Can U.S. industrial trade policy stay on course?

About the episode

For decades, the United States bet on globalization: open markets, cheaper goods, and far-flung supply chains. But that model is breaking down. After pandemic disruptions and rising tensions with China, a new bipartisan consensus is emerging that America needs to rebuild its industrial base.

The real question now isn’t whether to reshore critical industries, it’s whether the U.S. can do it consistently.

In this episode, we sit down with Sarah Bianchi, former Deputy U.S. Trade Representative and current senior managing director at Evercore, to unpack the forces reshaping global trade, industrial policy, and investment. Drawing on decades inside Washington and firsthand experience negotiating trade deals, Sarah explains how we got here and why political volatility may be the biggest risk to America’s economic strategy.

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Episode transcript

[00:00:00] Sarah Bianchi: People do wanna be invested in the United States and I think the risk is the back and forth in politics. I mean, I, I think there are places where both parties agree, chips being one of them, that there ought to be, industrial policy to, to improve and secure the supply chain. s

[00:00:18] Alfred Johnson: for decades, America's leaders believed 

[00:00:20] that 

[00:00:20] Alfred Johnson: open markets and global supply chains would deliver prosperity at home and stability abroad. But over those decades, we steadily lost the capacity to make things. And then came the pandemic, which exposed a deep dependence on goods made elsewhere.

[00:00:34] Then a wave of competition with China over semiconductors, critical minerals, and clean energy technologies. And finally, a political reckoning as both parties arrived from different directions at the same conclusion. America needs to reshore industry. The question is whether the US can follow through or whether that answer changes every four years.

[00:00:56] Sarah Bianchi: It would be better if we all acknowledged that and tried to work together on it rather than again. 'cause I do think this back and forth is very challenging if you're an investor. 

[00:01:04] Alfred Johnson: This is critical capital.

[Theme music rises and ends]

[00:01:06] Alfred Johnson: I'm Alfred Johnson, the CEO of Crux, the capital platform for the clean economy. America's renewed focus on industrial policy has brought radical changes to global trade. And if you wanna understand how trade policy actually gets made, you need someone who's actually

[00:01:21] been in the rooms hammering out deals. sarah Bianchi is that someone.

[00:01:26] Sarah spent decades in Washington, working across multiple administrations. 

[00:01:30] Most recently, she was deputy US trade representative for the White House, where she negotiated deals on energy and critical minerals. She's now a senior managing director at Evercore. 

[00:01:41] has firsthand knowledge of how US trade policy has been shaped, how it's changed, and how investors are thinking about the new landscape.

[00:01:48] Today, we get into all of it, how America started to embrace industrial policy. Again, what tariff whiplash actually looks like from abroad, why critical minerals are really tough, and how political backlash against AI could impact the build out of energy and data center infrastructure.

[00:02:06] She is exactly the kind of person you wanna talk to when the rules are changing, and right now, everything is changing. 

[00:02:12] Finally, a quick word before we get started. We discuss a lot of timely events in this show, and things could change. So this interview the state of play as of the morning of May 4th.

[00:02:23] Sarah Bianchi, welcome to Critical Capital.

[00:02:26] Sarah Bianchi: thanks for having me. It's great to be here. 

[00:02:28] Alfred Johnson: It's awesome to have you. Uh, I have enjoyed talking to you over the years about all of the kinds of things that we're gonna get into today. Uh, and the thing that I've enjoyed talking to you about is on the basis of your really unique perspective in this space. You've spent multiple decades in Washington.

[00:02:47] You've served in multiple administrations, uh, and most recently you served as deputy US trade rep responsible for Asia, Africa, energy transition, critical minerals. So bring a really, really rich perspective to the conversation. It's a. Remarkably tumultuous and fast changing moment in trade and industrial policy

[00:03:12] and things.

[00:03:12] have changed so much over the last two decades. Can you just back us up and, and open the curtain on how we ended up where we are today and what it tells us about where we're going.

[00:03:25] Sarah Bianchi: you know, I think you really have to go back to NAFTA and, um. Allowing China to join the WTO and a lot of trade decisions that actually, some of which fueled, but some of them also just happened at the same time as a lot of globalization

[00:03:42] and there really was a part of the country that, um, you know, didn't have new opportunities, felt hollowed out.

[00:03:51] Uh, I think that's been a, A theme that's kind of been underlying a lot of things for, for a while and kind of really hit its moment in some ways, uh, with President Trump, uh, kind of taking the mantle on tariffs and trade and questioning what was in some ways a bipartisan effort to kind of. Do more free trade, even with the transpacific partnership at the end of the Obama administration really called into question and I think got a lot of residents.

