Frustrated With Trade Talks, Trump Threatens China With Tariffs

May 6, 2019
Originally published on May 6, 2019 9:14 am
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RACHEL MARTIN, HOST:

President Trump has expressed concern that the trade talks with China are moving too slowly. Now a new round of threats. This weekend, in a series of tweets, the president renewed threats to raise tariffs on $200 billion worth of Chinese goods. The president has delayed planned tariff increases twice this year. Negotiations with Chinese officials are supposed to start on Wednesday. Joining us with more, NPR's chief economics correspondent Scott Horsley. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rachel.

MARTIN: So it was only a month ago that we heard President Trump say that - these are his words - something monumental would be achieved soon in trade talks with China. So how'd we go from something monumental to yet another threat of tariffs?

HORSLEY: Rachel, these talks are coming to a head. The last round of negotiations in - was held in Beijing last week, and the White House said those were productive. Treasury Secretary Steve Mnuchin has said he hopes to know by the end of this week whether a deal can be achieved or not. So we are approaching a moment of truth here. And maybe the president just thought this was a good time to try to tighten the screws on China. He is threatening to boost those tariffs on $200 billion in Chinese goods, from 10% to 25%, and he's also threatening to slap tariffs on hundreds of billions of dollars in additional Chinese imports.

MARTIN: So just to be clear, American businesses have complained for years - right? - that Chinese trade policies are unfair to them. So remind us, what is at the core of the dispute in this moment?

HORSLEY: There have long been big structural concerns with China over its habit of forcing American companies to share their technological know-how as a cost of doing business in that country and, in some cases, just outright stealing U.S. intellectual property. Trump himself is also concerned with the overall size of the trade deficit between the U.S. and China, which is big and has mostly been growing on his watch. Most economists say they're not overly concerned with the trade deficit. And China has tried to appeal to the president by promising to make some big purchases of American goods. But the larger question is whether there is going to be movement by Beijing on those big structural issues.

MARTIN: Mmm hmm. Remind us of the global implications of this.

HORSLEY: We're talking about the two - world's two biggest economies here, and so this has certainly created some uncertainty. The trade tensions have forced some U.S. businesses to rethink their supply chains, maybe move production to Vietnam instead of China. And it has probably reduced global trade overall. Here in the United States, anxiety over the trade war with China really peaked back in December. You might remember the stock market went through a real roller coaster.

MARTIN: Mmm hmm.

HORSLEY: It spooked consumers. It contributed to a pretty disappointing Christmas shopping season. But in the months since then, Rachel, we've actually seen some calming. There has been an assumption that there would be a trade deal between the U.S. and China. We've seen a rebound in consumer spending and in economic growth. Now here comes the president injecting new uncertainty, and you can see that in the gyrations of the global stock market just overnight.

Maybe this is all posturing; maybe this is just an effort by the president to gain some negotiating leverage, and it won't, in the end, have much effect. But if those tariffs were actually to kick in, if the president were to go through on those threats, it would be a different story.

MARTIN: So the president has argued that the tariffs might actually be helping the American economy. Can you fact-check that for us?

HORSLEY: Yeah, there's not much evidence of that. The president claims in his tweet that the cost of these tariffs is mostly being borne by China; that's an exaggeration. China may be absorbing some of the costs, but most is being paid by U.S. businesses and consumers. The effects have not been enough to derail America's economic growth, but there's not much evidence that it's actually helping.

MARTIN: Have we heard from any Chinese officials about their reaction to the president's threats?

HORSLEY: We have. China appears to be shrugging off this threat, for the moment at least. There were some worries that China might actually boycott the next round of trade talks rather than negotiate with a gun to its head. But the Foreign Ministry said - overnight, our time - that, you know, they've heard threats like this from the president before, they apparently are not taking them terribly seriously, and they say that the Chinese delegation will be at the bargaining table here in D.C. on Wednesday.

MARTIN: And just real quick - although this is a big question, Scott - I mean, you said Steve Mnuchin says this week will determine whether or not a deal can be made. I mean, what happens if a deal doesn't get made? I mean, it has to get made.

HORSLEY: Yeah, if the president were to follow through on these threats and the higher tariffs would kick in, it would certainly be an additional drag, and you'd see broader effect on a lot of consumer goods.

MARTIN: NPR's Scott Horsley for us. Thanks, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.