ChinaTalk's Jordan Schneider: US is making every mistake in the playbook to lose the tech war with China

listen to China Talk. If you're not listening to every single episode that you put out, you're falling behind. And so it's got to be just a bull market in every single stat you're tracking. No, except for except for America. Except for the America stat that I'm tracking, which is the only one that I care about, John.

I want to win. I want to industrialize. I want a golden age for America. But what we are seeing now is 2015 warriors era execution of how to lose a trade war. But what about uh uh reframing it using to use a metaphor like imagine playing like a beautiful beautiful violin concerto on the Titanic as it sinks.

Like that would be uh laudable, right? Yeah. It It's really fun to play a violin until your conductor gets thrown in a van and sent to El Salvador. This is the world we're living in, John. Oh no. Uh well Jordan, it's great to see you. Yeah. Good. Yeah. Good to have you back. You came on with a bang.

Um m maybe we could set the table like like how have you been processing the the the tariffs? Uh have you been on a roller coaster or is it have has it just been black pill the whole time? It's all the way down. It's all the way down the way down. Look, I want to believe I really want to believe.

I was going to give him a chance. I was sitting there, you know, January 10th like look this guy, he's got some moves. He's got some moves. Okay. He wants to change the way R&D gets funded. He wants to bring manufacturing back. He wants to fight a trade war with China. I mean, like, sure. Okay.

I you can you can I'll put in some table stakes for that. But what we're Can we start Can we start with the uh Can we start with the research, John? Let's start with that. Start with the facts.

Xiinping would cut off his left hand for the basic research university industrial complex which America has which no other country in the world can hold a candle to until 20 until late 2025 where every single good STEM PhD and STEM uh and STEM professor who who can get a job anywhere decides they're sick of this and doesn't want to live their life terrified that they're going to be taken away from their family and their research and, you know, their all their professional opportunities because they got a traffic ticket.

And this is the world we're living in now. John, you went to Northwestern, right? Nor Eastern. 40 40 visas already. 40 people's lives ruined because um uh Marco Rubio thinks that it's cool to um to pick fights with biotech and CS PhDs. Yep. What are we doing here? Okay.

What about let's go back to the initial trade war with China led by Trump 2019 tariffs kind of go in this tit fortat spiral 34 billion on on US goods 34 billion on Chinese goods we were discussing it at the top of the show starts with 50 billion rookie numbers then 250 billion um what is your postmortem on the 2019 US China trade war the 2019 US trade it was kind of a and and you can sort of write it off because the US economy was growing and we weren't picking a trade war with every other country on the planet.

But is it is it possible that we land in the same place and in the next four years you're like, "Well, yeah, we can write off the first two trade wars, but the third one's the real bad one, right? Is that possible? " Here's the thing. Here's the thing, John.

Jordy, tell me about what the risk-free rate is and why it matters for capital investment. Yes. Yes. Yes. It's very high. Have we Have we done that yet? We talked about the basis trade. It's not looking good. Well, yeah.

Joe Joe uh Joe Joe was was talking earlier with with Tracy specifically about uh in the the the US bill being potentially the greatest export that we could ever have. And I think that's an interesting uh positioning. Uh can we talk about your your audience are is you know deep state people.

No I I was going to go I was going to go towards this is by his own definition he says he's cash for the deep state. Okay. This is not me making it up. This is what his his words. It's great of freedom and democracy. That's what we're Yeah. Yeah. Yeah.

Um what what's the re what's the reaction from your business audience right now? Are they still at a standstill? Is it, you know, we can't make any decision because we don't have full clarity on what the world looks like in 90 days? You know, look, it's not it's not going to be 90 days.

It's going to be four years because this man likes to be in the headlines more than he likes literally anything else. So, he is going to keep doing things that put him in the headlines. He can't take wins. He was handed different Yes. Yes.

He was going to be in the headlines next month, but it could be because he's fighting with Rosie O'Donnell, right? And that has a different wouldn't do to have him pick fights with Rosie O'Donald. That is the timeline that we should all be rooting for. We need Donald Trump.

