Warren Buffett, Charlie Munger, Bill Gates on the state of the US-China trade talks

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Warren Buffett, Charlie Munger and Bill Gates sit down with CNBC’s Becky Quick yesterday to discuss the latest developments in the U.S.-China trade talks and what they think should happen next to benefit all parties.

Reporter: When you get China’s market down 5.5%, and down 7%, that’s something that has caught their attention today. Bill, you have spent so much time going back and forth to China and you know the Chinese leadership very well. What you are thinking on some of these things?

Bill Gates: I think good trade relations are incredible win-win for both countries. And it’s dangerous people think this is a zero sum game. So, I am hopeful that despite the latest announcement there is a trade agreement and the two countries can find ways to work together. The most important relationship in the world- both sides brought lots of strength –I understand markets are a little bit worried as these tariffs are getting higher and higher.

Reporter: When we first got the tweet, there has been report that Liu He and his delegation might not be coming here. I just heard a moment ago the Chinese have confirmed they will be sending that delegation this week…How the Chinese are going to deal with this when they are faced with the real force like the tweet yesterday?

Bill Gates: Well, I am not an expert in negotiation. But it creates a dynamic – both sides could start escalating against each other which would be a lose for both sides. This week will be interesting. Even though China is not a democracy, the political dynamics don’t allow them to look like they are caving in to a unilateral position.

Reporter: Charlie, you are an expert of negotiation. What do you think?

Charlie Munger: If you put tariffs on trucks, we and the Japanese are totally scatched in our auto industry. And that lasts a long time. It wasn’t the end of the world. We will end up with some trade settlement to develop tariffs on both sides. I don’t get excited about it at all. That’s part of normal life. Generally speaking, I think, that settlement is better than roughly a world war.

Reporter: If 25% tariffs on potentially all 500 billion imports coming in, would that concerns you about the American economy?

Charlie Munger: I don’t think we want a full scale tariffs war, just as high as both sides can make it. That would be massively stupid. If both of them a little bit disappointed in the negotiations, they should feel rapped up; for both sides a settlement is so much better than a trade war. They are just let you lose a lot of face to make that settlement. But I think they will.

Reporter: What do you think about, as an American, taking a stance with China at this point?

Charlie Munger: I don’t think we are crazy to say that some occasions you put the tariffs on to save some one, not the end of the industry.

Reporter: Is he right that we have been on the losing side of the deal?

Charlie Munger: I think he thinks we are at a loss as we’ve got a trade deficit. But I don’t think – I don’t totally agree with him.

Reporter: Warren, what do you think, who pays the tariffs- paid by the companies then passed onto the consumers?

Warren Buffett: They are taxed on consumers. It changes what people buy, what things to produce. You can re-adjust the world through tariffs. Generally speaking – there are always exceptions too: key equipment, military equipment – if a world adjusts to something very close to free trade, more people will live better than in a world with significant tariffs, and shifting tariffs over time subject to classic negotiations.

Charlie Munger: You’ve got to remember our country the United States is run on tariffs for some 50 years. This is not like some novel new things coming in. This is an old subject. (Is it a good thing or bad thing?) Well of course I’d rather have total good will that everybody is getting along. But I don’t see it being the end of the world to have some tension on the subject.

Reporter: If you look at Chinese stocks, one market down 5.5%, another Shenzhen market down over 7%, our futures down, all under 2%, does it mean it’s more painful to China than to us?

Charlie Munger: I don’t think China likes its market going down as a consequence of the trade brawl. (Reporter: How do you make sure if we have a deal, it is actually enforceable?) I think, China by and large a pretty good player. It’s desirable it works well.

Warren Buffett: We want China to be prosperous. (Charlie: Yes, we do.) If you postulate the world, I suspect the years for that matter, China or the United States feel like they are being abused, words not being kept, one or the other asks for one thing more, I mean, you are going to blow up the tension between the two countries. You can have a disagreement, but you can’t get things out of control.

Reporter: Which side you think is right?

Charlie: They are both right. I think they will settle it right.

Reporter: Do you think you all agree with that prediction? Bill, what do you think?

Bill Gates: It’s a dilemma when it appears to reacting to an automaton. In the Chinese case, there is no elections scheduled; their leader won’t be un-elected simply because they have to take a tough stand on trade negotiations. Markets up until recently would still get close, so that’s a little bit- the rational thing would get close, and I still read that (settlement) as likely.

Warren Buffett: I agree with you. Deadlines are a tricky thing. They produce reactions. They are really responding – the public opinion, they can frame people – that’s the way they get things done.

Reporter: But you do have a presence in China. Will you have a greater presence if the deal comes through?

Warren Buffett: We look at good signs. We have done a couple of things to China, trying to do more individually. It’s logical with the kind of capital we have, the big markets outside the United States, mostly likely to do something, and certainly China’s got the biggest market, there should be opportunities. If you are looking for capital around the world, we are very logical prospects.

Reporter: Why the deal does not work out, because of the trade tensions?

Warrant Buffett: I don’t want to go into details of that.

Reporter: In terms of what you do with your business, do these trade talks have any impact on you, on your investments, because you all have a large individual portfolio in China? Does this diminish your enthusiasm for Chinese investments anywhere?

Warren Buffett: If we got a call today for some business from China – they were looking for some big capital, we would be delighted to get that call. And we would follow through and make something happen.

Bill Gates: Certainly, there is in parallel with the trade talks, talk about what the technology export regime would look like, things like artificial intelligence. I have some concerns whether that will try to partition Chinese students from American students. The general sentiment towards China right now has gone down a bit. There are businesses or business deals that have to go through a new or tighter process. I am worried about even the sort of intellectual corporations being slowed down. We’ll see what that goes, but it’s a concern.

Edited by staff

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