Dan Collins: Because I'm from Michigan, I grew up in a 30 year de-industrialization process.

Basically what I call a 30 year recession. I saw all the factories close around me in my hometown, none of my friends getting decent jobs. And I'd asked my superiors at the time, what, what do you think about this? We're moving all our capacity out of the U.S. And they didn't care. They didn't even think about it.

It was, I gotta get my bonus.

Steve Hsu: Welcome to Manifold. My guest today is Dan Collins. He's the founder of Tyrell Chemical. He's a graduate of Michigan State University and also attended Qing Hu University in Beijing. He spent 20 years in China participating in the manufacturing boom there and actually setting up local manufacturing for major US companies, I believe, including General Motors.

We are here to talk about US, China trade, war, tariffs, manufacturing, supply chain, everything that's been in the news recently. Dan, welcome to the show.

Dan Collins: Thanks Steve. Great to be here.

Steve Hsu: Now you, we were just talking about this, you are a Michigander and you are one of several generations in your family to have attended Michigan State University.

Dan Collins: Absolutely.

Steve Hsu: uh, now the way we say it around here is go green.

Dan Collins: Absolutely. I was, my dad went there. I was actually spent as a young child. My dad lived in married housing on campus, so I literally grew up at Michigan State as well from about zero to four or five years old, so.

Steve Hsu: When I first moved here when I was at the University of Oregon and I moved here to be the vice president for research. And I came here before my family could make the move because they really wanted me .

Dan Collins: mm-hmm.

Steve Hsu: And I lived in that married, which they've now torn down.

Dan Collins: Right.

Steve Hsu: I forgot the name of that Spartan Village, or what it’s called. Yeah, so I lived there for, I don't know, three or four months or something.

Dan Collins: Yep. So, yeah, I still, I still try to get back to Michigan State every year. Love wandering around the campus, you know, one of the most beautiful campuses in the country.

Steve Hsu: It is.

Dan Collins: Yep.

Steve Hsu: It's very nice.

Dan Collins: Yep.

Steve Hsu: So let's talk about your experience in China. you, after graduating from Michigan State, was it around 96?

Dan Collins: 97. Yep. End of 97. Yep.

Steve Hsu: And right. And right away you went to Tsinghua on an exchange program?

Dan Collins: Yeah. Michigan State had a deal at the time with Tsinghua University, an exchange program. I was in a group of about, I think I think there were seven of us that went over from Michigan State. I was supposed to do one semester there. ended up staying there 20 years, which was not part of the plan.

But yeah. Tsinghua at the time people may or may not know, but at the end of the nineties, very few foreigners in China. I. Even less foreign exchange students. I mean, we were in the, you know, foreign exchange student dorms. where I did, what I did at Tsinghua was I got a really great chance because they were very focused on bringing in foreign students and kind of, you know, the eco economic development of China was just about booming at that time, late nineties.

You know, you were, they had previously a big lot of inflation issues and things, but they were re all those kind of free market reforms were about to take off. And I was studying reform of the state-owned enterprise under the dean of the business school at Tsinghua. So I got to do a lot of research there and yeah, it was a fascinating time, but it was the kind of experience where, you know, I would walk out of the dorm and I would be followed around, around town, you know, oh my god, what, there's a foreigner here, what's he doing?

You know, it was a different time, you know, at, at that time. So I.

Steve Hsu: Yeah, so for my audience, probably people know that Tsinghua is one of the most elite universities in China. By some metrics. It's the most elite and pro, possibly the hardest one to get into. similar to Beida

Dan Collins: Yep,

Steve Hsu: And uh, which are both in Beijing. And I think a very significant fraction of the top leadership of the Chinese government has actually passed through Tsinghua University.

So in a way it's, it's a little more technically focused than Beida. So it's a little bit more like MIT than Harvard. But, in a way, it's kind of like a combination of MIT and Harvard.

Dan Collins: Yeah. Tsinghua, they call it the MIT in Beida, which is, as you mentioned, down the street, is really like Harvard and it's all in that Haen district. You get one of the most concentrated clusters of brain power in the world. You know, you're, you get into Tsinghua, you're not a joke. I mean, it's like you gotta be at the very top echelons.

In their educational program to get in. So it's not that I was there, I got through an exchange program, but yeah, no, that's always impressed by Tsinghua people. Still proud to be associated with it in any way. So also Michigan State, although

Steve Hsu: Yeah. Michigan State's not bad either.

Dan Collins: Right. We're not at Tsinghua levels, but you know, we're we, you, you get out of state. I always said, you get outta state what you want. Like you can, you have some, even some of the world's top professors and you get out of it what you put into it. Really. You could do anything.

Steve Hsu: Yeah. There's a famous thing among, if you're in academia, there's a thing called the Shanghai Ranking. I forgot, which is probably Shanghai. Shanghai Ong University does it. But it's basically a pro educational research project where professors there have created this project where they just gather data on all the universities in the world, and then they rank them.

And it's a very, very quantitative criteria, like papers in top journals, citations, Nobel prizes. It's, it's, it's very cut and dried at how they rank the schools. And it's not subjective. It's not based on reputations, it's just based on what the researchers at the school produce. And so Michigan State's usually rank around a hundred in the world, something like this. And interestingly, when I first came here Tsinghua was only ranked like, you know, maybe, maybe a little bit if at all. But now Tsinghua is probably in the top 5 or 10 or 20 in the world. And a lot have moved up on these very objective rankings.

They went from, wow, it's a top university in this country of one and a half billion people. But it's still ranked at the level of, oh, a good Big 10 in the United States. But now it's quite different. Now, in those quantitative rankings, a bunch of Chinese schools are now really at the top in the world.

Dan Collins: Oh yeah. Well, I, yeah, I think a lot of those rankings too have traditionally overstated the US schools relative to others. You know, you take a look at Moscow State University, which produced the Soviet Space Program, you know, a lot of very high tech accomplishments from their engineering school.

Extremely difficult to get into, like Tsinghua, and yet they're like 200 and something, you know, below you know, some US party schools. I just don't buy some of those rankings. But absolutely all the China schools have moved way up. Which they deserve. I mean these are not, you know, the, I'm sure you're very familiar with the Chinese education system.

It's no joke. And it's very meta, you know, it's not easy to get into. So at some of those top schools, it's only based on your scores, you know, there's not any slush, you know, there's no fluff. I did so many community hours, nobody cares.

How high did you score?

Steve Hsu:One of the places that still, it's basically, you know, in a way it's so meritocratic, it could be considered cruel because students have to take the Gau exam at the end of high school, and that determines what college you go to.

And, you know Tsinghua would admit a few thousand kids every year, but those are like literally the few thousand best scoring kids out of about 10 million.

Steve Hsu: Recently, or maybe a few years back, it would be 15 million or 20 million kids who took the exam. So, you know, it's a very, very select group on very, very hard material. Like if you look at the math problems on the Tsinghua exam, they're actually like math problems that would be on an Olympiad contest in the United States.

They're not like the SAT math problems. They're way, way harder.

And so they, they really are, they are really doing a kind of high ceiling of people's ability and also how hard they study, because you really have to study hard to do well in the exam.

Dan Collins: Absolutely. I had a guy work for me once. He was not from Beijing, he was from Gansu. So there is a little preferential treatment at those top schools for people like Beijing people. Right. And for the Beijing University a little bit. But he was from Gansu, and I'm like, oh, you, you're from Gansu and you got into Xinghua.

You must have done really well on the Gau. He is like, yeah, I was number two in the province. I'm like, okay. That explains why you're so smart.

Steve Hsu: That could be like number two out of like 300,000 that sat for the exam.

Dan Collins: Crazy.

Steve Hsu: And just since you, since you seem to know a lot about this stuff I'll mention something which most Americans don't know, even the experts in China, if you're in one of the ethnic minority groups, the non han roughly maybe 6% of the population, which includes the Uyghurs. Rather than the Uyghurs being discriminated against, they were never subject to the one child policy. They get very, very strong affirmative action to get into the top universities.