[00:04:22] Um, and then I think there became, as part of that, and uh, Biden and Trump, uh, although very different, uh, both have this kind of idea and notion of building it here, bringing manufacturing back.

[00:04:39] and that idea, I think. Got even more momentum during COVID when we all learned what it means to have supply chains of that are vulnerable.

[00:04:48] It means to not have things that we don't make here. And so now I think we're in this place where really there is bipartisan agreement there. There are some things. Not agreement on everything, but whether it be chips or other things that we ought to build here. And there are also some places where free trade is not working, and so you kind of see it play out in different ways in different administration.

[00:05:14] So for the Biden administration was a lot of incentives. The inflation reduction act for the Trump administration. It's tariffs and equity stakes in companies and price floors. But, uh, I think either way, uh, it's here to stay. This notion of there are certain things, uh, that we have to build in the United States and certain places, or at least with partners and allies where not possible, and certain areas where we should be more, uh, skeptical of, uh, products, particularly coming from China.

[00:05:48] Alfred Johnson: So I want to go a lot deeper on that. So all of the implications of trade, tariff, and industrial policy. On what we make in the United States and how the supply chains form. But before we do that, let's go deeper on setting the scene.

[00:06:03] So we are obviously in this moment a pretty significant instability and a lot of actual conflict.

[00:06:12] Let's start with Iran. So that is a situation that. Feels like it is in some form of fragile equilibrium, uh, and it changes seemingly by the day. How do you see us unfolding from here? I noted also this morning that we saw gas prices hit a recent high, uh, this morning. So we're in a moment where that conflict is starting to play through into markets

[00:06:41] in a pretty material way.

[00:06:43] Sarah Bianchi: Yeah, and particularly by the way, uh, outside the United States, so we're still seeing it here in the US but, uh, Europe, Asia, um, parts of Asia, you know, that are dependent not only more on, uh, oil from the region, but also l and g and other things. So, uh, it is, and I think there were markets quite frankly, have been.

[00:07:04] Remarkably, uh, patient, uh, given the fact that right now, uh, the bid ask is still too high for resolution, and I think one of the things that we've learned and that the Iranians have learned is that, you know, we've always been extremely concerned about them having nuclear, uh, weapons, but in fact, they have this other nuclear option.

[00:07:25] Which is closing the street. And I think we've learned between this and Ukraine and other incidences, the asymmetrical warfare, meaning that, you know, you can have the fanciest military and highest performing military in the world, but if somebody can throw a drone from somewhere, it can really seize.

[00:07:43] Things up. And so, uh, I think that the markets are gonna continue to pay attention because right now I think we are in this situation where Iran still kind of thinks it's winning and its pain tolerance is quite high, uh, now that's not gonna be the case necessarily forever, but uh, there really isn't even.

[00:08:04] the room for the kind of the deal that the president's talked about, which is kind of much lighter in detail and, and than other deals, uh, that have been ta you know, that we've seen in the past. But this notion of some kind of economic relief, for stopping nuclear and keeping the straits open that, right now that the deal isn't there.

[00:08:21] And, um, people keep saying, you know, two more weeks, two more weeks, uh, you know, at a certain point, you know, I think. Marcus are gonna start to get a little nervous that it's not happening.

[00:08:32] Alfred Johnson: Yeah, so it feels like we're in this new moment of. Leverage where countries are experiencing and starting to experiment with having economic leverage

[00:08:46] alongside strategic leverage. I saw that you made a comparison to the way that the Chinese used

[00:08:53] the ban on rare earth's to what the Iranians have done with the straight. What does that tell you about how as these conflicts continue to metastasize the different. Parties and countries that we'd be navigating with around the world may think about their leverage in Iran, China, and elsewhere.

[00:09:12] Sarah Bianchi: Yeah, it's a really interesting, because when I went around, I, I did a lot of travel in 2024 when these, a lot of countries in the EU and, uh, Korea, Japan, and, and Asia were really thinking about. You know, the possibility that President Co Trump could return. And they knew him as an actor and so they were kind of like, well, how do we kind of get along and, you know, make friends and get these dynamics?

[00:09:35] Uh, but now that's really shifted. And I do think China kind of made the initial pivot. Remember the beginning of the Trump administration, we. On what seemed like an unending escalation, tariffs with China, 200, 300, you know,

[00:09:48] that seemed to have no limit. And then the Chinese did something that they really hadn't done in Trump 1.0, which is they showed their leverage, uh, uh, at least in a way that spooked the administration. and now we're sort of having conversations about Daytons and, and a whole range of other things. Uh, I do think, uh, Iran, uh, there were some lessons learned there. Uh, show your economic leverage, um, against, uh, you know, in these global conflicts. And, Brings you as a much better negotiating partner, uh, against the United States. That is certainly, uh, the case today. We'll see kind of going forward in other administrations if it remains to be a thing. But, uh, uh, certainly with a run on the streets, I think they've learned a lesson that will be enduring.

