Trump Will Be First To 'Blink' In China Trade War, Flexport's Ryan Petersen Tells Scott Galloway: 'The Market Finds A Way' Amid Tariff Workarounds, Fraud Surge

Ryan Petersen, founder and CEO of supply chain platform Flexport Inc., believes President Donald Trump will ultimately be the one to “blink” in this trade war with China.

What Happened: Speaking with Scott Galloway on The Prof G Pod on Thursday, Petersen said he believes the U.S. will be the first to blink in the ongoing tariff standoff with China. “You can kind of game theory this out,” he said. “One side is going to budge. If neither does, it's catastrophic. But if one side has to blink, it's the U.S.”

Petersen argued that the perception of the trade conflict differs sharply between the two countries, suggesting that “the Chinese will see this as something being done to them by a foreign imperialist power,” while Americans are more likely to view it as “something being done to us by our own leadership.”

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Petersen said, pointing to mechanisms like elections, financial markets, and bond markets that put pressure on U.S. leadership. American people “are way softer,” he says, in contrast to the Chinese, who “have suffered worse and can bear it.”

Petersen then highlights the workarounds and second-order effects stemming from the tariffs. “The market finds a way,” he says.

One common workaround is known as “tariff engineering,” which involves shifting Chinese components to Southeast Asian countries for “substantial transformation,” or enough value-added processing to legally reclassify the products as originating from, for example, Vietnam, thus bypassing the high tariffs imposed on China.

Petersen also warned of a likely spike in tariff “fraud,” citing growing incentives for misreporting shipment values. “There's now a huge incentive to lie about the value of your goods,” he said, noting that U.S. Customs and Border Protection does not have agents in China to go chase you down.”

Why It Matters: Several others have echoed the view that Trump may ultimately be the first to blink in the ongoing standoff.

Economist Nouriel Roubini recently described the situation as a “three-way game of chicken” involving Trump, Federal Reserve Chair Jerome Powell, and Chinese President Xi Jinping, and said that Trump is the most likely to back down.

Former SEC Chairman Gary Gensler shared similar views during his appearance on CNBC’s “Squawk Box” on Thursday, saying that the Chinese “are tough negotiators,” and that “they [China] think time is on their side and that they can outwait the volatility of policy on the other side.”

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