So the score you need to achieve as a Uyghur to go to Tsinghua, Beida is not as, not nearly as
high as what the ordinary Han kid, either from Beijing or from Gansu would have to get to get in. So there is a very strong favor in a way, favoritism toward these ethnic minorities.

Dan Collins: Yep.

Steve Hsu: China China, which, you know, like I think in the, in the usual narrative in the U.S. the idea is that they're heavily discriminated against, but it's actually actually the

Dan Collins: Yeah, I would recommend anybody go to Ürümqi and, and you know, Ürümqi has become a capital, it's literally the most developed city in all of Central Asia, which is kinda shocking because 30 years ago, 50 years ago, you're talking complete backwater. You know, I mean, you're talking, you know, camels and you know, little baars and, and you know, sheep herders, and now it's a modern, industrialized city.

There's car plants, solar panel manufacturing plants. You know, it's heavily industrialized in geography. Geography that's basically in the middle of nowhere.

You know, you go from, you know, from Beida to Ürümqi. It's thousands of kilometers.

Steve Hsu: If you study the engineering of what they had to do to bring power supplies, 5G access, all of that stuff to places like Tibet.

Dan Collins: Yep.

Steve Hsu: The government spent — and also even just roads, just good roads — the government spent unbelievable amounts of money to develop those far western regions of China.

And you know, if you're cynical, you could say, oh, they had to do that because otherwise they would have unrest if those areas were not developed. But for whatever reason, those are far more developed than the non-Chinese countries just across the

Dan Collins: Absolutely. Yeah. It's night and day.

Well, I mean, that's a whole subject we get into. I'm, you know, I was always very impressed with you know, the CCP, they had a rough start. I would say post World War II. Of course, they, or they were able to organize, but they really, they started to figure it out.

In terms of basic, practical economic development, you know, because they were pushed so far. You know, they had cadres in every little city and village listening to people trying to figure out what would work. And then when they went from the Soviet, you know, the Soviet command and control model started to break down clearly in the nineties when the Soviet Union collapsed.

They kind of saw that and then moved farther towards this, which we could talk about. We're talking about terrorists, but the, what I call the East Asian Economic Development Model, which is, which was based off Japan, South Korea. Not a lot of the people remember that South Korea, you go back to the fifties and sixties, it was Sub-Saharan level of poverty, Sub-Saharan Africa, level of poverty.

I worked with some Korean guys who'd be about 70 now, but they told me, Dan, you gotta understand, when I grew up, I was hungry. I didn't have food.

So that's where East Asia rose up out of. What China basically did, if you look at the big scope of things, started with command and control. Complete central planning didn't work.

It could marshal redevelopment after World War ii. That helped also work in the Soviet Union, but then it really, it flatlines. And then when they put in, they kept their command and control backbone. Oil and gas is nationalized, banking's, nationalized some heavy industries nationalized.

But then layered on top of that, they created the most hyper competitive private enterprises in the world. So all of this ecosystem is functioning together. and a lot of that private system is based on the East Asian economic model, which is export led development, development, capital accumulation, right?

And then human, human bringing up the human index. So how did we do that? So in China, when I went there, 98, 5% of people got a university degree. I think that number's now north of 50%, and you can literally maybe get towards 60. If you look at East Asia, Korea, Japan, you're, you could expect China to go to 70% plus, you know, on university degrees at some point.

So yeah, you saw, I mean, I lived through this. I saw the generations, you know, the dad was a steel worker. The sun gets an engineering degree, you know, and they just keep rising up. The human capital index improves.

So, you know, if you want to get into tariffs, I can, we can pivot there now, but that's where we're at. So yeah, I mean, I lived through this whole, what I call the rapid, most rapid ascent of any society in the history of the world. I mean, it was just obvious.

Steve Hsu: Let's stick, let's stick on this topic a little bit because I think even even people who think they know about China or East Asian development generally don't understand this, especially if you're not as old as you and I are, you wouldn't really know this 'cause it's, it's all kind of in the history books for a 30-year-old person today.

So to focus on HDI Human Development. If you look at height, the height of a 19-year-old in countries like South Korea or in China, through that period of development, when people grow up hungry, it's a big deal to even get some meat.

See, Americans can't understand this, but at the time when you, or maybe just before you went to China, people would be lucky to get some meat to eat every day.

Dan Collins: Right. Yep.

Steve Hsu: So just imagine that if you're an American. And the same thing in South Korea, right after the Korean War, they were desperately poor. What that does is stunt your growth.

Dan Collins: Mm-hmm.

Steve Hsu: And even in Taiwan the younger generation is much taller than the people that were born 30, 40 years ago.

Dan Collins: Right.

Steve Hsu: We just completed a genetic study in Taiwan using the Taiwan Biobank. And one of the interesting things is we could document that the genetics of height have not changed in Taiwan, but the average height has gone up several inches just because people got richer. They can eat more calories when they're going up. They get more calcium, they get more protein. Everything changes.

Now I just looked at some numbers and the average 19-year-old in China is taller than the average Italian.

Dan Collins: Oh, okay. Yeah, I believe I can believe that. Yeah.

Steve Hsu: Yeah.

So you just see this crazy thing where, like among old people, you see very few tall people, but then among young kids you see a lot of kids that are over six feet.

Dan Collins: Sure. Well, you know, in the two thousands — it was the nineties or the two thousands — China had to redesign the city buses because they had to make 'em taller.

Steve Hsu: Yes.

Dan Collins: So to your point, yeah. People are off, you know, make it makes sense and really post, yeah. You're talking post 1980, most of Asia was desperately poor and a lot of, not a lot of people understand as well is that East Asia, we're talking Taiwan, Japan, South Korea, you know, these tiger economies as they were called at the time, Hong Kong.

These guys were desperately poor and developed under mi military dictatorships through this export led development model. Now the problem we get into with trade is that they're still doing the export dev development led model and it's creating a lot of issues in this, with the state. So, but.

Steve Hsu: Let me mention two other things about development and human development. So I was just talking about nutrition. You mentioned already that at the time that you went to China in the nineties, only 5% of high school students were able to go to college, or 5% of 19 year olds were able to go to college, and now it's well over 50%. So if you think about that, that's 10x.

So if you were a smart kid in China in 1990 or 1995 and you wanted to learn to be a semiconductor engineer, you were probably outta luck because unless you were really at the tippy top of that society, you were not allowed to go to college. There just weren't enough resources for you to get trained.

Dan Collins: Yep.

Steve Hsu: Now you have a 10x within that society, you have a 10x in the fraction of the 19 year olds who can go and learn how to do machine learning programming or semiconductor development, or mechanical engineering, whatever it is. you're at developed world levels of human capital development. And that has come as a shock even to American scientists and researchers because they were used to this idea that like, yeah, China's this huge country, but they, and they send a lot of their people here for graduate school and stuff.

So we're used to like, oh, that level of human capital flow. But they don't realize that a 10x happened, happened in the pool. All of a sudden they're just awash in really, really smart, well-trained 25 year olds, which just wasn't the case in the 1990s. So an environment where you had to copy everything. You didn't have any strong tradition of world-class engineering or world-class science or chemistry, whatever. You just didn't, just didn't have it in 1990 or 1995. Now all of a sudden you have it for the first time you have it, and you have it at this crazy scale
where every year they're turning out about 10 times as many scientists and engineering grads as the United States or roughly equivalent to the rest of the world, actually, combined. So it's a, that, that delta has not been incorporated into people's thinking about what the U.S. is actually competing against right now.

Dan Collins: Absolutely.