[00:10:36] Alfred Johnson: Do you think that the straight is a comparably profound point of leverage, and would that suggest that what'll happen from here will look like What happened there? What do you think makes this different?

[00:10:51] Sarah Bianchi: Well, it is a point of leverage for right now. Um, you know, unlike, as, you know, having dealt with a lot of critical minerals and other things, uh, you know, figuring out how to mining and, uh, and produce, you know, a whole range of, of minerals, uh, is a longer term project than figuring out how to, you know, maybe divert, uh, on more resources out of the.

[00:11:13] The, the straight or find other pathways. So, uh, it kind of remains to be seen. but it's serious. It, I don't know how lasting and, and durable, uh, it will be, but it certainly is remarkable that even the country that is. By all accounts, experiencing a lot of pain right now.

[00:11:32] I mean, the United States military and the Israeli military did a lot of damage to the country. So, uh, remains to, you know, we'll see how long it goes. But I do think, this is again, something that we'll start to see,

[00:11:46] Alfred Johnson: What role? Do you see China playing in the background here? And how does the upcoming meeting that is planned for a couple weeks from now influence the span of potential outcomes here in your mind?

[00:12:00] Sarah Bianchi: The way I think. Really to think about China in Trump 2.0, uh, is uh, first of all, we haven't really had a president with like a halftime or a break like this. And so that gives everybody, including the president, you know, a whole, uh, a way of thinking about how they might do, do things different. And I think China came.

[00:12:21] Into this administration thinking we are not gonna lose this opportunity where the United States is going to irritate, uh, some of its allies, uh, to show ourself and present ourself as a, as a real leader on the global stage, uh, as best we can. So I think as a general matter, they. Don't really want a lot to do publicly, uh, with this Iran or with this Middle East, uh, conflict, obviously, they have their own, uh, economic stakes.

[00:12:52] Obviously the, you know, they're a player in the global economy, but they're not looking to kind of come in and, and, and settle this out. They, they would prefer, you know, just to kind of show like. Maybe the United States didn't quite get this right. You know, look at us, this responsible global partner.

[00:13:09] Let's talk about all these other important, you know, matters. Uh, so I think they'll try to, uh, keep really, this conversation. Now that doesn't mean occasionally they don't have their own interests and kind of call around and say, you. It'd be great if you could take that ceasefire agreement or whatever.

[00:13:26] They're active, but they're not looking to kind of be the public face that we've seen, like from a Pakistan or whatever.

[00:13:33] Uh, I think, you know, there's some chance the, the summit could be delayed, although I don't, uh, it's not my base case, but I think that summit in, and by the way, there's supposed to be four meetings between the United States and China.

[00:13:45] I think it is gonna feel very, uh. Vague kind of no hits, no runs, no errors. Like let's maintain this Deante look, China has stuff it wants, it does not want the United States to go back to the tariff level that was in existence pre the Supreme Court decision. But I think in general, they're playing the long game here.

[00:14:09] They're looking for, uh, just being a global responsible partner and um, you know, trying to keep things as calm as they can.

[00:14:18] Alfred Johnson: So let's get into tariffs for a second. So there have been

[00:14:22] so

[00:14:23] many.

[00:14:23] turns in the road over the last year and change, right? We're, we're find ourselves in a place where as. You describe it, there's a deante of a kind with China. Uh, but if you go back to the free trade era that we were in before Trump won, we're very clearly in a different one.

[00:14:42] Uh, the Biden administration maintained many of the tariffs on

[00:14:45] China or some of them, uh, that Trump had put in place the first time around. And then we had this notion of an across the board tariff and subsequent legal action and outcomes from the Supreme Court. Where are we today? And and how do you see this continuing to unfold?

[00:15:01] Also in the, in the backdrop of the security situation that we just talked about.

[00:15:06] Sarah Bianchi: Yeah, well, I think that, uh, the Trump administration is going to try to get back as close as they were. Pre the Supreme Court. I think their general posture is that they kind of landed the plane on this. And what I mean by that is, and and, and they're not wrong in the sense that, you know, everybody said, oh my gosh, it's, you know, gonna be crazy inflation from this and tons of disruption and It hasn't really been that to the degree that people weren't, uh, they are believers in tariffs. This guy has believed in tariffs since, you know, the eighties. Um, and so I think where we are is, uh, after the Supreme Court, um, a ruled, they put in place, uh, a global 10% tariff under, uh. Section 1 22 that allows you to do that on trade deficits.