If you want to take it all out on me, I'm here. I'll I'll I'll I'll be the sacrificial lamb for America's basic research ecosystem. If you want to pick if you want to pick a fight with a shitty podcaster, I mean like you know it's it's we've got we've got a brain drain of America. We got a capital drain of America.

We got a geopolitical drain of America because he wants to be buds with Putin and take over Greenland. And oh by the way, we are selling the best chips we have to China because Jensen spent a million dollars to have a burnt steak at Mara Lago.

I mean, it's like truly we're just checking off box of dumb thing to lose this tech war. Yeah, we we uh can you can you talk about the decision that that kind of flew under the radar? Was this Friday or I don't even know if it was yesterday at this point, but uh Nvidia is allowed to export the uh what is it?

The H um H20. So, it's an inference trip which um skirts right under the export control regulations. And Biden didn't do it cuz he's an idiot. And now Trump isn't doing it because he likes getting, you know, people to pay a million dollars to have dinner with him. There is no reason Nvidia does not need the money.

It's like $2 billion of revenue. Like they will be just fine without it. But we're living in this timeline where if you you know Yeah. So I if it's two billion in revenue then well it's only two billion of AI data center capacity and that's not enough to build a GPT5 level model and so it's irrelevant.

Like those two things can't be the same, right? Yes and no. I mean it's like okay sure. So like what are what are what are our like uh okay super intelligence. Yeah. Yeah. I mean I mean the the the steel man here is that you like like Yes.

You don't want them building super intelligence GPT7 level models like you know the the the the project Stargate the $500 billion data center cannot be built in China but yeah take $2 billion fine-tune GPT outputs it's still going to talk about Tianaan and you have deepse which is basically an American model v or manis which is clawed like vended into China and that's actually we were talking to Tyler Cowan yesterday about this he was saying that this is a win for American hegemony because the Chinese leading models have American and preferences baked into the weights at a very deep level.

Yeah. I mean, if we're if we're um if we're thinking that our models are going to democratize China, I mean, that's a that might be one or two steps too far away for me.

The way the way this playbook, John, is the way we kind of already are, which is sell all the chips into Malaysia, and if Chinese companies want to sort of run their cloud out of Malaysia and Singapore, then okay. and we can shut it off if and when we decide we want to shut it off.

But selling chips directly into China, there's no upside to it.

Um because if you're just opening yourself up to this like whole other universe of risks of maybe these $2 billion of chips actually do end up being enough to fast follow and you know compete with like a a totally up meta and a open AI who doesn't let a hypersailer hear you say that 2 billion could ever compete with 65 billion in capex.

That's ridiculous. Can you break down? We need to spend 65 billion this year. Billionillion. They're all spending 65 billion. Every single hyper see next quarter just what that $65 billion number is going to be looking like. I mean higher. Probably higher. I wish I not he's not a GI pill. He's so black pill.

His timeline is so extended. Uh we're talking 20 200 at this point. 2080 2080. Uh I want to so so we covered uh earlier on the show the the sort of uh venture capitalist version of the history of USChina relations. So like sort of high level you know trying to trying to get into the dynamic.

Uh there was um a few days ago uh April 11th the US told China to request a shei Trump call. This was reported uh which is sort of a funny you know it's just a funny way to go about trying to get you. Yeah. This is crazy. Here's my number. I mean, just call, right? I think we're just pick up the phone and call.

This No, but but talk about talk about the history. This is how this is how you do negotiations. But this isn't unique to Trump. Like this was the same negotiation that we saw with Reagan, Nixon, Clinton, like like the the the whole politics of diplomacy have always been extremely convoluted.

And there's never been an era where it's been like, oh yeah, this it was the Democrats that always just picked up the phone and called. It was always the rep school Republicans. It's like Trump's just repeating the playbook of the last 60 years of US China diplomacy in my opinion.

John, have you done a video about uh Chen? No. If if not, you should. Okay. Okay. So, he um is a Sorry, let me get the Okay. So, born um born in China, came to the US to study at MIT in 1935.

