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Glenn Profile picture
Glenn
@GlennLuk
Co-founder/BoD @HealthCareInc | Previously @Catalyte_io | VC/PE @Investcorp Technology Partners — Tech | Econ Development | Investing | China/APAC
17 subscribers
Apr 22 • 6 tweets • 2 min read
I don’t think people in replies making statements like “Korea will refuse to comply” quite realize that “ask” is a polite prelude to “also ban all RE shipments to Korea due to non-compliance”.

We are in a trade war. Gloves are coming off. Just as China was forced to adapt to chip export controls by stockpiling restricted equipment, exploiting loopholes, smuggling in the short/medium-term + developing domestic capabilities (upstream SME, building out domestic chip capacity) in the long-term …
Apr 22 • 15 tweets • 5 min read
I find it quite ironic how Pettis tries to distance himself from the Trump administration's tariff debacle given the clear influence his thinking and narratives have had in shaping the current obsession with tariffs; in particular, the disproportionate focus on the goods trade. We can clearly see this focus on the goods trade in the article's headline suggestion/recommendation of implenenting a "customs union like the one proposed by the economist John Maynard Keynes at the Bretton Woods conference" that attempts to enforce balance in (goods) trade.Image
Apr 21 • 9 tweets • 2 min read
Unclear how the U.S. can effectively enforce transshipment:

(i) Comparative advantage drives offshoring of labor-intensive work to developing countries.

(ii) For all practical purposes, offshoring these supply chains out of China will require cooperation from Chinese firms. U.S. wage levels are too high, which means this type of labor-intensive mfg work is simply not feasible to re-shore to America.

The U.S. lacks "producer power" here: it does not have the supply chain or indigenous human capital / know-how necessary to move these labor-intensive industries to its preferred countries via FDI.
Apr 18 • 21 tweets • 5 min read
For China, net exports does a particularly poor job of measuring foreign demand.

It overstates the “reliance on foreign demand” to GDP from two statistical effects.

While somewhat technical in explanation, these are very relevant in the context of trying to figure out which side has leverage in the ongoing trade war. The first is the structural deficit that China runs on FDI income. Foreign MNCs make for more money in China than Chinese MNCs earning income abroad.

The paradigm example is Apple selling iPhones to Chinese HHs. Apple sells over 40 million iPhones a year to Chinese HHs and has earned over $200 billion in segment GAAP operating income in China over the past decade.
Apr 17 • 9 tweets • 3 min read
Factoring in redistribution and wealth effects — which most people, including Armand seem to ignore — China and U.S are at roughly *equal levels of socioeconomic inequality but key difference is that China’s trajectory is improving while the U.S.’ is not. Probably time to re-up this deep dive I did last fall examining China’s socioeconomic inequality that goes beyond wages and takes into account redistribution and wealth effects.
Apr 15 • 14 tweets • 3 min read
Beijing has a bifurcated view on capital and this is something that has continuously perplexed Americans.

There is “strategic” non-market-oriented capital and then there is normal market-oriented capital that we are very familiar with. The entire SOE sector represents “strategic” non-market-oriented capital.

And many privately-invested firms are also subject to “strategic” goals through regulation and the active hand.
Apr 11 • 23 tweets • 5 min read
U.S. imported $439B of goods from China in 2024. Under the new tariff regime, it is heading towards nil over time.

What does the economic adjustment look like?

To answer this we need to go beyond dollars and dive into sector case studies:

In this 🧵 I'll focus on the iPhone. China exported ~100M iPhones to the U.S. in 2024 at customs invoice value of ~$430 each, for total recorded trade of $43 billion, or ~10% of total US-China bilateral goods trade.

This represented ~90% of trade captured by HS851713 (smartphones).
Apr 9 • 10 tweets • 4 min read
So I guess China’s response to the April 9th deadline was this white paper, published just a few minutes ago.

Link in ALT. https://english.news.cn/20250409/99fee2caf56643b590aab19d2dc9b239/2025040999fee2caf56643b590aab19d2dc9b239_XxjwshE007027_20250409_CBMFN0A001.docx Unlike the People’s Daily editorial, this one was published in English, which indicates who the intended audience is.

Here is my “live tweet storm” of reading that PD editorial.
Apr 7 • 8 tweets • 2 min read
My baseline scenario now is US-China bilateral trade reducing significantly in the coming years.

Whether it goes to nil or stabilizes at the lower level will be a function of the 2028 election.

What are some second-order effects of this? One second-order effect of this will likely be that China reduces its USD reserves.

This is not a direct retaliatory action: less direct trade simply means less need for USD-denominated reserves.

But what will be the replacement?
Apr 7 • 11 tweets • 3 min read
Let's game theory this from Vietnam's perspective.

▪️ Vietnam's biggest overall trade partner is China
▪️ China/HK comprise ~54% of imports
▪️ U.S. comprise 28% of exports (#1) with leading share in footwear/apparel
▪️ China/HK is 24% (#2) and largest category is electronics Vietnam reducing U.S. import tariffs to zero will not significantly increase imports from the U.S. 👇

The reason is that the U.S. simply doesn't have the things Vietnam's economy actually needs right now.

So this is actually a fairly easy "give".