[00:15:57] And then they launched a bunch of 3 0 1, uh, investigations, which essentially is a legal investigation that can allow you to a tariff or, or have other means to a partner. And I think basically their plan is by, uh, the time that, uh, this 1 22, which is in mid-July, runs out, they'll be ready to launch these 3 0 1.

[00:16:18] By and large get us back directionally to where we were. Which to your point is, um, when we started this administration, uh, we were at about a 2%, uh, kind of global weighted average tariff. Some of that, like you said, is from Trump 1.0. Uh, and we kind of landed in, in the. Like low to mid-teens. I think that's kind of where we're gonna land.

[00:16:38] Uh, when they're kind of settled and done. Now they make some tweaks along the way. Exempting food exempting of this or that. But I think directionally and we will end this administration in the low to mid-teens on a tariff rate. And as we saw with the last time, I think it's gonna be a lot harder for the next, uh, administration to unwind these than, than they might think.

[00:16:59] Alfred Johnson: Yeah. And, and Sarah, when you were at USTR, you spent a ton of time with our allies in East Asia. I, I know you. You've been to Korea and Japan countless times, officially and, and since

[00:17:13] when you're in their perspective, so these conglomerates that have invested so much in categories like semiconductors and electrical supply chain and batteries, what's the conversation like in capitals like Seoul and Tokyo as they look at evolving US policy on this?

[00:17:33] Sarah Bianchi: Well, certainly there's frustration. Uh, and, and part of it is obviously they don't like tariffs. Uh, but also I think it's the whiplash. You know, they, uh, made all of these investments around the inflation reduction Act. A lot of the Biden rules, uh, took longer than they wanted or thought. Uh, they're not totally wrong about that, uh, to get out the door.

[00:17:59] they, You know, see, even when we have a policy accommodations being made, so for example, uh, we exempted in the Biden administration exempted graphite from the minerals. Well, there's certain Korean companies that would, you know, can actually make graphite. And, and so, and the, the whiplash, I think is the hardest thing.

[00:18:19] And I think it is. Um. I think it is gonna be a challenge for industrial policy going forward if we can't figure out a little bit of how to stabilize, uh, of that. I would say right now, specifically, you know, they're trying to get through the current phase, right? And, uh, for Korea and Japan, uh, that also means these investment vehicles.

[00:18:39] Uh, and so, uh, Japan has already made some, you know, investments. They've announced some, their process is underway. Korea's a bit behind, but I think they're also anxious about. You know, making sure, uh, that azi in investment funds get kind of deployed, that they are doing things that are otherwise, uh, in their best interest, that they, you know, the kinds of investments you'd wanna make without that.

[00:19:03] Um, so there's a lot of, a lot of anxiety.

[00:19:07] Alfred Johnson: So let's back up on that. 'cause it's so interesting, right? We, we had this tariff regime that led to Japan and Korea offering these very large investment programs into the United States. I think it's 550 billion

[00:19:22] from Japan. Say a bit more about how that's anticipated to work. How do you think that the Japanese government and companies will navigate that?

[00:19:31] What will it mean to inflows of capital and to US infrastructure?

[00:19:36] Sarah Bianchi: Well, I think first of all, nobody, you know, it did its early days, uh, and I think some of the language in the deals again, uh, the United States had a lot of leverage, particularly in Japan. Because of the auto tariff that was on was, uh, quite concerning. And so they, uh, were willing to do, uh, quite a bit to get rid of it.

[00:19:56] So the, the way the kind of language in the deal works is not something any trading partner would like. You know, you receive the proposal, you get 30 days, you know, yes or no. It, it's a little, it's not, it doesn't feel the equilibrium, I think in practice soap. Far, uh, the kinds of deals that we're seeing are ones that people, uh, that the Japanese that, uh, they were the jic and the, you know, are, are generally comfortable with.

[00:20:21] But, uh, certainly comes with a lot of anxiety coming down the pike. Um, but I think when, I mean the reality is, uh, for both Japan and Korea, they are. And the United States, they're critical partners for each other, right? The Japanese know, and the Koreans. I mean, these companies know how to do a lot of building and batteries and a whole range of things, uh, that, that are quite, uh, complimentary to, to the United States skillset.

[00:20:47] So, uh, I think, you know, as long as they can kind of keep it, you know, and that they, they're not kinda being jammed on, proposals that don't make sense. Uh, again, the first round of, of Japanese deals, I think directionally haven't, you know, pressure tested each one, but generally met that test.

[00:21:04] But, uh, look, that's gonna be, um, you know, there'll be friction going forward. As you know, from serving in administrations, they always wanna, you know, ribbon cut and show progress. And this is pretty fast for, for a lot of these, uh, uh, projects.