He was got a clearance during World War II, was a part of a lot of classified work, was best buds with Vanavar Bush, um, you know, part of America's missile program, uh, in the early days. 1950, McCarthy shows up and blows up this guy's life. He says, "You know what? it.

I'm going to move back to China and proceeds to, uh, turn into the father of China's nuclear um, and intercontinental ballistic missile program. " And this is the playbook that we're currently running now is we're taking all of these smart people and telling them they're not welcome here.

And this is I I I am so sure of it. And it's just like it's just ripping me up inside that 10, 15, 20 years from now, we're going to see companies founded.

We're going to see weapons developed by people who at a sort of hinge moment in their life, you know, 30 some odd years old, they're thinking about where they want to build their life.

They're thinking about where they want to start a family and they see that you know this country is not open to them and and it's just like we have this founder cult in uh in in Silicon Valley right of you know the 10x engineer like there are going to be a handful of people who are going to end up kind of determining the future of technology and the future of the world and we're taking on risk which we really don't have to by telling all these people.

No, I I agree with all that. Uh that's not uh about communication and picking up the phone, but also uh also uh China uh they they do have Tik Tok, they do have DJI, they do have Unitry. Like they have the companies already.

Like it's not like they're they're like, "Oh, we haven't thought to build a competitor to Facebook or Instagram. " Like they've done it successfully. Like like like we're in we're in a competition now. Exactly. We're in a competition. So we can't be around anymore again.

Yeah, we're going to have four more years of around and it's it's just dumb. And like I still I still think we're going to pull it out. Like I still I still have faith. You got to believe, right? But it's we're going to be sitting here in in six years being like, "Oh yeah, we can totally sweep that one under the rug.

" But this one's the real deal. I really hope not. We can I really I really hope you're right, John. I want to live in You should You should You should hope that we're right about this. No. Uh but but talk talk to me going back to my original question.

Maybe it's not maybe it's not as exciting for you, but I think it's just interesting. Uh what's up with you know the US and China never being able to consistently have you know clear comm direct communication between you know the White House and Beijing. Yeah.

Um, you know, I think there's a there's a really interesting arc of the way that the Chinese government has sort of viewed US China interaction over the past 15 years in a way that's different for really the second half of the cold war.

So from like you know uh postworld war II Stalin up until really the Cuban missile crisis the US and China the US and Soviet Union weren't really talking and then you had the Cuban missile crisis people got really freaked out and both countries realized that eh it actually probably behooves us to be able to interact with each other in a more straightforward way as opposed to you know finding like business people and like you know ambassadors handing people notes because we don't have like good uh sort of leaderto leader comp uh uh interactions.

And then um even though there were scares uh for the rest of the the the Cold War, at least there was enough of a kind of uh uh muscle memory in terms of these two uh countries interacting with each other that that people started to get a better understanding of uh uh you know what strategic intentions were.

So the Chinese government I think like first off does not price in the risk of an accident turning into something really horrific nearly as much as the Soviet Union did over the course of the Cold War.

and they see that, you know, the the the Biden administration and the Trump administration uh and and the Obama administration as well like understand that this is can be a scary thing and they see it as a to negotiate with.

So, um, if you're if you're not worried about like, you know, planes, uh, uh, hitting into each other and you think you can get something out of, uh, you know, setting up like regular dialogues or calls or what have you, then um, you know, you're going to you're going to put it on one of your five asks.

But the the sort of the other thing that I think, you know, she's looking at when he saw what happened to um uh Zalinski in the in the White House, right, is like, you know, uh you I think that the the the um willingness to assume like interpersonal risk um is a lot lower for that system.

And they want to have stuff a little more baked out before you kind of like do one of these like leaderto leader conversations. So, whatever. They'll talk at some point. Like, I don't know if they're going to like end the trade war. Um, I'm not really sure what like the aims are.

Um, because it seems like they changed a lot over the past two weeks and they'll probably keep changing.

Um but uh yeah, it's just hasn't really been a priority um for the Chinese government because it's a thing that they think they can squeeze us on is is the just us wanting to have these conversations to you know one one of the thing that that's repeatedly come up in our conversations is just the nature of you know US tech companies broadly being banned from doing business in China.

everything from, you know, Google to Meta, others, and a lot of the people that come on our show are not even allowed to travel to China because they're in anything defense, aerospace related. Um, sure.

