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most the recent tariffs imposed by Biden Administration it's more Target and more drama so it's disappointing to see the Tariff set at such a high level that takes away consumer choice but why is the US doing that the imposition of tariffs on EVS runs contrary to the Biden administration's goal decarbonization of the US economy so what's the price of this tariffs on chines I that's going to slow down the move towards a lower carbon future you have a very constructive view on China but some United States investors don't from the perspective of a global investor China's country Rich an opportunity so you earn Global invest it's a very different mindset when you're in the Middle East and face a very different geopolitical Dynamics than if you're sitting in the middle of the United States for Griffin so thank you Ken very much and uh very nice to see you again it's great to be here I'm here for JP Morgan's 20th Global China Summit where Jamie Diamond has brought together a number of the world's most important investors and thought leaders for a really interesting conference on the ideas of this moment in time we see the most recent tariffs imposed by Biden Administration by comparing with Donald Trump it's more targeted and more dramatic is that the right thing to do do you think so the the general push towards tariffs around the world I think is actually quite sad the world has benefited tremendously from trade where each country puts its best foot forward with what they do best and the rise of tariffs is taking that away from consumers around the world the Chinese took it upon themselves elves to build the greatest EV manufacturing capability in the world and the increase in tariffs for Chinese EVS will take away American Consumer Choice as American consumers try to embrace a lower carbon future so it's disappointing to see the Tariff set at such a high level that takes away consumer Choice from American consumers and punishes the Chinese entrepreneurs who had the foresight and the risk-taking to build an industry-leading capability in the field of EVS you're right but why is the US doing that so part of this is the trepidation that the Chinese EV manufacturers will displace too much in the way of us Domestic Auto Sales and you can understand how just as the United States put restrictions on imports from cars from Japan several decades ago the United States might be thinking about how to phase in this new competitive threat from China but the EV tariffs of 100% I think are really a political statement by the administration in front of an election that's what I really think this is so what's interesting is the imposition of tariffs on EVS runs contrary to the Biden administration's goal of decarbonization of the US economy regarding the climate change so what's the price of this tariffs on Chinese EVS the big price of the tariffs on Chinese EVS is that we're simply going to use fewer EVS in the United States over the years to come and that's going to slow down the move towards a lower carbon future and we're going to impose greater costs on American consumers by not having the competitive pressure of the Chinese EV fleets being made available to the United States for a very long time you have a very constructive view on China uh but some United States investors don't how do you explain your constructive view on China well I think it's important to remember that that Citadel manages money for for entities Sovereign wealth funds hospitals universities around the world around the world in every almost every continent we have investors from and from that vantage point from that vantage point of being a global investor one appreciates that China has a substantial number of of Industry leaders whether it's in the manufacturing of solar cellular technology consumer goods manufacturing EVS so on so forth from the perspective of a global investor China's country Rich an opportunity from the perspective of an American investor the geopolitical tension between our two countries makes China less investable so you are the global investor I wear the hat of a global investor when I'm when I'm here with you talking about China so if I'm in the Middle East for example there's great enthusiasm about investing in China it's a very different mindset when you're in the Middle East and face a very different geopolitical Dynamic than if you're sitting in the middle of the United States you're very successful hedge fund manager how to mitigate the geopolitical risks on a practical level so on a practical level we think about the various geopolitical Dynamics around the world so for example the tension in the Middle East means that the price of oil could experience a sudden and profound shock so we'll look at what will happen to the value of our Holdings if oil for example is up 50% over the next two to three weeks in that environment for example the price of Airline stocks would fall the price of Cruise Line stocks would fall the price of stocks that represent discretionary spending by consumers would fall because consumers would have less money to spend having to pay more money for energy for gasoline so what we do is we think about the the the primary price impacts that a geopolitical shock will have and then across our portfolio will the change in prices across the assets that we own give us a loss that's acceptable to us as we think about managing the risk intrinsic in our portfolio for example the signo us tensions how to modeling that over the last several years the primary man estation of the geopolitical tension between the United States and China has been the imposition of tariffs so we look at if tariffs are threatened or might change what will that do to the value of the companies in which we invest and again like the oil price shock we try to conclude are we able to incur bear the losses that would happen from the imposition of new tariffs for example Ken you and Jamie Diamond the host of today's event both wound the government debt risks at the US repeatedly so how might the risk finally played out Jamie Diamond runs the most important Bank in the world and with4 trillion dollar of assets he has a unique perspective on the magnitude and the importance of the US government de debt and I agree with J that the United States needs to bring its spending back to more measured levels we're running a a national deficit of around 6% of GDP when we have a full growth full employment economy this is the moment in the business cycle where if anything the US government should be reducing its aggregate debt and not running a significant deficit so for an exended period of time it will simply be that the cost of capital is higher which means companies are raising less money they're able to pursue fewer new Ventures they're creating fewer jobs and wage growth is not as strong that's how it plays out in the foreseeable future in a worst case scenario if we don't bring our spending under control then you'll have a sovereign debt crisis like we've seen play out in a number of countries around the world over the years that would be a horrible outcome that would be far down the road what would be the Catalyst for the debt crisis the Catalyst would be an an auction that just goes very poorly that the US government shows up to raise billions of dollars in an auction like it does all the time and there's just a shortage of buyers you know it you'll never know exactly what's the precipitating event that causes Yes actually what I want to noce what the maybe the blacks when in the future would look like we don't know what that pre precipitating event is going to be after the fact we'll write about it we'll talk about it and we'll speculate as to why that was the event so if we if we think about the financial markets when a market is overextended or is fragile what actually precipitates a crisis is often in retrospect quite immaterial you know I remember the crash of 1987 I was in my I in my college dorm room at the time and the morning of the crash the stories and the headlines related to President Reagan's wife's health and related to a small Skirmish in the Middle East between a us um military vessel and a a small boat those were the headlines that day and the market was down 20 some per.
so what you don't know is what of event causes that loss of confidence that creates like a snowball rolling down a mountain moment where the market becomes completely chaotic and and fearful
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