[00:21:20] Alfred Johnson: Yeah, I find it so striking because we're talking about infrastructure projects that take. Years to

[00:21:27] plan and execute in the context of policy that's shifting basically all of the time. And one of the things that I've been reflecting on a lot is. You hear people give these very extreme takes on, we are in the deglobalization era or the complete separation of these big supply chains, and, and I think the, the picture that you are presenting, particularly with allies like Korea and Japan, with whom we have such integration, is something that looks more like reorganization.

[00:22:02] Of the global economy, global supply chains. Tell me how you think that plays out. Right? If we're in this fragmented but reorganized world that continues to have some amount of significant amount of interrelation and and cooperation across allied countries, how does that play out in things like supply chains for components, critical minerals,

[00:22:24] and other things that are necessary?

[00:22:27] Sarah Bianchi: well, I think in some ways it remains to be seen right from the Inflation Reduction Act. As you know, we saw a lot of investment, particularly a lot of Korean investment. Um, you know, we are seeing these, kind of. Japan, uh, ones will see, and, again, it's early days, but they're happening. Um, and look, there are places where, you know, people do wanna be invested in the United States and look, if they get a little governed support along the way, uh, that's great.

[00:22:55] Uh, I think the risk is, first of all, uh, the back and forth in politics. I mean, I, I do think, Trump is such a divisive character that. Almost seems like everything that he could do in instinctually the Democrats, would hate. And so I think the risk is, again, you get a different president and they try to unwind this.

[00:23:18] I really hope, uh, that they don't, uh, because that is the biggest concern. And look some of what the Trump administration has done, quite frankly, on critical minerals, and I think you've seen some of the Biden people say this actually. Not crazy. It's pretty good. You know, you do kind of need a price floor.

[00:23:33] You do need some government intervention. You know, you can't just have these ideological clubs that talk to each other. Somebody's gotta decide, you know, who's paying the price. And investors haven't been wanting to come into this space. And so how, how do you get that done? Uh, so I think the biggest risk is kind of the popping back and forth 'cause no idea is perfect.

[00:23:53] Alfred Johnson: Yeah. One of the things that I found interesting there is you have this rancorous political reality, right? Where the two parties seemingly can't agree on anything, but then you have within this category of industrial policy and trade. Some amount of actual coherence. Right? So I was looking at, uh, the recent way in which the markets for batteries in the United States and grid connection of utility scale batteries are objectively booming.

[00:24:24] And if you play that back. That started with a tax credit that went to batteries as part of the inflation reduction

[00:24:31] act. It, along with nuclear and biofuels and critical minerals, and a bunch of these other categories was retained in full in the tax law over the summer last year.

[00:24:42] And we have an industry that's that's booming by

[00:24:44] every possible measure. And so when you think about that, is there actually more coherence on aspects of industrial policy than it feels like? There is based on the, the way in which the conversation happens.

[00:25:00] Sarah Bianchi: that's right. I think there are places where both parties agree, chips being one of them, that there ought to be, um, industrial policy to, to improve and secure the supply chain. I think, uh, the IRA probably would have been a bit more durable. Maybe it was too early in that moment, but if we had, if it had been talked about as,

[00:25:26] you know, AI is coming, we need energy data centers.

[00:25:29] You know, I think the kind of electric vehicle, kind of centerpiece of it. Got it. Uh, off a little sideways enabled kind of Republicans to make fun of it or saying, you know, these guys don't want you to drive a gas car. So I think it is best when it is clear what the security nexus, is. And, uh, like the chip sack.

[00:25:50] Now again, this isn't always gonna kinda work, and I do think it's really important that policymakers take a hard look at, first of all, what are the industries they're talking about? Again, I think it, I think it makes sense when there's a security nexus. Um, also what's realistic, right? So if you're looking at something like shipbuilding, you know, is that something.

[00:26:11] Realistically that the United States can catch up on and compete on an amount of time, or is a different kind of partnership, um, irrelevant there. And I think, uh, those conversations are a little hard to have in some senses because there's different stakeholders who want all aspects, uh, uh, you know, different, different things.

[00:26:28] But, um, but directionally, I think that it is a, it is a through line and, um. It would be better if we all acknowledged that and tried to work together on it rather than again. 'cause I do think this back and forth is very challenging if you're an investor.

[00:26:43] Alfred Johnson: Yeah, it's interesting how the, the rationale for some of these things has shifted. And Critical minerals is an interesting example of that, right? Where the way it was rationalized as part of the IRA was as the necessity

[00:26:55] to have the components to be able to do the energy transition, and now it's front and center in this increasingly. Broad trade battle that we are in with China and increasingly seen as this strategic asset that we have to have. I wanna pull on your thread of realism for a second, because the reality of that supply chain is that it's not here. We've got a little bit of of development and, and there's more things that are contemplated, but basically all of the critical minerals and rare earths are produced in China, and a huge amount is refined there,

[00:27:31] even if it isn't produced there.

