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U.S.-China Trade Talks To Continue As Higher Tariffs Take Effect

May 10, 2019
Originally published on May 10, 2019 5:11 am
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NOEL KING, HOST:

And this morning, the trade war between the U.S. and China escalated. The Trump administration more than doubled tariffs on $200 billion worth of imports from China. U.S. and Chinese officials held talks yesterday but so far, no dice. They will be back at it again today, though. And with us to talk about that is Robert Daly. He's a China scholar at the Wilson Center here in Washington, D.C., and he served as a U.S. diplomat in Beijing. He's with us in studio. Thanks for being here, Mr. Daly.

ROBERT DALY: Good to be back.

KING: All right. So the big question was, would we see a deal or see no deal? The Trump administration has upped the tariffs, which would make you think no deal, but no one has stormed away from the negotiating table. So where does this stand?

DALY: No one has stormed away, and the new tariffs will only go in effect on goods that are leaving China today. So there is still a little bit of time. This looks serious, but we're not yet sure that it isn't just negotiation theater. Both sides would still like to have a deal for domestic reasons if they can get it. But it appears that China did, in fact, try to walk back some of the commitments that it had made in a written agreement of 150 pages. So the Trump administration was responding to something real. It's not just brinksmanship.

KING: Well, let's talk about the walk back because we had seen vague reports that China was reneging on something it had agreed to but not a ton of detail. What exactly did China say, ah, we don't want to do?

DALY: Well, there's a tactical side to this, and there's something of a cultural side. The tactical side is that China, not unlike the Trump administration, is trying to get the best possible deal that it can to do as little as possible to please Trump. So it's not unusual that they would try to walk back some of their agreements at the last minute.

But the real issue is that they had agreed to make some structural changes - difficult structural changes to the Chinese economy. And this involves things like decreasing subsidies to state-owned enterprises, more guarantees of openness to American companies, protections for intellectual property. They did not like having those promises committed to paper in this 150-page agreement. Those had to be made public. And it looks like a concession to the Chinese people.

KING: OK. So they didn't want to go as far as the Trump administration wanted them to go - at least not in writing.

DALY: They would have preferred a gentlemen's agreement. They keep speaking of sincerity. Liu He, the vice premier who's here now, has repeatedly said, I am here sincerely, which means, trust me. And one of the things that means is as gentlemen, as leaders, let's not put all of this in writing. We'll see where that goes.

KING: In response to the Trump administration raising the tariffs, the Chinese government said - just a couple of hours ago I believe - it will take, quote, "necessary countermeasures." We don't have anything in the way of detail on what those measures will be. But I wonder, do you have a guess on what they might be?

DALY: Well, they are running out of American imports on which they can do tit-for-tat tariffs. So they can do a higher percentage of tariffs on those imports from the United States. They can also go after individual American companies that are very profitable in China. But they can't do so without major costs to China. If they were to go after, say, an Apple or a General Motors or a Starbucks, it would undermine their claim that China is increasingly open for business and is a good place to invest. So they don't get a cost-free retaliation to this.

KING: Is there any sign that China might just concede, put it in writing, do what the Trump administration wants?

DALY: Well, no. There is no sign of that yet. They cannot do everything the Trump administration wants because, as we've discussed before, we are asking for structural changes that are at the core of the Chinese Communist Party's governance of China. So they - no, they cannot do that.

And they're entering, remember, a very sensitive political season. You've got the 30th anniversary of the Tiananmen Massacre coming up. They need to look strong. Xi Jinping puts himself forward as sort of the all-knowing, all-powerful leader of China. And he has to seem that it - to be defending the interest of the Chinese people.

KING: So what are the risks to the United States, if continuing to raise tariffs, if it doesn't push China to make a deal?

DALY: Well, all of these tariffs cost the American people. President Trump repeatedly says that China is simply transferring money to American coffers. But there are numerous academic studies which indicate that these costs are being borne by the American importers and increasingly by American consumers.

And China is going to be very careful when it retaliates to target consumers in sectors in the United States that are supportive of President Trump. They've already done this in targeting soybeans. They're very deft politically, and that's what they'll continue to do. So they are going to make him politically pay a price. And American consumers will pay as well.

KING: So play that out a little bit. The price of my X might go up. What is X?

DALY: Right. So X, for example, it's been estimated that costs of apparel and clothing for a family of four could go up by $500 if we put 25 percent tariffs on all remaining Chinese imports as has been threatened. If we not only raise the tariffs on this $200 billion to 25 percent but then go for the remaining 325 billion that haven't had tariffs on them yet, that hits everything - all food, all apparel. And it also hits things like technology and hardware.

KING: We're talking about real money for American consumers. Negotiations do continue today. What do you expect to happen in them?

DALY: Well, I still think it's likely that we will get something that is called a deal by the end of June. I think it is more likely than not because President Trump, for political reasons, would also like to get a good deal. The stock market is going to have a strong response today against this. It's going to go down. He won't like that. And we're entering the political season in which he wants stability.

So I think a deal is more likely than not. But it will only be a brief hiatus in this long-term, contentious U.S.-China relationship.

KING: And then we just go back to this.

DALY: That's right.

KING: Robert Daly is a China scholar at the Wilson Center here in D.C.

Thank you so much.

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