David Mahon: Mahon China Investment Management CEO on the trade war brewing between the US and China

US President Donald Trump today forged ahead with tariffs of 125 percent against Chinese goods - escalating the US-China trade war.

Trump’s sweeping tariffs have unsettled the global economy since coming into force over the weekend, and China has vowed to fight back with tariffs of their own.

Mahon China Investment Management CEO David Mahon says China won't blink first in the stand-off.

"Trump's already blinked on all the other tariffs that he flung at countries quite randomly, so I don't think this is an economic argument. Reciprocal tariffs are another form of self-injury."

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge Right now, Chinese goods one hundred and twenty
five percent tariff when they reached the US border. US
goods eighty four percent of the Chinese border. It's a
high stakes game of who blinks first of chicken between
these two superpowers. Trump says won't be him.

Speaker 2 (00:15):
China wants to make a deal. They just don't know
how quait to go about it. You know, it's one
of those things that aren't quite they're proud people. President.

Speaker 1 (00:23):
She's a proud man.

Speaker 2 (00:24):
I know him very well, and they don't know quite
how to go about it. But they'll figure it out
in the process of figuring it out. But they want
to make a deal.

Speaker 1 (00:32):
David Man is a New Zealander who's been investing in
China for more than thirty years. He's with us from
Shanghai this evening.

Speaker 2 (00:38):
David, Hello, Hello, Ryan.

Speaker 1 (00:41):
What do you think the chances are of China blinking first?

Speaker 2 (00:47):
Well, Trump's already blinked on all the other tariffs that
he's flung at countries quite randomly, So I don't think
this is an economic argument. You know, Reciprocal tariffs really
are another of self injury. But once you get beyond
twenty or thirty percent against you. What else is piled
on doesn't really count. The whole thing is a political

(01:10):
push against China. So I think China's response to date
has been correct. It is reciprocated without escalation, and it
is going to sit tight. It is nothing to gain
by giving in.

Speaker 1 (01:23):
So you're saying, whether it's thirty percent, forty percent, fifty percent,
or one hundred and twenty five. Once you reach a
certain point, what you just start sending your goods elsewhere.

Speaker 2 (01:34):
Exactly. And China has been I guess, Trump proofing its
economy to some extent since his first term as president,
and in fact, Biden was a more efficient opponent against
China on trade in terms of applying Tower of surgically
blocking technology to China. But China expanded its share of

(01:58):
global manufacturing and trade made over those eight years. So
the time we come to the second trunk term, China's
already diversified considerably. This will hurt the American Market's an
important market, but China is apart from the eleven coastal provinces,
are developing country, and there are surges and downturns and

(02:20):
sectors all the time. Factories close it happened throughout the
ev sector. As they got to the point of being
able to produce great cars, there was a cost to
that and many fell by the wayside. So this is
a country that is a customed to being buffeted by
such things, and it's the only counter is any partner,
a trade partner that America has that as an internal

(02:43):
economy that's large enough and comprehensive enough that that can
be its engine and that can carry it through. It's
not as vulnerable as the other Southeast Asian countries are.

Speaker 1 (02:54):
David, what does New Zealand do in a situation like this?
You know China better than anyone in this country. What
does New zer and what should our line be so
that we don't I mean, obviously we want to suck
up to Trump get the best deal we can, but
we don't want to alienate China. It's our biggest trading partner,
it's number one and number two, so a lot on
the line for us.

Speaker 2 (03:14):
I think we have a good history, and you always
hear that every round of political cycle moves, we get
a new government and they've got bigger challenges of the
previous ones, which I don't agree with. I think that's
something which it's just a truism out in Clark's administration.
John Keebill English's administration was very good at managing the

(03:38):
China relationship with the America relationship by not reacting to either,
by basically maintaining our non alige status, which doesn't mean
we suck up to anybody. And we did deals, and
we did deals as a country with little agency, but
we're respected when we were in that position. I think
it's been confused in recent months under the current government,

(04:00):
but I see the language from Wellington in the last
I say two months has been pretty sensible. So I
think that we have a government and a national party
can look back on its predecessor administration learn from that,
take advice from that, and we don't need to reciprocate.

(04:21):
We've had a tariff slapped on us. Whatever we do next,
it's at this level we'll only hurt the New Zealand
economy further. I think we just have to accept this
for the time being, not out of weakness, but just
patiently watch because Trump is so volatile and he is
so unaware. I mean, listen to the tone of his language,
talking to China like a child that can't understand how

(04:44):
to deal with trade negotiations, This five thousand year old culture,
this extraordinary economy that's pulled itself out of poverty in
forty years, which would have taken two hundred for another country.
These guys know what they're doing. They have tremendous endurance
and oddly the lack of support the government suffered post

(05:06):
COVID and failed to recover in the last two years
because of a slightly flat of a significantly flat of
a normal economy. We're seeing our galvanization within China around
the government, and people are quite sanguine and there's a determination,
partly a defiance, that they'll make their way through this.

(05:28):
So I think New Zealand, as small as we are
and as little political agency as we have, we should
also not choose to act immediately and be patient.

Speaker 1 (05:39):
Just watch watch from David Appreciate your time David manchief
executive at Man China Investment Management.

Speaker 2 (05:45):
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Speaker 1 (05:49):
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