[00:27:33] So talk about that supply chain and how it is vulnerable and the the ways in which investors may be taking advantage of this current moment to present some new formulation of it. That is more sustainable for the US and our allies.

[00:27:50] Sarah Bianchi: It's a great question. I mean, I do think you really have to almost go mineral by mineral. There is some, uh, uh, lithium in the United States. There's new ways of extracting it, uh, that are really promising. There's some really, there's some good projects. Um, the processing part remains a challenge, right? I mean, if, if you have to, for a lot of these, right, you have to.

[00:28:13] If you can extract it here and then you gotta send it somewhere, you know, uh, in some senses, I think some of the tall technology is, is and will catch up. So like, now you can direct lithium extraction without as much, you know, challenging on the mining side. Uh, but, but it is, um.

[00:28:30] a challenge and I think it is better. And this is where I will give the Trump administration some credit. Uh, sometimes I think people think, well, um, we'll all just get together and talk about it and, and we'll have a group or some club where we get our minerals together. Well, that's actually a really challenging thing to get done because, uh, when you're seeing the, Trump administration is trying to get a few one to say, okay, but we're gonna have to pay a price to get this investment here. And then it's like, well, I don't wanna pay higher. Well, like the automakers don't want me to pay higher. And so I think you really gotta go in with some hard knock economics and investment, uh, realism and just understand that people don't wanna necessarily pay more just 'cause it feels good.

[00:29:14] Have their own supply chain and just to be very, uh, clear-eyed. And again, there, there are certain minerals where that's, uh, super possible. But, uh, and there's others where it's more challenging. And, you know, I do think that sometimes you see, uh, again, policymakers thinking, well, if we're just all in it together, you know, we'll, we'll work it out and get it done.

[00:29:34] But these are very challenge, even our allies, I mean, negotiating with them is, is quite challenging. So, uh, I, I think that's, that's really. Important.

[00:29:44] Alfred Johnson: Yeah, it's interesting 'cause the math has to math, right?

[00:29:47] And, and so you take something like lithium and, and it got a pretty significant tax credit as part of the 45 x tax

[00:29:55] credit regime. And as you mentioned there, there is a lot of promising technology and some exciting projects there. But

[00:30:01] The

[00:30:01] other thing that has happened 

[00:30:03] in the last few years.

[00:30:04] is that the price of lithium. Internationally has cratered as China has brought a lot more

[00:30:10] to the market and that has led to some of these projects being canceled or stalled. And that then presents this question of do we want that industry in the United States or not? And if we do, what is the necessary set of incentives to bring it here and get it built? And it feels like we haven't yet. Solve that problem in a way that will really bring these supply chains back. Is that how you see it?

[00:30:38] Sarah Bianchi: I think, uh, I think we're, like you said, we see really promising signs, and I think lithium's a good example of where there are some promising, uh, signs because you're just going to need it. And, um, so you can get kind of offtake agreements and, and the like. But look, I do think, uh, experimenting with offtake agreements, experimenting with price floors, I think all of that is really.

[00:31:02] Important to think about, uh, when you're trying to get this done. Uh, again, I, uh, people, you know, who just think like we can have a club and all agree, uh, are just not, um. You know, we tried to do that with the, in the Biden administration, with the global arrangement on steel and kind of like getting Chinese steel out and I didn't really get anywhere 'cause everybody has their own kind of interest.

[00:31:24] So I think it's very challenging to get the kind of, where do you want your policy to kind of fill the gap? Um, energy loan to a whole range of places can do that. But, but that is gonna be, uh, on the mineral side, uh, where the rubber meets the road. And again, it's different for different minerals, but. When you have a, like you said, when you have a, uh, the main kind of supplier, uh, at least of processing, uh, willing to kind of flood the market, you gotta figure out what you wanna do about that.

[00:31:54] Alfred Johnson: Yeah, you have all of these complex intersecting. Strategic and competitive things that are happening. At the same time, we haven't even talked about ai, 

[00:32:05] right? AI is driving a huge amount of energy investment. It's driving up prices domestically. It presents this new geopolitical strategic access that countries are competing on. How do you see that entering the picture here? As we think about our relationships with international allies, adversaries across the board.

[00:32:29] Sarah Bianchi: It's a great question. I think first of all, we're about to have a, a, we are seeing the rumblings of a political and policy backlash against, uh, ai, uh, this president has taken, at least in Trump 2.0. It's kind of interesting 'cause he went pretty hard after some of the tech companies or, or in, in Trump 1.0.