On the ground in China, do they uh do does the government or the the military, I don't even know how much of this information would ever appear online and available, do they laugh at us for allowing Tik Tok and DJI and Uni Tree? Like do you think it's silly?

It's like you're tariffing our you know cheap toys but then you let us sell you still let us sell DJI drones. You still still let us distribute brain rot to 100.

Like is it a funny thing to to them because to me it's a terrible irony and that like we just can't get a Tik Tok ban across the line or we can't we haven't been able to get them to sell it yet.

And um and again like these sort of uh industries and products that have you know extreme national security risk, you would think those would be the easiest things that the United States could make a sort of collective decision on that would um so I'm curious what their sort of like reaction to the the silliness of it all is.

Oh yeah. Laugh laugh laughing their way to the bank. I mean, like, look, there there there is there is definitely like some trade war that needs to be happening. Step one, Tik Tok and DJI. You said it yourself, Jordy.

I mean, it's like I would love for there to be a like really wonderful globally competitive supply chain that uh America can can create the sort of autonomous drones that um uh Ukraine has been able to to to leverage.

and even they still have to um uh buy stuff from China because there's not enough um uh there's not enough there there exchina um but instead uh we're kind of going in a very different direction. So yeah, I mean it's you're you're totally right, Jordy.

It's just um uh there's there's not a strategic vision um that we're seeing out of uh this political moment. Um, and I think they're um, you know, not to put China 200 feet tall, like there's definitely things that they're not they're going to do wrong.

Uh, and their economy isn't perfect and their sort of like techno-industrial complex is not perfect. Um, but they figured out a lot of this manufacturing stuff and Yeah. So, so the one thing that's clear very very good at manufacturing. I don't think anybody disagrees on that.

Um, how do you judge like what do you look for to understand, you know, if China was really suffering right now from these new tariffs? We wouldn't know about it, right?

It would be it's sort of like it's not like they're going to come out and start saying, you know, talking to the people publicly their stock market, right? Yeah. Sure. But but like there's a lot of information control in the same in a way that that's not necessarily the case.

Like if a US business is being affected by the tariffs, that person's going to go on LinkedIn and Tik Tok or they'll come on TBPN and they'll say like, "Yeah, my costs are up, you know, whatever 300%. " And unless they're coping really hard. Yeah.

Um but how how do you try to judge the the actual impact of the tariffs in the in the domestic, you know, you know, the the Yeah.

I don't think it's as as it's as opaque a system as like um you know the the the the CIA um and different corners of the US government were having these like big drawn out debates in the 1960s 1970s and 1980s about how large the the Soviet um economy was because they were saying like okay let's say they spend 10% of GDP on um uh you know on defense so like you know what's the base that they're doing this off and Um, it was really hard to figure out how big the how big the Soviet economy is.

I don't think it's that hard to figure it out today. As as John said, we have uh trade data, we have the stock market, we have, you know, quarterly earnings from from all these companies. And I think there's like enough out there of like chatter of people saying like, "Oh I got laid off because of the trade war.

" um that like you know you'll you'll you'll be able to pick up the the the atmospherics just in the same way you you can by having uh you know reading Joe Eisenthal's Twitter feed, right? What about uh what about uh kind of the the new ally ships that are building?

I mean you obviously you were very upset about like you know America kind of potentially frustrating trade partners like Canada, UK, Australia, France like we shouldn't be pushing them away. Uh some of that subsided.

Uh it still feels like in general if we're going towards a more bipolar world uh and you're and you are creating some sort of broad western alliance like you're going to put the five eyes together. You're going to put NATO and America together. Uh but who is who's on China's side?

I've been worried about like a China, Russia, Iran coalition forming. Are there other countries that are starting to flip into uh Chinese allyship more seriously post trade war?

Yeah, I mean this is a really interesting thing is like the reason that China wasn't really able to capitalize um during trade war number one is because they were feeling their oats and they thought they could still do wolf warrior diplomacy and and bully other countries around um even though Trump was sort of like on on them in their own way.

