Decoder with Nilay Patel
00:14:32 · Nilay Patel
[00:14:32] S2: It it feels like my entire teen experience was a conversation about NAFTA. Right? And we should open free trade in North America. Then later I got to college and all the economic discussion was about the EU and creating the single market in the EU. And we're gonna stand up these big open markets and there's gonna be free trade inside of those markets and that will lead to a kind of economic prosperity. We're fast forward to 2026, and the desire to tear a lot of that down has gone way up. Right? Particularly as you look at the USMCA and Chinese goods coming to Mexico to come to The United States, sort of nakedly circumventing the entire policy goal of imposing tariffs. The goal is to build the iPhone in The United States. The goal is to build manufacturing in The United States. I know that you have never really thought that's an achievable goal, but that is the goal. That is what the administration promised. And we've created these sort of trade groups, trade associations that allow that goal to be circumvented. Do you think the walls are gonna keep going up or do you think they're gonna come back down?
00:15:33 · Willy Shih
[00:15:33] S3: I think we're gonna see more pressure to kind of moderate our behavior a little bit, okay? Because let's face it, there are a lot of goods where we as a country need access to inexpensive labor, Okay. So, I'm actually very pro USMCA as a successor to NAFTA because I actually think, you know, there are things that we need inexpensive labor. Mexico is a good place to source things like that, right? There are things that we need from Canada, right? So if we were to look at North America as a trading block, then what you would see is you would see the benefits of specialization, right? Which is the whole rationale for trade in the first place. It's like, we're better at doing this, you're better at doing that, you know, we'll... Specialize in that, we'll specialize in this, we trade, everybody's better off. Okay? And if you can do that with a community of countries that understand the need for that type of balance, then everybody is better off. Okay. I think the problem with China is they're very happy to have this imbalance where they want the world to be dependent on them, they don't want to buy stuff from the rest of the world. When you have that, then trade doesn't really work. Right? So, I think that's the problem. I'm hoping we're going to realize that we're better off among a group of like minded countries where we can trade within that block. So, for example, if The US were to view North American partners and European partners in Japan and countries in Southeast Asia and Australia and New Zealand, and by the way, parts of Central And South America, and even Africa, and say, okay, let's trade across this block. We'd have access to most of what we need, whether it's critical minerals or, you know, low cost labor or a lot of technology specialties, right? So, you know, we could do much better with that. Much better than a kind of go it alone strategy in my view.
00:17:59 · S0, Nilay Patel
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00:19:02 · S1, S4
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00:20:02 · S4, Nilay Patel
[00:20:02] S4: This holiday, switch to the Simplicity plan from Verizon. It's one plan, one price. Just $30 a line per month for you or the whole family and on their best five g network. Switching to Verizon and shopping their best deals makes the holidays simple. Head to verizon.com or your nearest Verizon store today. [00:20:28] S2: It's funny. The first Friday book, which I highly recommend the audience reads, it's a it's a fun read, is just setting up the first principles of why we trade it all in the very concept of labor arbitrage, which seems like we're having a a national policy conversation that is 500 steps removed away from these basic ideas of why we would trade. And it is entirely centered around, can you bring manufacturing back to America because we let all the manufacturing jobs go to Mexico and then go to China, and particularly in high-tech, and we're behind. And there might be some extraordinarily bad event like a war where it's exposed how little manufacturing capability we have in United States. And that sort of has nothing to do with the basics of specialization in various countries around the world. Right? It... It's it's another problem, and the blunt instrument is, boy, it's bad that all of our drones are made are made in China. We're gonna we're gonna prevent the drones from being sold here. And, of course, our industry will set up drone manufacturing in The United States. I don't see that connection. Do you see that working?
00:21:28 · Willy Shih
[00:21:28] S3: No. I I think that's, kind of a transactional view where you look at one piece at a time as opposed to looking at the bigger picture, right? I think we have to start with a core principle that The US is a high cost country, okay? And therefore, if you want manufacturing jobs coming to The US, then you've got to have high labor productivity, okay. And in fact, if you look at the types of jobs that are coming back to The US, they tend to be using a lot of automation, using a lot of sophisticated manufacturing processes and stuff that is high skill that you can justify the high, high labor cost. Either that or they are... They are things where we have a technological lead that nobody else knows how to do in the world, right? I was looking at like, the high temperature super alloys that are used in the hot section of jet engines. Right? There are only three companies in the world who know how to cast those, and two of them are in The US and one of them is in The UK. And there's things like that the rest of the world has to buy from us. Okay. So, you know, if you have high labor productivity or, you know, highly differentiated products, those we can make in The US, we can make them successfully. And by the way, most of them never left the country, right? Jet engines, you know, The US and France and UK are major suppliers of those to the entire world market. Even the Chinese buy those from the West, okay. And so, it's like, if we have these things that we do better than anybody else, we should invest in those and make it, make sure that we're always in the lead and then everybody else will buy from us and then nobody will hold, you know, then you'll have some balance where you can't be held up, right? There's a lot of this thinking is like, I wish I could turn the clock back to the 1980s or the 1970s when manufacturing was the path to the middle class in The US. It's like, no, manufacturing has changed worldwide. Okay. And those jobs that you want to have manufacturing in The US, you've got to have the high labor productivity or the high differentiation that'll go with it.