[00:32:47] You know, he's taken the view that like when you're in a strategic competition, you just gotta like unshackle and, you know, try to win the race. That's not where the American people are. That's not where a lot of Republicans are, like DeSantis in Florida, that's not where, so I think what we try to tell market investors is, look, by the way, like, you know, this is the, the peak of.

[00:33:11] Supportive government is right now on AI today. And, um, and as we get through these midterms, uh, we're gonna have, you know, you tell me how many people running for president, you know, if it's sub 30, I'll be, uh, that'll be, you know. The good, nice low number.

[00:33:31] Alfred Johnson: the over

[00:33:32] on 30. over. Okay, there you go. And look, people are looking for lanes, right?

[00:33:37] Sarah Bianchi: And so of course there's gonna be a lane that says cancel. Like, stop investing in data centers. Of course they're gonna be, you know, and, um. and I try to tell equity market participants, like, you know, when Bernie Sanders was like talking about Medicare for all and like running second in 2019 and 2020, like the healthcare stocks, like, they took quite a multiple hit.

[00:33:58] And I remember thinking, look, I don't think Bernie Sanders would be the president. If he does, he doesn't have the votes for Medicare for all. So like, why do we care? But I do think the sediment is gonna, um, uh, really start to shift. There is also gonna be some. Strange bedfellows in in this. I think even people like Steve Bannon have said that, you know, mag's really nervous about a, about ai.

[00:34:19] Uh, and so I think we are in for a whole slew of conversations, uh, in this space, um, that people aren't, uh, prepared for. And again, a lot of these companies, you know, make up significant part of the market cap of the s and p. So, uh, I think we're in for kind of a world of, challenges.

[00:34:37] Alfred Johnson: There's an interesting parallel to draw. We, we talked about a moment ago how in industrial policy there may actually be somewhat more alignment than people give credit for. I expect if there are those 30 candidates and there are 15 on each side that are running, there will be people on both

[00:34:54] sides that fully occupy that lane. So this is an interesting political issue that seems to be. Bending across and creating these different groups

[00:35:04] on either side, and that may drive some amount of alignment. How do you, how do you see that playing out as we get through the midterms and start to get into the presidential race? The backlashes is obviously something that is quite prominent right now. The models are only getting better. What do you see as the, the ways in which this is gonna evolve from here?

[00:35:25] Sarah Bianchi: Yeah, look, I think first of all, like you're seeing a lot of state activity, right? I mean, a lot of data center, it's kind of expressing itself in data center. Some states like Florida, California are starting to do, You know, more comprehensive kill, switch, all that kind of stuff. Uh, uh, you know, it's kind of amazing when the kind of heroic company is the one that says, like, I'll give the defense department a lot of stuff, but not the one that can, can, like, lose control and kills all or whatever.

[00:35:51] Uh, that's a little bit of an exaggeration, but, um, you know, we've seen it in tech. Uh, we're starting to see it in big tech where people are, are really anxious about social media. So, uh, the Supreme Court took a case to. on a law in Texas that, that said, like, look for kids, you can't like program this stuff to them.

[00:36:09] The algorithm just can't do that. And, uh, so, and, and that was Texas and, uh, and Florida had a state law. So I think you're gonna start to see it, uh, in the states. First, uh, in addition to in the presidential, uh, uh, debate, honestly, I don't think really anybody in Washington's quite prepared for it. and, um, that always, you know, gives you the risk that all of a sudden a hammer can come through that you don't notice.

[00:36:36] Uh, like. Oh, we gotta get rid of TikTok or whatever, you know, like just the quick kind of blunt instrument. But, uh, yeah, I think that the jury's really out on this. Uh, some of these companies might just, you know, decide they're better off negotiating, reasonable guardrails, and they are kind of like letting all flowers bloom.

[00:36:54] Alfred Johnson: Yeah, it's, it's this really strange moment, right? Because there's this objective. Volatility that's happening everywhere around us and the systems that we operate within are shifting and this new technology is before us. It seems like it's the most powerful technology potentially we've ever created. And we see equity markets reaching daily, all time highs, even as oil crosses a hundred, right?

[00:37:25] So it's this, this complex. Set of factors that seem to be playing out in risk assets

[00:37:32] in a Different than

[00:37:33] expected way. How do you make sense of that?

[00:37:36] Sarah Bianchi: What do I make of it all? Uh. I mean, it's not like a, it's not totally fake, right?

[00:37:42] There's like actual real things associated with it. Uh, I just think the implications are, um. gonna be profound. And, and the challenging thing is, and I'll say this as a policymaker myself, it's hard to know like when we did the chip export controls in the Biden administration, I mean, you know, to get the level of expertise to understand that this chip can do this and that one isn't safe.

