, try to accomplish it? And how do you get allies on your side to try to accomplish it? Because to the degree you can affect China's, uh, the way China acts, it, it is much more effective if you have allies working with you because then they can see that the harm isn't only from the United States, but is from Europe, from Japan, from Australia, from many other countries that China cares a lot about.

Bob, great to have you on the show today. Thanks so much for joining us.

Thank you.