Steve Hsu: The other thing you said, which I wanna emphasize, is that all these Asian tigers went through an authoritarian phase where, you know, if you wanna like bulldoze somebody's farm because we need it for, you know, an air, air airport tarmac, or we need it for a super highway, that it's much easier if the authoritarian just says, look, this is our economic development plan. We're doing this to you. There's no courts that are gonna protect you. We're just gonna do it. We're gonna move you over there. And maybe it's terrible for that individual farmer, but the country develops very fast, as long as the government knows what is kind of doing the right thing. And but in the case of the other East Asian economies, they transitioned out of that authoritarian mode into very vibrant democracies.

I personally don't think that once China gets a little bit more developed and a little bit wealthier, it couldn't become more like Singapore or South Korea than North Korea. So, so everybody in America, the, the anti-China, people in America want to portray the country as like, it's, oh, it's like a giant North Korea,

Dan Collins: Yep.

Steve Hsu: But in my mind it's much more like a giant Singapore than a giant North Korea.

Dan Collins: Oh yeah, absolutely. The Chinese that even going back 20 years ago, they laugh at, they kind of laugh at North Korea. They laugh at the Kim family. You know, I study with some North Koreans at Ching hu but you know, they're definitely afraid to talk to me and spend some time on the North Korean border.

But yeah, the Chinese, they look back and, you know, Mao, Mao is still a hero, but they also realize like, why did we get into this cult leadership thing? This, it's crazy. And they laugh at the Kim family, you know, North Korea and people buying into that. So yeah, absolutely China is way closer to Singapore on the scale than, than in North Korea.

That's in North Korea, you know, the 1960s. China is like history. It's long gone.

Steve Hsu: Yeah. You know, when I meet with government leaders there, like sometimes I'll be there and I'll, for some reason I'll be at some event or I'll be sitting at lunch some, you know, at the event with some government official, I even have relatives on my father's side who are government officials, right?

And when you talk to them, they're just like technocrats that you, that might have come from Singapore actually. and the way they think about their society, like none of them are thinking about, oh, I don't like this business guy. I'm gonna send the secret police over to his house now and interrogating him or having him shaken up like that just isn't part of the mentality there.

So the picture that even JD Vance has of what Chinese society is like or is totally wrong.

It's like, there is a legal system there. Maybe it's not exactly like ours or maybe it doesn't operate as efficiently as it should or effectively, but generally things are resolved through that set of rules. They have a set of rules by which the society is run and they mostly follow those rules.

Dan Collins: Yeah, I, what I tell people if you feel more free in China than you do in the United States, to be honest.

So, you know, I drove a car there for 20 years. I never got pulled over by the police. They were stopped at a checkpoint. You know, you basically do what you want in China, as long as you're not hurting anybody.

You can basically do what you want. It's a very, you know, free society. You're not, you're not forced with high insurance bills and high medical costs or high property taxes. it was, you know, the nineties from today was kind of the wild West from, I'd say nineties to 2010 ish. You know, it was really the wild west.

It was like, just build the businesses, get it, get it done, do anything. Nobody cared. But then after that, they really started clamping down on, you know, environmental regulations and these types of things. But yeah, no, I lived through the Wild West section. Not a lot of people remember the late nineties.

China was so, it was not as poor as it used to be, but it was still in big trouble. Like when I was at Ching hu they had to open businesses. The government didn't have money to send the universities, so they said go open businesses. So they'd open a telecom company, they would, the military were running hotels.

Government said, we don't have money for you. The military opened bars and restaurants and hotels. Eventually they were told to get outta that business. but it's also how they develop their massive industrial base they have now, which is very impressive. I would say the world's leader in terms of actual manufacturing capabilities is they did a bunch of joint ventures with foreign companies, the best manufacturers in the world.

I used to run a Norco jv, a joint venture Norco's, like the Lockheed Martin of China or something.

They do assault rifles. They do, you know, weapons, all types of different west artillery weapon systems. But yeah, they learned, okay, let's bring in the guys that know how to do forging and castings and stampings and precision engineering and manufacturing.

That's how they learned it. So it was really smart where, you know, invite people in, learn how to do it, and then it, then you just do, can do it yourself. And so it was, I lived through that whole joint venture kind of model. It was quite interesting 'cause I used to visit Chrysler a lot and I'd go through the second floor, which was the Beijing Beijing military section of something.

Something was developing, was developing their military vehicles. And then the third floor was the Chrysler jv. At the time it was called Chrysler. But yeah, no, it was interesting. But they went from that to, you know, we used to have too many workers. One of my first jobs off Chinois was at General Motors.

They had bought a bunch of facilities. Nobody wanted to go visit these companies. Like though they sent me, I was the young guy, I'd go out to the boondocks and you know, the boondocks like Hong Jo, right? Which is an amazing place now. But back then everyone considered it like backwoods or something. And uh, you know, I'd look at all these joint ventures and we would have 800 people.

Steve Hsu: For the listeners, that's now the home of DeepSeek, for example, and Alibaba.

Dan Collins: It looks like the future. It looks like the future if you go there, it's just an amazing place. But yeah, back then, you know, all the big executives didn't want to leave Shanghai. Basically, they'd send me out to all these facilities and I would be in different factories every week just trying to understand what's going on.

And you know, they would have seven, 800 people, they would probably need a hundred. So we literally had way too much labor in the late nineties in China. It was a huge excess of labor. Then by 2010 what had happened, you'd already started to see the first signs of labor shortages, which was incredible.

Like nobody would've believed that 10, 15 years before it would be incomprehensible. because there was a lot of rust belt unemployed up in the northeast, you know, the whole Chinese economy was shifting. and then now you still have China, you have, I think you have an economic transformation issue.

So what do we talk about? All those people that went to college, now they don't wanna work in factories. So you have, you have all the one child policy, you have all these highly new educated people. How can you shift your economy on a dime to go from, you know, blue collar to white collar like this within a decade?

Extremely difficult. I think China's doing their best to manage it. But if the slowdown, you know, the slowdown of what we talk about now in China, I think it's basically that it's how to convert. That economic system where your human capital index rises so fast, right? And you're seeing that with these young engineers in deep seek and all these other, you know, types of companies.

And it is, it's just, it's just changed so fast. So there's a lot of transitional things that are happening now in China that have to go forward. But, yeah, it was amazing.

Steve Hsu: let's, let's, let's spend a little time talking about the joint ventures that you worked on. So I think most Americans are not familiar with what happened. So, we have this cartoon campaign, you know, slogan kind of thing. People say that like, they stole our jobs, they stole our ip. And part of that could be, depending on which party you're in, it could be something like rich Americans selling out the working class Americans by moving all the factories to China.

So, this is very complicated and emotional rhetoric around this, but you are ground zero, right?

Dan Collins: Yeah. Yeah.

Steve Hsu: So, so my understanding is if, if you worked at the GM joint venture in China. They were forced to do a joint venture. So GM owned half, maybe, or a little bit less than half.

Dan Collins: Yep.

Steve Hsu: And maybe a Chinese state-owned entity owned the other half.
The two parties agreed that they would set up manufacturing in China. There would be, there was agreed upon know-how and IP transfer as part of the JV. GM signed onto it, Chrysler signed on. In return, they got access to this huge market, which for many years until recently, was a huge profit center for all of these automakers, including Volkswagen and other automakers outside the U.S.

Dan Collins: Yep.

Steve Hsu: But the point I wanna make is that it was legally, it wasn't that Americans went there and said, oh, we're gonna, we're gonna build stuff here, but we're gonna protect all our know-how. It was actually from the get go in agreement that there was gonna be knowledge transfer and IP transfer to the Chinese JV. And that is indeed what happened. Now, tell me if I'm right about that.

Dan Collins: No, that's generally right. I think so. A lot of people don't understand. So what historically the companies like a GM or anybody went there originally for, was this market access? Right, so all the joint ventures we did were for market access. The car makers had to be JVs, but parts makers didn't have to be JVs used.

I set up a lot of wholly owned facilities in China. I also worked for a Taiwanese steel conglomerate. I had 2000 employees. I was the only non-Taiwanese manager, so I did that, you know, you know, all in Chinese as well. So, you know, I spent years doing that. But yeah, so we went for market access, right?

