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Will Trump's trade war turn into a military one?| LBC
Jun 1, 2025
Matt Frei is joined by former Chinese diplomat, Victor Gao, to discuss the possible military impact of Donald Trump's now 50% tariffs on steel and aluminium imports. Donald Trump announced the doubling in tariffs at a rally in Pittsburgh yesterday. Increased from 25% to 50%, the US president is aiming to boost the US's local steel economy, moving away from reliance on China. Matt Frei also talks to business advisor, Sam Lowe, about the economic impact of Trump's changing tariffs on companies in the UK and around the world. Listen to the full show on the all-new LBC App: https://app.af.lbc.co.uk/btnc/thenewlbcapp #mattfrei #trumptariffs #china #donaldtrump #trump #president #uspolitics #usa #LBC LBC is the home of live debate around news and current affairs in the UK. Join in the conversation and listen at https://www.lbc.co.uk/ Sign up to LBC’s weekly newsletter here: https://l-bc.co/signup
View Video Transcript
0:00
When you hear Pete Hexas say what he said in Singapore, and of course, what Trump said about, you know, trade war with China, what is your reaction
0:10
Thank you very much for having me. Yes, the United States has launched the largest scale tariff war of the trade war, not only against China, but against the rest of the world
0:20
Some Americans call the trade war as the economic nuclear war. So I tend to agree that this war should be stopped as quickly as possible by all over the world, as well as by the courts in the United States
0:37
As far as the Secretary of Defense, Mr. Hexer, I would say he will not be able to fight against the megatrend of China's reunification with Taiwan
0:48
And the United States will never really decide to shed the blood of their soldiers and officers to defend the so-called separatism of Taiwan, because they will be involved in a civil war, which was now finished in 1949
1:06
And if the separatists in Taiwan want to push the edge of the envelope, it will cause the resurrection of the unfinished civil war
1:15
And between China and the United States, I don't think we are destined for war. I believe in the inevitability of peace between China and the United States. No one should agitate for war between China and the United States because that will be mutual destruction and amagetal for mankind
1:33
But do you think that a trade war, which it looks as if China and the US are either having or might have, is the precursor to what could become a military conflict? Are those two issues linked
1:47
Well, if we look back into history, on many occasions, trade war eventually led to war
1:54
And I think the task for our generation to make sure that the trade war will be stopped peacefully
2:01
and the trade war, if continued, will not lead to a hot war
2:05
because a war between China and the United States will lead to mutual destruction and amageddon for mankind
2:13
Nobody should want to be involved in the Armageddon of mankind. We should all work hard for peace
2:20
Let's embrace peace and let's bring the trade war, which is a wrong war for the United States to fight
2:26
to an end as peacefully as possible. But it's also a bad war for China to fight
2:32
because of the domestic economic situation in China itself. You've gone from a housing bubble, which burst perilously
2:40
to a factory bubble, which requires you to sell the stuff that you make
2:45
to your trading partners around the world, including, of course, the United States
2:49
So to what extent do you feel vulnerable by the trade war that has been raised by the United States
2:56
First of all, China does not want to fight a trade war or a tariff with anyone
3:02
especially with the United States. However, if you look at the situation, the United States initiated a trade war
3:08
they imposed the trade war on China and the rest of the world and the only thing China needs to do which is the right thing is to step up and defend free trade And defending free trade is not just for the sake of China it for the sake of
3:25
mankind. Now, comparing with any other country in the world, China is in the best condition right now
3:32
The piercing of the property bubble was initiated by the Chinese government. And after several years
3:39
of restructuring, I think we've put the property bubble behind us. And China is highly organized right now, very much disciplined
3:48
and China can go forward with or without the United States. Sorry to interrupt, Victor
3:54
China would be in a much better position. What I've been reading, Victor, is that actually, far from being organized
4:00
the Chinese leadership is panicking because the domestic economic situation requires you to sell your stuff abroad
4:09
And if you can't sell it abroad, you're going to have real problems at home because you cannot replicate your foreign markets with a domestic market
4:16
You know, Chinese citizens are just not prepared to pay the same amount of money or to spend any money on the stuff that Americans are buying, for instance
4:24
I completely disagree with the proposition of your question with due respect
4:29
I think ever since 2017, China has been readjusting its exports. And by now, China's export to the United States only account for about 13 percent of total Chinese export to the rest of the world
4:44
And China is now the largest trading nation with more than 140 countries in the world
4:50
Therefore, if you allow me to say one point, I think philosophically we don't care if we are forced to lose out the U.S. market
5:00
Why? Because we value freedom, we value free trade more than economic losses
5:06
I think the Chinese nation as a whole, being very much united, will be able to sustain whatever losses there are if we are shut out of the U.S. market
5:17
But the quick pro call is that the U.S. will be shut out of the Chinese market
5:22
So President Trump and the U.S. government need to ponder the real consequence of having China-U.S. trade, bilateral trade, two-way trade, grinding to a halt
5:36
What will be the consequence for the American consumers? I think they will be panicking
5:40
There is no panicking in China at all. OK. Victor, stay on the line, please
5:44
I want to bring in Sam Lowe. Sam, when you hear what Victor Gow has been saying
5:48
when you hear about the rhetoric and, you know, and the fact of these steel towers just announced by Donald Trump
5:53
how worried are you that this will actually, you know, turn into a much more serious trade war than the one we've seen so far
6:00
Or is it a case of taco, as they like to say on Wall Street
6:04
Trump always chickens out? So I'm not fully bought into this so-called taco hypothesis
6:11
because the premise is that Trump makes these big announcements And then he, as you say, chickens out and rolls it back in the following days
6:20