And it'll be fascinating over the next few years to see whether or not they take they sort of learn from that experience and take a more consiliatory approach and and you know don't uh try to like uh you know nickel and dime these countries uh in order to really potentially win them over.

But uh you know Southeast Asia like okay I guess like we we did 76 76% tariffs on Vietnam and then we cut it back. Like who knows where we're going to go with that. But the the the it's it's it's two things.

It's like are we going to go to China or are we just going to cut trade deals with every other country ex the US so that we're going to you know the the sort of like the free world exus is going to have this you know thriving inter uh uh you know thriving trade ecosystem which we're just not going to benefit from um because those supply chains won't run through um the US or our consumers won't get to benefit from or our exporters won't get to benefit from.

So um you know there is like there are a lot of like intellectual risks here. There's the intellectual risk of like thinking China's 100 feet tall and you know we're we're we're shot and there's no way we can compete with these companies.

U but there's also the the intellectual risk of thinking America is 200 feet tall and we are like you know we're still only 25% of global GDP.

Um, and that's that's a whole lot of GDP out there which is going to be thinking about what to um, you know, what to do and who to trade with and where to invest and um, I have a question. What is the So, China blocked uh, orders of Boeing aircraft to their national airlines. Are we going to see uh, they're going to go?

Yeah, that would be cool. They prefer the ER. Do you have do you have any sense of of uh I'm assure I'm I'm assuming that uh China's been aggressively trying to clone uh various you know US commercial aircrafts for years. Is that as advanced as the automotive industry uh in China or is it a is it a ways behind?

Yeah, it's interesting. That one's kind of been like the final frontier. Um uh it has been a clear national priority for a very long time. Um, and jet engines are really hard apparently, even if you layer on industrial espionage and like an enormous amount of state support.

My guess is that like the reason it has taken so long for COMAC to um to get its together and and build competitors to Boeing and Airbus is is probably the fact that it is state-owned and there are just like poor incentives going on versus the sort of free market free-for-all that you saw in the electric vehicle industry just attracted better talent, more capital.

Phone companies moved over into cars and they're not doing that in planes, right? Yeah. So, I think there's, you know, and there's like relatively limited upside. It's like a national prestige product as much as it is a capital uh, you know, a capitalist endeavor um to make these jets. So, we'll have to see.

I mean, I'm like, look, if they can't do it, the the orders will just go to Airbus and like that sucks. Um, but it is what it is.

Um, and I think, you know, these that industry in particular there there's so much like geopolitics baked into it that I'm not shocked that that was that was what on the, you know, first list of like things to um uh things to start cutting from a US import perspective. Last question. You seem pretty blackpilled.

How's Dylan Patel doing? Have you done a wellness check? He seemed pretty blackpilled when you talked to him a few days ago. Uh, what's his mindset like right now? I wish him the best. I don't know. I think he's it's just uh like like I thought AI would be our out.

Um, but if we're going to sell them all the chips and we're going to screw up the like American P capital base that we're banking on to fund uh all this AI expansion and we're going to throw away the AI diffusion role such that like the chips are actually just going to end up going to Saudi Arabia and Qatar and Brunai.

um then you know it's it's just we're just taking on risk left and right and like we might be able to pull it out but it's some uh uh it's it's it's hard to watch. Thank you for letting me have turn this into the Jordan therapy session. We're going to leave you the white pill one way or another. Okay.

Oh, I I just had a question of like where does where does the Middle East really sit in all of this, right?

Uh it feels like in many ways uh you know we cover business and technology in many ways the relationship between the US tech industry and uh Saudi Arabia you know Qatar UAE is you know thriving just due to the the capital flows but you know uh how do they think about uh even picking you know I haven't seen themselves inserting themselves into the story over the last couple weeks and I'm sure that's for good reason.

Uh, but I'm curious how you see them as a player in all this. Yeah, it's interesting. I feel like I feel like their diplomatic system like knows how to play the klepto kleptocracy game much better than Canada or Europe.