They did the numbers. The Chinese car market, well, we're selling half a million cars this year, but just do the math. As they get wealthier, they're gonna buy a lot of cars. Sure enough, today, a few years back, GM was already selling many more cars in China than they were in the United States, and we're not buying any Chinese cars.

So it always looks at the, you always look, look at the market. So China has been very open with their market, unlike Japan and South Korea, which have basically blocked their markets and will, you know, Ja, like I always say, Japan won't buy South Korean cars. South Korea won't buy Japanese cars. Neither one will buy Chinese cars.

So that gets into that kind of mercantilism, export-led development thought process. But China, on the other hand, foreign multinationals have made a fortune in China and continue to do so. General Motors, I think the last number I saw official reports were, has made over $15 billion in China. So China eventually became 30 million vehicles at the time.

This gets into how it is related to what's happened in the U.S., which is basically what I say, one of the four big geopolitical trends of my lifetime: the fall of the Soviet Union, the rise of East Asia, the rise of China, and the de-industrialization of the United States.

These are the four overarching things that have happened. East Asia Rise, China and the US are all interlinked. So, they didn't steal our jobs. We went there to, for the domestic consumer market, number one. But number two, when people realized how easy it was to manufacture the exports started flowing right, and already by year 2000, I think, Walmart was eating up 10% of all Chinese exports.

Just, you know, China got so good at, you know, mom and pop setting up this little shop and that little shop, you know, it could be done in days, right? Little guy with a screw machine company just sets it up. Like we talked about the human capital index, you know, they were working in the factory next week they're, they're making that stuff right?

You saw these, you know, in China today, all these little ecosystems of certain product lines develop, oh, this little village is known for sunglasses. Next thing you know, they're producing 90% of the world's sunglasses because they've got 50 little companies that have set up making them.

So they just learn, they just climbed up that value chain so fast. So the exports absolutely became a huge thing, but that wasn't all, the only intended original reason for going to China was that the consumer market's gonna be massive. And then people also forget that half of the trade deficit with China is created by our own multinationals manufacturing in China. So, you know, there's very few Chinese-branded products in the United States. There's a lot of Chinese products. It's 80% of everything you touch, but most of it is controlled by the U.S. multinational firms. You know, like the Apples and the things.

Steve Hsu: Yeah. I want to get more into that in a moment, but I just, I wanna get back to this one point of like, what was GM thinking when they hired you to set up a line.

Dan Collins: It's a consumer market. A hundred percent.

Steve Hsu: And so it was primarily so they could access the China market. But then as a byproduct of that a little bit further in, in the future from there, they realized, oh, I could actually make stuff in China and re-export it back to the United States.

Dan Collins: Yep.

Steve Hsu: Not necessarily cars, but, but other things.

Dan Collins: Yep.

Steve Hsu: And the, the sort of populist line, maybe the MAGA, even though I'm kind of a Trump supporter, like the MAGA line here would be, hey, the rich corporation sold out the American worker and replaced the American worker with Chinese workers.

That fulcrum that, like where that happened, they went there originally to capture the market. They did explicitly transfer technology and know-how to China. China got good at making stuff to the point where the companies ended up re-exporting back to the U.S. But it was, how conscious was this decision. Like, if you talk to some guy, like maybe you talk to some exec at GM and maybe he has Michigan roots and his dad worked on the line, you know, making Cadillacs or something.

Dan Collins: Yep.

Steve Hsu: You know, did he say like, well, this is the smart business thing for us to be doing, but I, I see this is not gonna be good for Michigan in the long run.

Like, did you ever have conversations like that?

Dan Collins: I had those conversations. I am, basically, you could call me a MAGA guy, but I have a lot of practical, more real world intricacies within the whole political stuff, especially with regards to economics and tariffs. But no, I had those conversations. A young engineer, because I'm from Michigan, I grew up in a 30 year de-industrialization process.

Basically what I call a 30 year recession. I saw all the factories close around me in my hometown, none of my friends getting decent jobs. And I'd asked my superiors at the time, what, what do you think about this? We're moving all our capacity out of the U.S. And they didn't care. They didn't even think about it. It was, I gotta get my bonus. Okay.

Steve Hsu: Yeah.

Dan Collins: So there, there's, there's room. There's blame to go around on how the U.S. got to where it is. Number one is, you know, the unionization is not, you know, the union has not helped the U.S. in terms of manufacturing capabilities. It's been a hindrance from day one.

Shanghai General Motors produced higher quality than U.S. General Motors with ma. Many fewer workers in China than us used to because of unionization rules. It was never about salary, but it's unionization rules. Second thing, at that time frame, people forget, from 2000 to 2016, we had the highest corporate tax rates in the world under North Korea.

Just under North Korea, 38%. So what the multinationals all did was they said, why am I, I, if you set up a fixed asset plant and equipment in the us, you're gonna get taxed 50%, right? When you factor in everything, okay, and you've got all these retirees and you've got a unionized workforce, I'm gonna go make it in China, run the financial transaction through Hong Kong, and I'm gonna pay 0% tax.

Every multinational in the, in, out of the United States did this. This is, this is, I was kinda shocked to learn this when I was younger. I'm like, you, you're all running these financial transactions through Hong Kong, you know, and it was an issue even in China because you would transfer price stuff outta China with no profit, recognize all the profit in Hong Kong, ship it back to us.

The U.S. company is a wholesaler distributor. They recognize no profit. So that was basically the gain that was going on this whole time.

Steve Hsu: But, you know, not so different from maybe Google, Facebook Google Meta, and Microsoft, all their profits being in

Ireland or something. Right. Like totally

Dan Collins: Right. So we, yeah, it's ridiculous. We gotta get to the bottom of all this tax dodging and, and get more realistic on where to recognize profits and, and keep taxes at a reasonable rate where you can manufacture. Right. So we, we, we push people out of the country basically.

Steve Hsu: Okay. But just, just to make that historical point, very crystal clear. American executives in your era were just following obvious incentives.
Dan Collins: Yes.

Steve Hsu: It was a no-brainer for them to just be like, well, I know my dad worked 30 years at that factory, and I'm sad that my cousin's not gonna be able to work at that factory. But the only way we can survive as a company or the best way we can thrive as a company is we're gonna move the manufacturing to China. We're gonna recognize the revenue in Hong Kong.

Dan Collins: Yep.

Steve Hsu: It was not rocket science. It was almost like this, you know, was the obvious way to do business. But it ended up hollowing out the American economy.

Dan Collins: Yeah, that, that's what Price Waterhouse would tell you to do, right? That's what the consulting companies would tell you that that was, that was the model everybody was following.

Steve Hsu: Right.

Because there is, if you're anti-China Hawk today. You don't know or care about any of that history, you just say like, those Chinese guys, the, the CCP stole all our jobs and stole all our jobs. Stole all our IP.

Dan Collins: Right, right.

Steve Hsu: Right, that's all, it's been morphed into that.

Dan Collins: Yeah. There's a lot of intricacies that, you know, I really hope the US can like. Unfortunately, I don't think we have the people in the U.S. at the top that are conveying all these things, but there's blame to go around. There's win-win situations involved here. In both cases, I'm constantly pushing the G two concept, which is let's the US and China work together.

If you look in ai, it is a U.S.-China game. You know, most of the industries are, now, it's for large scale companies, right? Macedonia is not gonna be able to come out and make an EV or a ai. Better ai. It's basically China, US and then maybe Europe can get its act together and catch up. Maybe, maybe not, but uh, yeah, we need to work.

You know, this whole concept of the IDE trap, I like to say, do you realize like Athens and Sparta, you can drive between these two cities in three hours? Okay, so the point is, US and China, the world's big enough, let's work together. Let's build mutual prosperity. I think China would understand that us, yeah, you have a manufacturing problem, let's work together.