And this is true to an extent insofar as we saw for example the imposition of the Liberation Day reciprocal tariffs which were very very high And then for many countries then a few days later he rolled it back and said we actually just going to do 10 for everyone for now but my point is that he still did the 10 for everyone on cars he still done a 25 tariff on everyone on steel he already done a 25 tariff
6:43
on everyone he's now threatening 50 he's doing an investigation into pharmaceuticals which could
6:48
lead to a 25 tariff there he's doing an investigation to semiconductors more tariffs there so while he
6:54
does often chicken out, so to speak, from his biggest threats, he actually has reset the bar
7:01
in a way. He sort of shifted the Overton window in terms of what we think is normal. And the average
7:06
tariff rate of the US is going up and up and up. By the end of the presidency, I expect it to be
7:11
on average, around 15 to 20 percentage points higher than it was at the beginning. And I think
7:16
that matters. And I think focusing on the idea he always chickens out, mixes the fact that he often
7:21
does actually follow through. Maybe this is Wall Street's threat. Maybe this is Wall Street, you know, hopeful, you know, wishful thinking
7:27
How damaging has this chaos of tariffs been so far to the American economy and to the
7:34
world economy? I mean, one day, you know, he announces 50 percent and I don't know, maybe 100 percent
7:39
Then suddenly there's a reprieve. Is it 90 days? Is it 120 days? I mean, does anyone actually know where they stand at the moment
7:45
It's utterly confusing. And who's damaged more by this? so it's created a huge amount of uncertainty for companies insofar as you can't necessarily invest
7:54
on any given basis because you don't know what uh the the the economic parameters will be on a
8:01
day-to-day basis i mean to give an example of this when he announced the film tariff i'm not sure if
8:06
you remembered this we haven't actually seen that was only last week wasn't it yeah yeah so these
8:10
haven't come into effect yet but when he announced them and this all of a sudden meant that people
8:15
signing contracts all over the world to say film in a given country or hire studio space outside
8:22
of the US paused because all of a sudden they think well our product somehow might get tariffs
8:29
even though you didn't necessarily follow through from it the uncertainty still has a cost in terms
8:33
of the impact on the US and the world I'm still not sure we've fully seen this yet and it will be
8:37
multifaceted in so far as tariffs in the US could lead to inflation in the US it could actually lead
8:42
to deflation everywhere else. Going back to your previous conversation, as we see Chinese goods
8:48
that otherwise would have entered the US being diverted elsewhere into other markets
8:52
which could push down prices in those markets and could lead to them imposing
8:57
their own tariffs on China, which is, I suppose, this escalatory spiral that many people fear
9:02
Victor Gao said earlier, and I'll get back to him in a minute, that China has an amazing capacity for pain
9:07
and for dealing with the economic consequences of a trade war, a greater capacity than America. Do you think that's accurate
9:16
Well, maybe we'll find out. It does appear to me as if both the US and China viewed the Trump
9:25
145% tariffs and the Chinese response, which was slightly less, but still over 100% as being too
9:32
much. You know, that was a pain point that was too much for both economies, which led to the
9:36
negotiation that happened a couple of weeks ago, and the reduction of the tariffs, which Trump is
9:41
are now threatened to reimpose So I think there is a point at which it too painful for both I would assume that we going to settle around a 30 to 40 percent tariff in both directions
9:54
And we should remember, which is a lot of tariffs already. That's a lot, isn't it? 30, 40 percent
10:00
I mean, there was already 100 percent tariff on Chinese electric vehicles going to the US
10:05
This has been going on for a while. So in a sense, this is an escalation of an existing trend
10:09
It's not it's not the creation of it. OK, finally to you, Victor, taco. Trump always chickens out. Yes or no
10:17
Well, I would give President Trump all the respect he deserves as the president of the United States
10:24
However, I think President Trump is very mischievous. His art of war really is the art of inflicting as much pain on everyone around him in the United States and outside of the United States
10:36
and President Trump has become the greatest unreliability, unpredictability and a lack of reliability in the world of today
10:47
So we need to deal with him as he is rather than blow him out of proportion
10:52
He is the greatest source of lack of reliability in the world of today
10:58
OK. And China may be a lot more reliable, but many people are also very unhappy with the way that China has conducted its trade
11:05
the way China is conducting military policy at the moment. So you're predictable, but scary
11:13
Well, I think China is the major force for peace and China is the standard bearer of free trade
11:20
The world should be proud of that. You don't believe that, do you, Victor? I do believe that
11:25
I mean, you're great at producing stuff, but you've been cheating left, right and centre
11:30
I want to be the bearer of the flag of the free trade
11:34
for the sake of mankind, as well as for Britain. OK, just one more on Taiwan
11:40
I mean, the language used by Pete Hector was kind of frothy, but essentially he didn't even go as far as Biden did
11:45
in terms of, you know, destroying America's strategic ambiguity over Taiwan. Do you think that at the end of the day
11:52
America might be persuaded itself that intervening militarily in Taiwan is the right thing to do
11:59
Well, we the Chinese always look at this, starting from the philosophical point
12:04
Now, philosophically, it is against the fundamental interests of the American people to be involved in the so-called Taiwan separatist movement
12:13
It's absolutely against the United States government. The United States, if involved in supporting separatist movement in Taiwan, will be illegitimate in whatever they do
12:25
They will throw out the diplomatic relations between China and the United States out of the window
12:31
Therefore, they need to really ponder the consequence of what if they shut themselves out of the People's Republic of China and they become a force for Taiwanese separatists and they bring death to hundreds, if not hundreds of thousands of American soldiers and officers for the sake of what
12:50
For the sake of supporting separatist movement in Taiwan? There's also the question of what the Taiwanese people themselves want
12:56
But we'll leave that for another day, Victor. Got to leave it there. Victor Gao in Beijing, thank you very much
13:01
Sam Lowe in London, thanks to both of you for joining us
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