STEVE INSKEEP, HOST:
Just before he announced another $200 billion in tariffs against China, President Trump explained the kind of trade deal he wants.
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PRESIDENT DONALD TRUMP: It has to take care of our workers. We can't have them pinpointing our farmers because they think that weakens me a little bit because our farmers are the great - they are incredible patriots. They understand what's happening. The markets were closed to them - vast markets were closed to them.
INSKEEP: OK. So what's he talking about there? It is meaningful that the president mentioned farmers. They have been hurt as the U.S. imposed tariffs and China retaliated against U.S. agricultural products sold in China. Last night, as the president imposed another round of tariffs, China promised to retaliate again, which Americans doing business in China have to watch closely. And we're going to talk to one of those Americans, Jake Parker, watching all this from Beijing where he is vice president at the U.S.-China Business Council.
Welcome to the program, sir.
JAKE PARKER: Thank you.
INSKEEP: How do these tariffs look when you're an American doing business in China?
PARKER: Well, companies were quite disappointed with the announcement today. For the companies that we've spoken to, those with supply exposure to tariffs are considering their options. Some are moving their sourcing. Some are planning to maintain their current supply chains and either deal with the cut in margins or pass on as much of the tariff cost as they can. Most are still evaluating how long the tariffs will be in place before they make significant changes. For those companies with sales exposure, they'll either absorb some of the tariff cost or try to pass it on. But they may lose business to competitors from other countries - something that's already happening, based on USCBC's survey report that will be released today in Washington.
INSKEEP: Supply exposure to tariffs - meaning you're a company that gets something from China that you sell in the United States. You might be in a position of either raising your prices or trying to find someplace else to get the product. Is that what you're saying?
PARKER: That's exactly right. And one of the questions that we frequently get is - are U.S. companies diversifying their supply chains away from China? And products could be produced elsewhere, but cost, timing and availability will drive that consideration. One member that sources televisions in China recently told me that in response to the threat of the $200 billion in tariffs, the company had begun due diligence on shifting purchases to other countries. The reality is that the capacity is key. The production capacity of the rest of the world combined falls short of the television manufacturing capacity in China.
INSKEEP: Wow.
PARKER: It makes it extremely difficult to shift production away from China in the short to medium term.
INSKEEP: Well, now that makes it - that is a significant point because if U.S. companies could just get products otherwise, elsewhere than China, then U.S. tariffs might actually put serious pressure on China because they would be losing, and the United States wouldn't be, necessarily, losing all that much. But you're saying that's not possible. Now, there is also the question about whether tariffs on both sides simply reduce the volume of business that each can do. And Fred Smith of FedEx said yesterday that the tariffs are now hurting economic activity between the two countries, which FedEx would know because they ship things. Is Smith right?
PARKER: Absolutely. The immediate impact is certainly some declines in trade. Also the Chinese have indicated a new threat of retaliation, which they've done with each of the previous rounds of U.S. tariffs, though we haven't seen any specific announcement of what those tariffs might look like. In August, they did release a list of retaliatory tariffs, in draft form, of between 5 and 25 percent on U.S. products. We can expect that to likely impact the trade between the two countries.
INSKEEP: Granting that you don't like the way the president of the United States is addressing this problem, I'd like to know if you agree that there is a problem. In his statement last night, he said Chinese trade practices that the U.S. wants to change, quote, "plainly constitute a grave threat to the long-term health and prosperity of the United States economy." Is that right?
PARKER: Well, the U.S.-China Business Council and our member companies agree that there are absolutely problems in the U.S.-China commercial relationship. Those on IPR protection, forced tech transfer, the structural issues around state-owned enterprise reform, industrial policy and subsidies are all ones that do need to be addressed. However, we disagree with the tactics that the president's using. We don't think tariffs are the answer. We think the two sides need to sit down and negotiate an outcome that is beneficial to both countries and helps the Chinese implement the types of reforms that the Trump administration is looking for.
INSKEEP: With respect, the two countries have sat down and talked in a seeming respectful way many, many times in the past without much result.
PARKER: You're absolutely right. We need timelines, we need measurable deliverables, and we need licenses for the companies to be operating in China so that we're actually feeling that impact instead of just new promises because the business community, frankly, has promise fatigue in China today.
INSKEEP: Mr. Parker, thanks very much.
PARKER: Thank you.
INSKEEP: Jake Parker is vice president of the U.S.-China Business Council in Beijing. Transcript provided by NPR, Copyright NPR.