We have, you know, no issue for us to re industrialize. It has to, we're the only large co you know, we can't be 350 million people and make nothing. You know, that's what I tell people. Like if you also, there's a lot of trends, as I'm sure you're familiar with, that are helping out. And what I do today in my businesses is we're focused on reshoring, a lot of manufacturing.

Because what you're having now is humanoid robotics, which is gonna be here by 2030. Low cost energy in the US you know, hopefully if they can keep up with the power generation build outs, the whole story for offshoring is gonna be gone. The tax, the tax rates are lower automation, automated 5G connected equipment.

and most of the stuff will come back just based on national security reasons. So it's in the process of transferring a lot of it back, but, you know, you have to know how to do it smartly, right? Like you, maybe you want to keep your tool makers offshore and just do final assembly, bringing in some labor intensive sub components.

But the whole tariff thing, you know, like I was, I've been for tariffs for 20 years because as I was telling people mod moderate tariffs because. China's not a free market economy. It's really not. Japan and South Korea block their own markets, so you can't be fully wi, you know, even Germany and UK have tariffs against you.

You had no tariffs against them. So you can't have a wide open economy forever, and then everyone else blocks their own markets. You get what you have now in the U.S., which is hopelessness, deindustrialization.

Steve Hsu: So if I could just recap a little of that for the audience. So, I think you are saying that like. Trump is not crazy when he says other countries are and have been using tariffs against American companies for a long time.

Dan Collins: Yep.

Steve Hsu: And you know, a lot of the things he said, like, look, I would just be happy if we just had exact, we'll just mirror what you do. Wherever you are, we'll be there. And at least it's fair.

And I think the, the press who, which is still, you know, like as anti-Trump as it’s ever
Been, like that message never gets across that Trump is reacting to an unfair setup that has been in existence for generations.

Dan Collins: The correct concept is there. The execution, I think, was done poorly. So the concept is, yeah, Japan imports 1% of their cars. China 0.3%. South Korea 1%. There's a reason for that. If they're also competitive, why aren't they buying each other's cars? Right? So there's tariffs and there's also non-tariff trade barriers.

So I can give you some examples.

In China, this is a real story. You'll never hear this. This is from real experience. I think it was 2003. The China car market has started to boom. The government came to us with a letter. No official o, no official overhead on it. Here's the plan. You gotta localize all this stuff because the car makers, we were making fortunes on importing components and sub assemblies and just putting it together.

That's not what China wanted. 'cause all the jobs and technology came with building the stuff, right? Not just latching it. Ratcheting it together. So they gave us a plan, like you localize 60% of the car, or it will be taxed as an import. So we set up all the factories. I would spend the next five years literally doubling the capacity of the plant I was at every six months.

So we, I call weaponization of the customs. Customs will constantly monitor, why is this still getting imported? They come to you, why, why do you have to import this? Why can't you just buy this here locally? Right? These are the things that go on. So, and Korea at, there was a time if you drove a foreign car, they wouldn't sell you gas.

Okay? They're, they're nationalistic. Oh, he thinks he's too good for a Korean car. I'm not gonna sell him gas. You know? So that's the reality of the global trade system. You don't find it in textbooks, right? In textbooks, it's very simplified and it works beautifully. But in reality, as I say, you'll only find free trade in economic textbooks.

That's the only place it actually exists.

So he had, Trump had the right concept. We have to, you know, you can't be a superpower and not make cars. We made 9 million cars last year, the same number we made in 1970. Okay. you can't be a superpower and not be able to make steel, not be, not be able to make ships.

You see all this erodes into the US defense industrial base capacity where we have trillion dollar budgets and we can't make anything on time and everything's five times over budget. you're, you're seeing even things we should be leading on like automation. South Korea's way ahead of us. China's way ahead of us, you know, in terms of, I think you posted a chart on X about robots per amount of workers, right?

So the auto, I follow the automation in China very closely 'cause I plan to use it for a lot of my plants and. In the States. It's just incredible what's going on. So, but, we've lost the basic core of manufacturing. When you lose that, you can't do the more advanced stuff. Right? So we've gotta get back to making stuff so they have the right idea, wrong execution.

It's been chaotic, it's been changing.

It's mass tariffs. I just paid, and one of my companies just paid the first Fentanyl tariff I ever paid. It literally says Fentanyl tariff on it, on the, on the documents. That was 20%. But I have a chemical that we import only from China. It's sold to some of the largest semiconductor makers in the world, and it's now at a 200% tariff and it's not made here.

Right. everything, when, when we 200% tariffed on China. That's 145%, 20% fentanyl, 20%, 24%. Section 3 0 1 tariff. That is going to, we're gonna have shortages here real quick. We're gonna have mass chaos. So I would've executed the tariff system by HTS code. That's pro product code. Go start with cars. Cars, sure.

20% of people can switch to American cars. People importing cars can work on localizing cars. That there's a substitute there, but people don't realize how deep the Chinese supply chains are. Okay. 80. You know, when they do trade or manufacturing numbers, they do it in revenue, right? But keep in mind, everything in China's US is five times more expensive than in China.

So what, what I say is 80% of everything you physically touch is coming from China. If you look at in terms of widgets, how many containers are leaving globally every day? You know, of the top 10 ports, I think eight are in China. 'cause they're moving the volumes. So it's not just a revenue game, it's a volume game.

You've got, and now we've tariffed everything outta China. It's gonna be a disaster. We're gonna have issues, so.

Steve Hsu: Could I dig into that point.

Dan Collins: yep,

Steve Hsu: Actually, you've said a bunch of things in the last few minutes that I want to return to. But, this is one I specifically want to drill down on.

If we look at the goods that are affected by the tariffs right now and effectively a lot of them, I mean, you mentioned one where there's no substitute, so that's just gonna be an increased cost component in our process here. But some of them are like, stuff that sold at Walmart may just stop coming.

Dan Collins: Yes.

Steve Hsu: So we, we have, we have finished goods going to retail that maybe will just disappear.

When, when someone imports something here and they pay X for it, they're generally selling it for 5x at the store.

Dan Collins: Roughly. Yep.

Steve Hsu: If they can't get it, then the cost to our GDP, our economic activity is actually 5x, not X. Right?

Dan Collins: Yep.

Steve Hsu: China loses X because they couldn't sell it to us, but then all the people who moved it and managed the Walmart and Walmart shareholders, they were getting that 5x when they sold it and that economic activity could potentially go away.

So that is actually an asymmetry against the U.S. for goods that can't be sourced somewhere else, right? If X had to come from China. Is that a fair analysis of GDP?

Dan Collins: Well, absolutely, and I've argued for years the American GDP is a lot of fluff. It's capturing a lot of financial flows. It's, you know, it's, it's expensive hospital bills and legal services and, yeah, no, you're right. Absolutely. That $5 item in Walmart that costs a dollar outta China, America will lose the $5 GDP if they don't have to simplify it if they don't have the item.

Steve Hsu: Yeah.

Dan Collins: And to your point, items are stopping a container, traffic leaving. China was down 50% for the last, say, three weeks. and now I just saw today the port of LA is saying this week, 30% decline in incoming traffic.

Why is that happening? Because guys that are importers, the, it's, it's the chaos. Nobody knows.

Nobody is someone willing to pay 200% more than they were just paying, you know? some things you could eat some, you know, when it was 25%, you could eat that margin. You could figure it out. You could ask for a little price increase, even if it's 40%. Oh my God, I'm gonna have to raise your price 20%. Right?

But when you get to these kinds of levels, it just shuts the system down.

200%. Like what? I don't know if anyone will pay for that. I'm just not gonna order it. I'm just gonna wait. They're just stopping.