Um, you know, they got their reps and sets when it comes to dealing with, you know, family dynasties and whatnot. Um, so they're smart to keep quiet. I think um uh you know the the diffusion rule um that the Biden administration put out at the very end was really a play to force them to pick sides.

And basically the the deal was like look if you want access to the future. If you want access to compute then you really got to play ball with us and you got to play ball with our AI cloud providers and our sort of like broader uh defense ecosystem.

And if you're going to um you know have too much China AI in your um you know in your national bloodstream, then we're going to reconsider whether or not we're going to let you um you know buy chips and access our models and whatnot. So we'll see.

This is a regulation which I think is going to be a really interesting bellweather. Um because it was a very clever um uh hinge to sort of force the Middle East uh government and the governments and the money that came with that to invest in the Western as opposed to the Chinese uh technology stack.

And look, if they're if they don't love what they're seeing, maybe they'll be more excited to if they a don't love what they're seeing and b we take away the jack that we had um around them, then you know, you could see them starting to to wiggle in other directions and and take um and take side bets on a pot that they may have had to have gone allin with us uh if it wasn't for um all the craziness we've seen over the past few months.

Got it. Very last 30 second question.

U how real do you feel the yield coming out of TSMC Arizona is or is it marketing to the admin that hey we're doing what you want uh and Nvidia coming out and saying they're going to make blackwell chips in the US you know it's hard to judge whether how it's hard to understand how real it is when when you know we know that uh people get excited about oh we're going to produce$500 billion dollars of of blackwell chips in the in the next 5 years I think is what they were saying.

Uh which sounds amazing but uh in this current dynamic when there's so so many different conflicts and um so much on the line it's hard to know what's marketing and what's like actual you know you know uh it's a it's a good question. My my rule of thumb is like you can't lie to the SEC.

So just like wait for the filings. Um, but look, there everyone's everyone's trying to figure out how to get on this guy's good side and maybe this is something that might work. Um, so, uh, you know, I like it's a it's a it's an interesting sort of like policy trade-off.

Like would we rather have cheaper AI hardware that like Microsoft and Amazon can buy? Would we rather have it be in the US?

I mean like if it if if the sort of pressure is forcing more stuff to be built in America like there are pluses and negatives from that especially um if we're doing like accelerated timelines and like the prices are going up and I think this is applies to TSMC as it much as much as it does lots of other industries.

So look like they're like they're more pot committed than almost any other any other company in the world. Um and they don't really have an out um for for this.

So, they're going to do everything they can to, you know, make uh make Arizona work and make the relationship with this administration in this country more broadly work.

But I'm almost more concerned about the other uh the other companies who don't have as much money to burn and you know have other options when it comes to setting up manufacturing plants and finding sort of like end uh uh you know and end users to sell to that are just going to look at what they're seeing now and like nah we can we can we can open that up that playbook again and see um see what else is what other countries and loca loces are on the agenda.

All right. Well, fantastic. Fantastic. A spirited debate. Uh, we'll figure this out. We're We're built different. America's going to be fine. Don't worry about another thousand-year reign. It's all good. Just relax. Just Just put out great podcasts. Cash in while you can.

Since China's in the news, tell people where they can find Chinat Talk. Give the pitch.

China ch China talk media China talk media China talk one word your favorite podcast app I promise you I'm not that negative most of the time it's like 8020 good vibes there's some great stuff on there and we appreciate you coming by golden retriever mode yeah activate golden retriever mode be a little bit more positive and uh and all right we have another guest next we have another guest no no that is not family friendly get out of here we'll talk to you soon thanks Thanks for stopping by, Jordan.

Bye, Jordan. This is great. I missed I I missed that completely. Uh yeah, he did a he did a little uh little squirt gun to the head motion. Not good. Never not not family friendly on this show. Anyway, um I'm going to hit the sound. We got Aaron Gin coming in the studio.

He's written some absolutely banger takes about China GPUs. Uh he's been called the GPU whisperer. And uh there's a fascinating article I want him to break down for us. He wrote this in January 22nd of this year. It's time to build America's cyber nuke. We desperately need a deterrent to stop