Source: Barron's Chinese Author: Nicholas Jaskinski Evan Greenberg, CEO of Chubb Ltd, has a highly influential fan - Warren Buffet, CEO of Berkshire Hathaway. Berkshire Hathaway disclosed last month that it held 6% of the shares in Chubb, one of the world's largest insurance companies, by the end of 2023. Berkshire itself is a major participant in the insurance industry, but it is not the only buyer. In the past year, Chubb's stock return, including dividends, was about 40%, surpassing the S&P 500 index's total return of 25%, and making the company's market capitalization reach $110 billion. This increase in market capitalization reflects Chubb's outstanding performance, which is attributed to its prudent underwriting practices and conservative management of its investment portfolio of about $140 billion. The company's earnings per share increased by 48% in 2023 and its book value per share increased by 21%. Greenberg is the son of Maurice "Hank" Greenberg, the former CEO of American International Group (AIG). Greenberg worked at AIG for 25 years, rising through the ranks. He left the insurance company in 2000 and took over Ace Limited in 2004. The company merged with Chubb in 2016, the largest M&A in the property and casualty insurance industry at the time. Today, Chubb is the largest commercial insurance provider in the United States, and the company is also known for its high-end homeowner insurance for the wealthy. However, about half of the company's premiums last year came from outside the United States. Asia has always been a growth area where the company is bullish: Although Asia accounts for 40% of global GDP, the insurance industry accounts for only 26% of the global insurance market share. This gap is expected to narrow over time. Greenberg sits on the board of several nonprofits that focus on international and Asian affairs. Barron's recently interviewed Greenberg about his underwriting philosophy, the challenges of dealing with increasingly frequent climate disasters, and US-China relations. Following are the edited excerpts of the conversation.

Author: William Pesek

Currently, the theme of the 'Trump trade' has been replaced by the theme of the 'Grand Bargain' between President-elect Trump and china.

Despite Trump pulling Canada and Mexico into a large-scale 'trade war' against china, and choosing more anti-free trade individuals in the new government, the US stock market still saw a significant rise last week.

So, is the investors' view that Trump's circle's strategy of 'escalating the situation to ultimately de-escalate it' likely to succeed correct? The author believes that the probability of this strategy succeeding is low.

This involves two different questions. The first question is, what is Trump's plan? It is well known that he hopes to force china to comply with US demands by threatening to impose high tariffs. Trump's appointment of Scott Bessent, who recently joined the MAGA (Make America Great Again, Trump's campaign slogan) camp, as Treasury Secretary has given people hope that imposing tariffs is merely a negotiation tactic.

The second question deserves more attention: how will china respond to the impending chaos brought about by 'Trump 2.0'? Perhaps it won't be as 'submissive' as many believe.

After all, in the last 'trade war' initiated by Trump, china outsmarted him at almost every critical moment, and Trump's various blunders since his victory on November 5 indicate that he did not learn much from that experience.

Trump seems dissatisfied that the 'trade war' from 2017 to 2021 did not prevent china from rising on the global stage, as the 'trade war' did not reduce china's trade surplus, nor did it bring millions of jobs back to the usa, instead, those jobs went to vietnam.

One can ask american farmers, manufacturers, and small business owners whether china paid the price for those tariffs, or ask japan, south korea, and us allies in southeast asia what they think about the 1,460 days of Trump's term starting January 20, 2025, and you will find that Trump's 'revenge tour' cannot proceed in asia.

Meanwhile, china knows that japan still harbors resentment over Trump's withdrawal from the trans-pacific partnership (TPP) initiated by the usa in 2017, because TPP was at the core of japan's attempts to contain china.

'Trump 2.0' threatening to impose a 25% tariff on canada and mexico has effects similar to those in the past, while other major trade partners of the usa are closely monitoring the situation, fearing that negotiations with us officials will again come to nothing.

The most worried person may be japan's prime minister shigeru ishiba, who has not yet had the opportunity to meet trump at mar-a-lago, and trump's team has made it clear that it is okay for the leaders of the usa's most steadfast allies in asia (if not the whole world) to stand aside.

'Trump 1.0' was not very friendly towards japan either, as the flattery and subservience of former prime minister shinzo abe did not stop trump from withdrawing from TPP, even though abe had utilized a lot of political capital to persuade his liberal democratic party to join TPP.

China, observing all of this, has gained some experience, one of which is that trump will never be satisfied, as he will continuously make demands that will only increase.

If china decides to sit down with Trump for a "big negotiation" between these two countries with a total economic output exceeding 47 trillion dollars, the Trump team is likely to be disappointed if china does not accept the demands made by him, and countermeasures will begin again. Meanwhile, if china makes significant concessions to Trump, it knows that he will present more demands a year later.

Since 2017, some significant dynamics have changed. One of them is that china is no longer as reliant on the usa market as in the past, which means china has multiple options for countermeasures.

One option is to devalue the yuan before Trump devalues the dollar, thereby offsetting the impact of the 60% tariff.

Additionally, china may restrict exports of key commodities required for "Trump economics" to the usa. Of course, Musk and his colleagues in Silicon Valley can explain to Trump the risks of the usa being unable to obtain rare earths and other materials. A reduction in imports of gallium, germanium, graphite, and other materials will shake up the usa's semiconductors, telecommunications, and electric vehicle industries.

China may also significantly sell off its holdings of 730 billion dollars in us treasury bonds or target american companies that are most negatively affected by decoupling, such as $Apple (AAPL.US)$ 、$Microsoft (MSFT.US)$、$Tesla (TSLA.US)$、$Amazon (AMZN.US)$And.$Walmart (WMT.US)$etc.

In the end, china will become a protector of free trade and globalization by 2025, while the usa will be pulling the market back to 1985, which will only lead to the "BRICS" nations (Brazil, Russia, india, china, South Africa) and the "global south" increasing efforts to replace the dollar in trade and finance.

It is worth mentioning that the 'victory' of Trump's 1.0 trade policy is actually an illusion. The agreement Trump reached with japan in 2019 ended in a stalemate, and the United States-Mexico-Canada Agreement (USMCA), which he used to replace the North American Free Trade Agreement (NAFTA), also brought little change.

The best-case scenario is that Trump's 'great negotiation' with china may simply be a public relations maneuver that won't change much, depending on whether Bessent can keep Trump from succumbing to his worst impulses.

The worst-case scenario is that a vengeful Trump negotiates with china with full force, and this approach will make everyone poorer.

What the global economy can do is hope that Trump can restrain his worst impulses, and hope that the so-called 'normal people' can tame Trump's circle. However, in the face of 'Trump 2.0' launching attacks on the world—especially on china—again, the coming year is sure to be the most unprecedented one we have ever seen.

Editor/Rocky