00:00Santosh Rao is head of research at Manhattan Venture Partners.
00:03Always great to have you on the show.
00:06Let me ask you, what do you think the signs were that this extension of the truce was always going to happen?
00:14Yeah, I think great to be here, great to see you.
00:18I think what exactly happened is I think America has seen that just riding roughshod over every country does not work.
00:26He's managed to get the other countries, subdue other countries or get whatever he wants.
00:31But I think with China, they have, in fact, if you look at it, the optics of it, I think China has won in this case.
00:38They did not give in.
00:39They said we need to negotiate.
00:41And finally, U.S. has come back to the table.
00:44And this was kind of expected.
00:45There was no way that he was going to go ahead with all this huge tariffs on China.
00:49There's a huge deficit.
00:52So China was going to work it out.
00:53I think the net net, I think it's a huge positive for the retailer ahead of the busy season coming up, holiday, I mean, the buying.
01:02So I think it's net positive.
01:04And what that is going to do is it's just going to set a pace, maybe more rationality, more consensus in terms of where to go with it.
01:13And not just any random punishing every country for doing something that's totally not their fault.
01:19So things like that.
01:20So a lot of things, I think, to begin with, this is a good thing.
01:24I think China, if you want to ask who won in this thing, I think China comes ahead.
01:29This is the thing.
01:30You say these huge tariff increases have been avoided.
01:33If the deadline wasn't extended, what would we be looking at in terms of risk?
01:38Oh, yeah.
01:40If it's not extended, then there's going to be tremendous pressure on the retailer, on prices across the board.
01:46And inflation on the headline basis, it's down because of energy and food prices came down.
01:53But on the courses, it's up.
01:55It's up quite a bit.
01:57So I think inflation is still an issue.
01:59So maybe it's not growing very fast, but it's still there.
02:03So they don't want that.
02:04And if they continue, if he imposes these tariffs in November, it's going to really spike up prices, spike up inflation in the U.S.
02:15So he doesn't want that.
02:16So net net, I would say it would have been bad.
02:19It will be bad.
02:20I have a feeling it will be extended further if needed.
02:22But both countries cannot afford the disruption that this is going to cause if both countries keep their stand.
02:29Do you think this is just going to keep on happening until the hopeful summit between President Xi and President Trump happens?
02:36I'm absolutely in that camp.
02:38I think that's where it's going because there's just so much at stake here.
02:42You know, you just cannot impose tariffs for a country like China, which is a huge player and has the full bricks behind them, brick countries.
02:51So I think it's going to reorder the global order, especially.
02:56So I don't think China, U.S. wants to risk that on one hand, on the political side.
03:02But overall, I think U.S. needs the rare earth materials and many other things from China, which are very key to the future of U.S. economy and the global economy to some extent.
03:13So I think there's a lot more at stake for U.S. to just kind of end it here, end it there and not go forward.
03:19But there's enough breathing room now.
03:21We've got 90 days.
03:22They'll talk and talk and talk until they come to some kind of a meaningful middle ground, if not some off ramp for both countries to say that they won on this one.
03:32So I think that's what's going on.
03:33There's nationalism involved.
03:35There's a lot of pride involved.
03:37And the way he negotiates is almost humiliating for countries to go along.
03:41But they do it because they have to do it, smaller countries.
03:44But China and all, they don't need to just go along with anything.
03:48They have a lot at stake.
03:49The biggest economies, huge economies after U.S.
03:53So they're not going to just lie down and take it.
03:55They're going to fight it back.
03:57And that's what they're doing.
03:58And they're getting it that way.
03:59So I think there will be some kind of a settlement down the road.
04:01So I think there's a lot of people who are going to just lie down the road.
