View From China On Tariffs

Aug 25, 2019
Originally published on August 25, 2019 11:06 am
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LEILA FADEL, HOST:

Let's hear about how China is reacting to the president's aggressive policies. The two countries have slapped new charges on each other's goods. This came as they're in negotiations over trade. The question is - how much economic pain can the two countries take before one of them blinks and makes concessions? For the view of China's strategy, we're joined now by NPR's Emily Feng in Beijing. Hi, Emily.

EMILY FENG, BYLINE: Hi. Good morning.

FADEL: Before we get to the latest developments, take us through some of the details of the back and forth between the U.S. and China over the last few days.

FENG: There has been a lot going on, basically a flurry of new tariffs from both sides. On Friday, China said it was going to put tariffs on $75 billion of U.S. goods in two rounds - September 1 and December 15. And, not coincidentally, those are the exact dates during which the U.S. said it was going to implement new tariffs of its own on $300 billion of Chinese goods.

Last Friday, China also said it was going to resume tariffs on U.S. cars and car components, which they had paused earlier. And that's going to hit U.S. brands like Tesla, Ford, BMW, especially, which just moved its production plants to South Carolina, pretty hard. The U.S. did not take this lightly. So within hours, the U.S. said it was going to increase existing tariffs on $400 billion worth of Chinese goods. Trump also had a tweet on Friday implying that President Xi Jinping and China was an enemy of the U.S. It's a sharp turn from the, quote, "very strong personal relationship" Trump has said he has with the Chinese president.

FADEL: Now, what was the reaction in China after President Trump hiked tariffs in response to China's new tariffs on American goods?

FENG: It was confrontational, as expected, though. So over the weekend, China's commerce ministry called these new tariffs, quote, "bullying trade protectionism" and warned that the U.S. should immediately stop this wrong approach or all consequences would be borne by the U.S. But both countries have this very different narrative of who escalated first. In July, the U.S. says China was the one that agreed to make big purchases of U.S. agricultural products and then made no effort whatsoever to purchase things like soybeans or pork. And that's why the U.S. proposed new tariffs earlier this month. But China says it didn't make those purchases because the U.S. goods were more expensive than market rates. And it's imposing new tariffs because the U.S. made the first move.

FADEL: So how is all this affecting China's economy right now? Is there pressure on the government there?

FENG: There is. And it's growing because China's economy is slowing down. It's growing at the slowest rate in nearly three decades. In part, that's because China's in the middle of this really risky economic transition. It wants to upgrade from an economy that's reliant on cheap exports, manufacturing to a more high-tech one. And the economic costs of U.S. tariff trade war is going to make that transition harder. But, outwardly, China says it still wants a trade deal but doesn't need one. And it can outlast a trade war longer than the U.S. because it's more centralized. I talked to Wang Huiyao. He's an economic adviser to China's cabinet and president of a think tank here in China. And here's what he said.

WANG HUIYAO: Through this process, China is also diversifying. China is making more business with other countries. China has been cultivating its own technology and rely on self. So in the end, U.S. will lose its business. All the company will lose the China market.

FENG: So he sounds really confident, but there are things the U.S. can do that China is worried about. And one of those is cutting the federal interest - Federal Reserve interest rate. That would make Chinese prices more expensive compared to the U.S. ones, and it could tip China's economy into a recession.

FADEL: So what do you think China's endgame is here?

FENG: China knew that these new tariffs from the U.S. were coming when it decided it was not going to buy U.S. agricultural products. So it's either deliberately escalating a trade war with the U.S., knowing that it can outlast the economic impacts, or it sees this as an opportunity for more trust-building. The two countries are supposed to meet in Washington, D.C., in September. And if they decide to roll back these new tariffs that they've just announced, then that could be seen as a trust-building exercise.

FADEL: NPR's Emily Feng in Beijing, thank you very much.

FENG: Thank you. Transcript provided by NPR, Copyright NPR.