Steve Hsu: So the example I gave is finished goods that would be sold at retail in the United States. and that Trump in a recent comment said, oh, so what, so instead of your kid having a choice between 30 dolls getting 30 dolls at Christmas, only getting two dolls, the end of the world. Okay, let me shift to something else, which is that there's some high value add manufacturing process in the us, like maybe making a car and, but some screws
or pumps or some, some significant component is necessary to build that car and it's being sourced from China. Now, it can't come in because of the tariffs or, or whatever it is.

That's hidden from most people. I think most people don't, they can think about Walmart, what's gonna happen tomorrow at Walmart. They don't understand how embedded all this is in, you know, advanced manufacturing that we really want to work in the United States.

Dan Collins: Yep.

Steve Hsu: Comment on that or you could even talk about semiconductors, which you're involved in.

Dan Collins: No, absolutely. So your point is exactly correct. They're called the Golden Screw Theory, right? If you have an entire hundred million dollar operation and you're missing that golden screw for some piece of equipment, you just don't have it. It just shuts down. But it's actually much worse than that.

To your point, so much U.S. manufacturing is a lot of assembly. It's not real manufacturing anymore. All the hardcore manufacturing, the dirty stuff. Forgings, the castings, the, all this type of stuff. The stampings are all imported. Most of it is from China. You know, the chemicals, China makes 50% of the world's chemicals.

We almost make none like our chemical production left years ago, decades ago. All of this stuff has to be imported, put in the manufacturing equipment. Absolutely, you could start seeing massive shutdowns … I always say if the China trade ship stopped showing up, they'll, it could shut the U.S. down in 30 days completely.

So that's the non-retail side of it. Like you're absolutely right. Like the manufacturing that is here in the States is fully dependent on it. You know, I gave you an example on semiconductors. It takes a thousand chemicals to make a semiconductor chip, a thousand different chemicals. Most of those are not made here.

They're imported, many of them from China. So yeah, it's, that's why you wanna keep the trade open, but you have to, you know, this system's been building up for 50 years. And then to think you can change it just with the stroke of a pen overnight, it doesn't work that way. It's just gonna create, and guess what, it's gonna be a lot easier to re-industrialize with a decent economy than if you just crash the whole thing down.

So, I think, I think what Trump has done is they come in and they go and they get the problem. They go to Michigan, they go to Pennsylvania, they look around and they go, what has happened? All our manufacturing's gone. Okay. They look around, where'd it go? China. Okay. And now they're flipping the card table over the global trade system, just in anger, you know, but it, it, we really need to be wise at this point.

We really need to take, you know, a more thoughtful approach, how we handle things,

Steve Hsu: Okay, so one of the main reasons I wanted to invite you on the show is for that perspective. So under the hypothetical that we don't get a negotiated settlement with China in the near term, so say this extends for months, and the tariffs stay at this super high level, a hundred percent, 200% level for months, you're predicting basically even, even like a lot of the core manufacturing that we really care about in this country, even semiconductors gonna seize up?

Dan Collins: Yeah, I think the first thing we'll see is on the retail side. So when you get 30% less containers coming in, that's just less stuff. So what I always say is, if you don't make stuff, then you have to import stuff. If you don't import stuff, there just ain't no stuff. So

Steve Hsu: Yeah.

Dan Collins: What happens to the stuff that is here? All the prices start to rise because it's in demand. So I think on the production side. The first noticeable for everything will be the retail side, production side. They will air freight components in to save their production if they'll pay the extra money, if they absolutely have to. So you may or may not see some se may or may not see some seizing up, but you're gonna just start, you're getting the, it's so chaotic right now, and I deal with all types of companies.

Fortune five, hundreds, nobody knows what to do. Nobody knows what the tariffs are actually gonna end up or be. I know I want to get out of China. Oh, I can't get outta China. Guess what? When? When we talked about it, it's not just dolls. Okay? If you want your car repaired, you do almost every AutoZone, O'Reilly, Nampa, 90% of the car components are all made in China.

Okay? And those are all imported. So even if you wanna make those here, okay, just to replace, like take a brake disc, right? If you wanna make, break this and take and furnish the whole US market, you need 35 factories. Okay? Each one's a hundred million dollars. Okay. Start making it. And then when you do make it here, oh by the way, the price is double.

So these are the things, you know, to re industrialize the US it's gotta be a plan and it's gotta happen over time. It can't just be, you can't just wish it into existence, you know,

so.

Steve Hsu: So, now I think what you just told us, that example of, you know, the brake pads or, or whatever it is. I don't think the average American understands that 90% of the car parts are coming from China. I'm not even sure the Trump team understands that.

Dan Collins: They don't.

Steve Hsu: But I'm pretty sure some CEOs are pounding down the door to the White House and to Trump's team to tell them this is the, this is our future if this doesn't get settled relatively soon.

So what, do you have any prediction for how this is gonna play out? Because it looks like the Chinese are playing hardball though. Maybe they're softening a little bit. So what, what do you think is actually gonna happen now?

Dan Collins: So from the Chinese side, you know a lot of people, we make the mistake here, we look at everything, oh, made in China. Because we can't make anything. Everything's from China. So we think that's China's economy, right? This is not correct. So 15% of their exports now go to the us.

Like I always say, if they lose that, yes, it's painful.

Yes. You're gonna have individual factories where all their market is us, they're gonna be in big trouble. Yes. But at the, we buy everything from China, we're just not gonna have stuff that's gonna be much more trouble. You know, you're, you're talking recession versus depression here. So on the US side, I'm like one degree separated from some people in the Trump administration.

We are pushing some of these narratives in there. I'm sure guys like it. I'm sure the big boys, you know, the Apples of the world and things have been, you know, talking to them about this. I agree with your point. I don't think they understand how deep the China supply chain is. They haven't thought of the second order, third order, or fourth order.

They just think and, and, and by the way, the U.S. manufacturers with manufacturing plants are booming. Many of their orders are, their order books are now 10 years out. Like they have no capacity. They're full. But in the cases of that happening, there's just not enough of them. You know, there's just not enough.

So it's gotta be phased in gradually. So I can give you an example on syringes. I think people realize, oh my God, 90% of our syringes are imported from China. That's a national security issue. So there is one syringe manufacturer left in the US. There's a couple real tiny ones, but there's one large one.

Their order book is out 10 years now. I have no capacity. I can only give you an allocation because the tariff now on medical syringes is 245%. And guess what? That capacity is also not laying around the rest of the world. It was all in China.

So these things have to transition slowly. We could've done, and I know Trump's probably thinking politically, I gotta do it now. If there's a recession, it's gotta get over. Now, before the midterms, he's not thinking long term because of our political system. But what has been smarter is you could phase in tariffs. Okay guys, this year it's 10%. Next year it's 15%. The year after that's 20% that gives every, you know, the year after that's 30%.

That gives everybody the runway, you know, from the planning perspective of these corporations. because you can't just set a factory up overnight. It gives them time to figure it out and it gives them direction. Yep. Okay. I've gotta finally reassess this stuff. And that would be a much more stable plan.

But yeah, I'm afraid how it ends up is we've got a lot of chaos coming, unfortunately. So inflation shortages. Tariff at some point. Yeah. It's not sustainable. I think both groups will back down. I did hear some positive things on the Fentanyl side of it where, you know, they'll maybe get something done on that.

But yeah, I'm, I'm just hoping we go back to say a 40% range. I think it's survivable, survivable if that happens, but the current rate is not.

Steve Hsu: This is now more of a political analysis, but could Trump come back and like, maybe, maybe it comes down to like 40% or 35% and Trump comes back and says, Hey, we put the heaviest tariffs ever on these bastards, and we got 'em to stop sending Fentanyl and killing Americans, and then that's his political win, and then we settle out there. I think that would be viable on the US side. At least the MAGA side wouldn't notice how stupid the whole thing was.

But, but, the Chinese side might not let him off that. That's the question. They're talking so tough now. They might not let him off, so I don’t know.

Dan Collins: I, I have a win-win for both groups. To your point, it's kind of, it's funny, and I agree, Trump could actually declare victory, but with nothing happening.