Apr 7 • 17 tweets • 4 min read
This is an important point. There is an upper limit/cap on how much you can disrupt the Chinese economy.

↗️ 34% already covers a large chunk of the 2.5%. There are decreasing marginal “returns” of further increases where “return” is sadistically defined as “hurting China”. Let’s put that 2.5% in perspective of China’s fiscal impulse.

Net budgeted fiscal impulse increase was ~2%.

There was another 1% increase in the fiscal budget, so a total of 3%.
Apr 7 • 7 tweets • 2 min read
Brad has this really strange definition of “overcapacity” that is based on production of something above “domestic market”.

IOW any country that exports is at “overcapacity” in that product category.

Then he says U.S. tech/Internet is “fundamentally different”. But the U.S. is clearly a net exporter of Internet/advertising/tech. So it has “overcapacity” of this stuff under this strange definition.

Just as he argues Chinese mfg firms “flood” the global market and pressure foreign companies you can use this same framing on U.S. tech companies …
Apr 7 • 8 tweets • 3 min read
Balance of Trade (BoT) only measures physical cross-border flow.

Physical cross-border trade is only a subset of today’s modern global trade due to contract manufacturing and offshore tax havens. The above distinction succinctly captures the crux of the BoP debate I’d had with Brad Setser 👇

Like the Trump administration’s reciprocal tariffs formula, Brad focuses on BoT not BoP in trying to determine fairness.
Apr 6 • 42 tweets • 14 min read
This rapid response editorial from People’s Daily published a few hours ago provides major signal on China’s response strategy to the Trump “reciprocal tariffs”.

This is very much in line with what I have been tweeting over the past few days on the topic. It’s signal-dense, and worth parsing through key translated excerpts in a 🧵.

Source: opinion.people.com.cn/n1/2025/0406/c… Rapid response time.

Note the publication date: on a weekend Sunday evening less than four days after the April 2nd tariff announcements.

The depth of this response and the rapidity of the initial retaliatory response (within 24 hours) validates that Beijing was fully anticipating the possibility of this scenario for months.Image
Apr 6 • 8 tweets • 2 min read
Although a niche product category, perhaps passenger CNG (and not consumer electronics or chips) should be lauded as an example of strong execution involving state capacity.

India is now the world market share leader in passenger CNG vehicles. The negative in this is whether such focus on CNG actually had negative ramifications on the development of India’s domestic electric vehicle industry and ramp.

CNG seems like a transitory fuel technology to an eventual fully electric world. And it’s not like India awash in abundant natural gas reserves.

If so, this could be regarded as an example of strong execution against a suboptimal strategy.
Apr 5 • 19 tweets • 6 min read
Let’s think about footwear and tariff impact.

~22B pairs of shoes are produced annually.

China produces ~half and is the largest exporter.

This has been gradually declining as rising wage rates make it less competitive over time (footwear mfg is relatively labor-intensive). Image Vietnam is the second-largest exporter, exporting ~1B pairs per year from ~2,200 factories located mainly around HCMC.

Indonesia is also a large exporter. https://tradebeyond.com/vietnam-rising-footwear-manufacturing-capital/
Apr 4 • 7 tweets • 2 min read
This is unusually pessimistic and seems to rest on the assumption that only the U.S. could drag poor countries into developed status.

Globalization is not going away, but merely evolving. Trade flows re-routing. There will be an adjustment period but we are not going back to a pre-globalized world. Yes globalization is a fracturing a bit but we should also remember that the world’s most successful “dirt poor” to wealthy development stories took place during the Cold War when the global economy was similarly fractured.

readwriteinvest.com/p/what-are-the…
Apr 4 • 8 tweets • 3 min read
This is what happens when you live in a reality disruption field.

China is unlikely to pursue any of these pathways. 1. Has already (and swiftly) responded from an expanded retaliatory toolkit.

Beijing was clearly prepared for this scenario.
Apr 4 • 15 tweets • 3 min read
People still don’t seem to appreciate that official trade figures don’t include the U.S.’ largest “exports” to the world, which is intangible brand/IP/tech that flows via MNCs and aren’t captured in cross-border trade data because the physical products are often produced abroad. The large goods trade deficit is balanced out by services surplus and by profits generated overseas by U.S. MNCs that result in both repatriated FDI income as well as earnings power that supports stock repurchases and rising valuations.
Apr 3 • 6 tweets • 2 min read
Evaluating U.S. demand by revenue share exaggerates U.S. demand for underlying *manufacturing value-add.

Here’s an example 👇:

The U.S. accounts “30% of the global footwear and apparel market”. This number is based on global revenue share.

Americans spend a lot on shoes. But how much of that revenue is actually going to manufacturing vs. retail, branding, distribution, design, overhead, etc.?

The average Nike shoe costs ~$110 retail. But the physical cost of the shoe is only about a quarter of the retail price. And labor is a fraction of that. https://weartesters.com/cost-breakdown-100-nike-sneaker/
Apr 3 • 12 tweets • 4 min read
The measure for how many Fs China gives about the tariff (which was objectively higher than expectation) will be in how it reacts policy-wise.

So far small FX movement and no new incremental stimulus announcements. So far “dgaf” is proving out to be the default stance. This thread covers the latest fiscal impulse bogey, for the record.

Incremental policy changes should be measured against this.