[00:38:07] I mean, these are, you gotta really know stuff. And I always think of that line, that justice, uh, Elena Kagan said after, uh, one of the. Cases around big tech. She's like, you know, we're not exactly the nine most experts, uh, on the internet, like up here at this Supreme Court. And I think that is a challenge, um, because this stuff was moving so fast and it's hard to kind of figure out even who understands it.

[00:38:30] Um, some cases when those things kind of happen, uh, policy makers do nothing and in some cases, uh, they. You know, use blunt instruments again, let's ban this product. Let's, you know, and I think that's kind of remains to be, be seen. But I think if the, whatever kind of vol, I mean, if this, if this is as you know, promising as people say, I think the volatility is only gonna grow in the next couple years.

[00:38:57] Alfred Johnson: Yeah. It's funny because even though that's the case, I find it hard to make the bear case on

[00:39:05] US energy and manufacturing infrastructure,

[00:39:07] right? There are just so many, there's so many factors that. Point in that direction. You've given a lot of

[00:39:12] them, right? This increasing competition that we have, rising energy prices, AI, all points in this direction, that all builds upon this environment that you talked about being in the wake of COVID 

[00:39:26] when we had to rebuild these supply chains. So if, if we're moving in that direction, is there, can you make the bear case there? How would you do

[00:39:35] Sarah Bianchi: For the manufacturing and energy thing. Uh, I, I, I agree with you. I think it's bullish. 'cause even if, um, you know, we, uh, clip the wings of this thing by 20, 30%, there's still a lot of investment. That needs to happen. I would say the aspects of it that I am more bearish on, uh, are the things that really require a lot of permitting and long-term investment to, to get done.

[00:40:04] Uh, I just think we've seen this in the critical mineral space investor. You know, it's very hard for an investor to put money into something. Thing that, uh, might take, you know, a very, very long time. And by the way, when it does, who only know the price could be, you know, someti somewhere between, you know, one and a hundred x.

[00:40:24] I mean, that's just not, that's not the kind of certainty people look for. So I think there are some of them where, um, you know, this kind of big tech break, it, Silicon Valley attitude meets like, you know, state regulatory processes and, It's pretty tough. So I think there's some places where kind of regulatory barriers, uh, uh, could win in, in that.

[00:40:48] Um, but generally I am bullish. And also I think it's interesting, the, the good thing about these companies is they can pay for it, right? And so I do think there are creative solutions around data centers and the other, it's like, make your own power, get your own. There are a lot of, uh, bullish aspects and I, I think the regulatory kind of gridlock of, of getting projects underway. Again, you've probably seen more of this than me, but in some, in some areas, I think it's gonna still be hard.

[00:41:19] Alfred Johnson: I'll bring you to a last, hopefully optimistic question, which is you have spent a lot of time. At this intersection of policy and markets and companies and, and you know how all the different pieces connect. If you could snap your fingers and fix one thing about the system, as the system is currently constructed, what would you do?

[00:41:42] Sarah Bianchi: Well, I do think this durability issue's really important. 'cause investors do not. There's just, you can't run a model if it's just gonna be overturned and, and it, it's almost a joke. Like, you know, each administration comes in and there's 9,000 regs that go to OMB to undo the last guy's thing. Uh, but if you can gain the trust that at least it's gonna be durable. I do think. That Will, be helpful.

[00:42:05] Alfred Johnson: Yeah, no way to run a railroad. You can't invest in a railroad if you don't know if the track's gonna be there when the next administration comes in. 

[00:42:13] Well, Sarah Bianchi, thanks for coming on Critical Capital.

[00:42:16] Sarah Bianchi: Thanks for having me.

[00:42:17] [ THEME MUSIC]

[00:42:18] Alfred Johnson: Sarah Bianchi is Senior Managing Director and Chief Strategist of International Political Affairs and Public Policy at the Investment Bank Evercore. And as you could probably tell, she spent decades in Washington working for multiple administrations, most recently as deputy US trade representative, responsible for clean energy and critical minerals.

[00:42:38] I love hearing Sarah's takes on what's really happening with US trade policy. If these are the kinds of conversations you love to listen to, think about subscribing to us on Apple, Spotify, or wherever you get your podcasts.

[00:42:52] Critical Capital is a co-production of Crux and Latitude Studios. Our production team includes John Sheehan, Jenna Herzog, Steven Lacey, Anne Bailey, and Sean Markwand. It also includes Emily Hughes and the excellent team at Crux, the capital platform for the clean economy. I'm Alfred Johnson. Thanks for listening.

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‍Critical Capital is a co-production of Crux and Latitude Studios. Learn more about how Crux is financing the future of energy.