And, people may not notice, right?

So, but a win-win on, on,

Steve Hsu: On Fox, they'll just report it as a win.

Dan Collins: Yeah, they’ll just report it as a win.

So, yeah, I see win-win for both groups here.

So let me cover the Fentanyl thing right now real quick. Fentanyl's a cancer drug precursor. It's sold all over the world, mostly by China, I think 70% China, some Turkish, some Indian companies. It goes into Mexico. Where the drug cartels mix it with other stuff to make the street drug Fentanyl, and then they distribute it in the United States.

Somehow, China gets to blame for this, which I find ridiculous. It, you know, it's not the drug cartels, it's China, right? So I had a very easy win-win here. China just says, you know what, Mexico, you're abusing Fentanyl that we export to you and cut them off. Okay? China wouldn't even lose a sale because Mexico's then gonna go to the US to buy the Fentanyl cancer drugs.

Right? Then, the Fentanyl, China can easily just say, guys that Fentanyl's from the U.S., we don't even export to Mexico. We cut them off because they were abusing it. Okay? Done. Not your problem, right? It's a win-win for everybody. The trade side. I agree with you. I think China wants to level some kind of a lesson.

I think they, you know, and, and not only just the tariff duty rates, China has tariff duty rates. They have a 25% tariff on cars. Right. So then, I don't think, I think if you went sanely to China before and said, guys, we have to manufacture, we're gonna put these tariffs on everybody, then you 're not excluding them.

I think China, you're, we're kind of backing them into a corner. We are publicly trying to get, you know, the quad around them. India, Australia, Japan. We're trying to, we're trying to create these like World War II type alliances against them, and now we force 'em into the arms of Russia, which culturally, the Chinese and Russians don't really have an affinity with.

The Chinese and Chinese love America. They loved Americans. You know, we had a lot of cultural affinity between China and America. So we kind of dropped that ball in pushing them towards Russia geopolitically. But yeah, I think at the end of the day, the US could win this very easily. You know, you get, you start selling 'em chips again, right?

I think one of our biggest goals was stopping ship chip shipments to China. It's like, why are you, why are you reducing the profit of our firms and forcing them to develop competitors? That's all you've done.

Because at the end of the, and I know you're in this field, you probably know, I'm sure you know it better than I do, but it's like, it just doesn't make sense to me. Like why handicap your own companies from the world's largest market.

Steve Hsu: No, I had exactly the same analysis of this as you, Dan, I think it was a huge mistake. The whole chip war was a mistake by the United States, and it hasn't kept them back because in a generative AI, they're just barely behind us, if at all.

And now they've got a blossoming, very, very vibrant, powerful domestic semiconductor industry, which was energized by this whole crisis that we engineered.

Dan Collins: Yep.

Steve Hsu: And actually, to be honest, if you were a Chinese nationalist you would just hope that we just keep this Nvidia ban on for a while because Huawei is right there with clusters and advanced technology that can compete with Nvidia. Now Huawei's gonna have one of the largest markets for its AI chips and NVIDIA's AI chip market goes down by a factor two because of something done in the White House, right? I think on the Chinese side, they'll be like, yeah, keep your, keep your Nvidia chips.

Dan Collins: Exactly. Yeah, exactly. We just gave them, we just gave 'em short term headaches. Right?

Steve Hsu: Not only did we give them short-term headaches, but we also created an alignment between all their companies. So all their, like everybody's following their own incentives, right? So the guys who fab the chips have to compete with TSMC and Samsung.

So, the dumbest, easiest thing for the purchasing guy at SMIC to do is buy the same chip making equipment that TSMC buys, which is all western companies. But the moment you sanction and you say like, hey, we're gonna cut this all off from you, well then the guy has to go down the street to Haan, to his buddy's startup and say like, hey, does your thing work? because we gotta buy it now.

Dan Collins: Absolutely. Right.

Steve Hsu: If it doesn't work, my engineers are gonna help you get it working. And so, that whole dynamic was just triggered under Biden by what we did. And they went from being tough for these small companies making semiconductor equipment to breaking the reason I described, to suddenly like they are embraced by Huawei and Smick and all these other companies. It’s insane.

Dan Collins: It's funny when you mentioned Haan District, funny story, the, when I was at Chin Hu to give people the idea to let you know how much brain power is clustered in this area, that's where Chin Hu and Beda is. The guys out selling the fake CDs. At the time, the fake DVDs and CDs, they'd, I took a look at it, I'm like, what is this AutoCAD SQL database? It's all advanced computer software.

Steve Hsu: software.

Dan Collins: software.

Steve Hsu: software.

Dan Collins: Like, how much is this? Oh, that's a $40,000 site license. Oh, but here's eight RBs. Okay. But that's how we did it back in the day. We just would, and we learned, learned the systems, played with them, you know. But yeah, it's, it was Huawei as you mentioned, now has a walled garden in the world's largest market.

It makes no sense.

We always used to say in not just tech industries, but auto as well. If you're not competing in China and winning, you've lost, you have to be able to compete in China, because it's the world's largest market for everything. It's 80% of EVs, right? So if you're not in China winning, you're losing not only their market, the consumer market, but the engineering talent, the supply chain, you know, all of this stuff. It's just so crucial to be in China competing there.

And and you know, and, and trying to, because if you're not doing that, you're, you're, they're gonna leap ahead of us and then by that point it's gonna be almost impossible to catch up, I think.

Steve Hsu: Yeah.

Dan Collins: Yeah.

Steve Hsu: It's just a scale thing. I mean, it's the largest 30 million cars a year sold there, as big as the US plus Europe together. And also the most competitive, you know, cutting edge technology competition. And if you can't compete there, you're eventually gonna lose. How are you gonna beat them in Brazil? Or how are you gonna beat them in the UK, right?

Dan Collins: Yep.

Steve Hsu: You’re going to be outcompeted, right?

Dan Collins: And, and we're seeing global retre retrenchment by American multinationals all over the world and that kind of thing. Ford sold their car plant in Brazil to BYD. So it's already at a stage where these Chinese corporations are gonna take most of the global market share in almost everything. I would say our last technical adult might be Nvidia chips, you know, Apple iPhones.

So if we lose that, then that's, you know, what else do we have? There's not much left, so it's gonna be interesting, I think.

Steve Hsu: I mean in terms of cost performance, I would say the Chinese cell phone. I mean, of course you might just be locked into the iOS ecosystem, in terms of the cost, performance of the phones, the Chinese phones are actually better than Apple phones honestly.

Dan Collins: It's been that way, it's been that way for 10 years. You know? I, I,

Steve Hsu: Yeah, and they're losing in China. I mean, iPhone market share in China has been going down.

Dan Collins: Exactly.

Steve Hsu: And that's the, again, the most competitive market for this stuff.

Dan Collins: Exactly. Yeah. Apple, I'm not, I think they have a lot of problems. I mean, 20% of their sales are China, which is declining,

And I think still 70, 70% or more as manufacturing just got a 145% tariff. So they're in a difficult situation. And, you know, you're, what's the difference between the latest iPhone and an iPhone from seven, eight years ago?

I'm not seeing much. When you look at the Chinese phones, they're just, they're just moving ahead like it is. China's an interesting market, as I say, it's like a shark's. It's like an alligator swamp over there. If you survive, you're the biggest alligator in the world.

There's no IP protection, right? People think, oh, they steal anything. So in China, someone will copy stuff the next day. So they have to constantly be innovating over there.

And that's why these companies have become so powerful. The Tencents and the, the Babas and the, you know, these are just juggernauts companies at that yeah, I think most of the world would be buying Yds Xmi you know and they're even displacing their own industries.

So, interesting thing in the car market now you've got the tech firms, right? By BYDs, the Xmi, and Huawei.

Steve Hsu: Yep.

Dan Collins: they're displacing the old state-owned enterprise companies. The S EICs, the fans, the Dong Fung. So there's this redistribution that has to happen where you bleed down those old state-owned car makers and these brand new private companies are coming up.

So yeah, it's just in its interesting dynamics.

Steve Hsu: Sounds like though you think, you know, if we, you know, maybe we come off this problematic rollout that Trump just had, we, we come off it to some more reasonable place. time, the U.S. can get some manufacturing going. Right? I mean, it's not absolutely too late, is it?

Dan Collins: No. Well, no. And well, so what came with the de-industrialization in the United States, and I mentioned that's the four pillars of a huge economic change. I think the last 40, 50 years, one of the four. What came with that de-industrialization is massive social issues. You see that? Go take a drive to Flint, lead in the water,

Go, you know, go to, I mean, Detroit.

Look, God, I mean, I tell DC people go, go, go, go. Go, go to Detroit sometime if you don't think we need tariffs. 25% of Michigan's on Medicaid right now. Okay? And that's just not Michigan. It's every state. So how we get it back is, and what I focus on with a lot of VC investors now on reshoring number one, you have automation, right?

That takes away a lot of the old labor cost issues that were involved with moving manufacturing out. Number two you've got low-cost energy. The U.S. has some of the lowest LNG prices in the world. They still think we have to be able to convert that to low-cost power generation. If you want to create a prosperous society, you need to be able to create power for the future, for AI, the EV, all this stuff at 10 cents a kilowatt hour or less.

And keep that, you know, you've seen what's happened in England. They're at 33 cents and every productive enterprise in the world they had is gone. their last steel mill closed. England's last steel mill closed, and now they're trying to start a war with Russia. I mean, the delusion is insane. So how we bring it back is we have low cost energy, we have automation, we now have reasonable tax rates.

and saying the thing, oh, we don't have the labor is kind of a non issue for me. I think it's a, I think it's, you know, 350 million people. You tell 'em you can't find a thousand people to work at TSMC. Of course you can. So there is a, you know, of, of course, absolutely. We need to develop our own STEM people.

We need the best tier of Immigr immigration, you know, on the engineering side. keep that open, but as you know, absolutely it can be done. It will have to be done. We were the world's manufacturing power 50 years ago. We were making 25% of the world's chips 10 years ago. So all this can come back.

It's just. Our system, when we got de-industrialized, became set up for financialization. Everything's money, printing debt buy the lease, you know private equity focused. The worst thing you can do in a private equity company is spend money and invest it. CapEx doesn't do it.

Just go buy it from somewhere.

Right? It's all about return on investment. So we have also, the whole system itself will have to focus back on a, setting up a sustainable environment for a manufacturing economy, you know, and get our human capital index going back the right way instead of down. So,

Steve Hsu: These are all hard things and they're gonna take time. I, I just hope our society, our society, can commit to a sustained rational strategy.

You know, these quick dumb wins, that, you know, this guy Howard Lutnick, just, just, I can't listen to this guy for even five seconds. But, but yeah, I mean, like, that kind of attitude is not gonna get us anywhere. You have to admit that you're in a long-term marathon and, you know, it's, it's too important to lose.

Dan Collins: We need someone to explain that, guys, this is not a, this is not a 2025 thing. This is a come out with a 10-year plan, come out with a 10-year plan.

You know, come out with a 10-year plan and just say, this is where we need to be in 10 years, and this is what's gonna take and get out of the constant political cycles.

And both political parties, you know, literally you have, whoever's outta power is rooting against the country.

You know, you know what I mean? The Democrats say, we'll cheer bad economic growth, we'll cheer shortages, you know, for political reasons. You know, it's crazy. So yeah, I, they hopefully hopefully we get it sorted out.

I think we need China's help to re-industrialize. I think that should be the focus, like literally.

Steve Hsu: You know, one of the things Trump said during the campaign, which gave me some hope, is he actually said, he said, look, these Chinese guys, they can sell their cars, their EVs in America. As long as they build the factories and also transfer know-how to Americans. Like, that's fair, right? And that made me think Trump is reasonable on this, right?

Dan Collins: Yes. And that's all I'm doing now. It's part of my part of my reshoring, my, the facility, new company that I'm trying to build now. I got the first one going in Tampa to make medical equipment that is a Chinese joint venture strategy, but flipped it on its head.

Get these Chinese companies to come over to the U.S. and invest.

Oh, by the way, guys, in us, your price point is gonna be five times what it is in u in China.

You have less competition, bring the facility over, you know, manufacture it here and, and capture that market while you can. Right now, China's not getting value for what they make. You know, they'll make something for a dollar and it sells for $5. Get the plant over here, sell it wholesale at two 50.

You know, You know, what I mean? You're, you're getting, you know, double what you get in China for it, or triple. So I think that avenue is open if we do it. Smart Chinese companies obviously are scared of us now. They don't wanna invest in us. They, you know, there's too much tension.

But if it's done at the high level, you literally could go with China and say, the US needs a remanufacture. We're gonna invite a trillion dollars in capital equipment investments from China to the United States.

Here's a great example. The pork industry, Smithfield Foods, have you heard of this company? It's Chinese-owned. It owns about 60% of the pork industry in the United States. They manage 18 million hogs. So keep these ratios in your head. In China, the entire pork industry manages 118 million hogs. Okay? So 118 million versus 18 million, okay? The entire Chinese pork industry profit is about $1.7 billion.

Smithfield makes $10 billion a year. It's literally 10 x the profit for 10 x less management. You see? So because the Chinese market is so competitive and the US market has become these oligopolies, every industry you're in, there's two companies, three companies. So we need to go back to the drawing board and figure out how to let a hundred flowers bloom.

Let these, let entrepreneurs and new manufacturing companies develop, figure out what's blocking that. Is it regulations? Is it capital? You know? And, and get that fixed and, and, and then it'll take care of itself, the system. The private enterprise system will take care of itself. You just need to, you know, we're like fish and if you set the fish tank up properly, we'll thrive.

But if you leave in dirty water, we're all gonna die. So that's what works.

Steve Hsu: That's the beauty of the market system. And you know, the communists, you know, to their credit in China figured out like if you really want to get stuff done, you have to have the incentives aligned. You have to have a free market and let people go. And they'll do it.

Dan Collins: Oh, absolutely. I, I tell people, China's much more capitalist than the us. People don't get it. They, the best capitalists in the world. But like, as I mentioned, they kept a backbone of some key strategic sectors.

And it's not a free market. I mean, they will, they pump the ev industry full of money, you know, I mean that's,

They saw that as strategic. They wanna stop oil imports, you know, as much as they can. So but, but the private enterprise system that functions in China's completely, you know, it is cutthroat capitalism.

Steve Hsu: It's funny because in academic economics they sometimes argue about this question of like, well, if you really had perfect competition, wouldn't the profit margin just be driven to zero. In China in a lot of areas it’s just like that. They drive the profit margin. They compete so hard. The profit margin is literally zero.

Dan Collins: That’s correct. Theoretically, if capitalism is done right, margins should go near zero.

Steve Hsu: Yeah,

Dan Collins: Just, just enough to keep people alive. And that's what's happened in most Chinese industries. Yeah.

Steve Hsu: Yeah.

Dan Collins: It's amazing to see, it's very interesting. Yeah. But, and that's why they're so competitive, you know, so.

Steve Hsu: Well, Dan, I've really enjoyed this conversation. We're, we're about an hour and 20 minutes in, so I should probably call it. And uh, I'm sure our listeners really enjoyed benefiting from your vast experience. Is there any place you are online that I should point to in the show notes?

Dan Collins: The best place to find me is on X @DanCollins2011. Yep.

Steve Hsu: Great. I'll put a link there in the show notes.

Dan Collins: Yeah. Cool. Awesome. Alright, man.

Steve Hsu: Take care.

Dan Collins: Good, great to meet you, Steve. Yep. Talk soon. Keep in touch.

Steve Hsu: Yeah. I hope we meet in person someday.