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How China Is Grappling With Growing Trade War With U.S.

Jul 11, 2018
Originally published on July 11, 2018 6:51 pm
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AILSA CHANG, HOST:

Last week when the U.S. imposed tariffs on tens of billions of dollars in Chinese goods, China matched that with its own tariffs. It was tit for tat. Now the Trump administration, as Scott Horsley just mentioned, is threatening an additional $200 billion worth of tariffs on Chinese products.

To help us understand a little more how China is grappling with this situation, let's bring in Yun Sun. She's director of the China program at the Stimson Center think tank in Washington, D.C. And she's been talking with people in China about these tariffs. Welcome.

YUN SUN: Thank you for having me.

CHANG: So China's Commerce Ministry says it is shocked by the Trump administration's latest threat of tariffs. What confuses China the most about Trump's actions?

SUN: I think essentially the Chinese have a difficult time understanding whether President Trump is looking for a fight or he is looking for a deal. See; our original assumption from the Chinese side is that Trump was looking for a deal; he was looking for the best deal.

CHANG: OK.

SUN: But it turns out that through - after rounds of negotiations that have happened between the two governments, Trump is leaving no more space for negotiation, and the trade war is already on. So from the Chinese perspective, first of all, there's - 34 billion U.S. dollars of Chinese imports are being tariffed, and now there's going to be another 16 billion that's coming up. And then there's another 200 billion has being announced yesterday. So what is the end to this? What kind of endgame is Trump really looking for? I think that's the biggest question the Chinese are trying to grapple with.

CHANG: And with that latest threat from President Trump imposing $200 billion worth of additional tariffs, China doesn't even import that much in products from the U.S. So what could China do to retaliate in this round if it were?

SUN: You are correct. The retaliation to the same level would be very difficult for the Chinese unless they double the rate of the tariff. For example, President Trump announces 10 percent of tariff on 200 billions of Chinese import. Since China does not import that much from the United States, then China can double the rate of the tariff if China wants to achieve that equivalent effect.

But there are other things that I think the Chinese are doing. They're trying to engage the United States in further negotiations by also making some goodwill gestures. For example, two weeks ago, the Chinese announced the opening of certain market access in different Chinese industries. And I think the Chinese are doing that as a strategy to engage Trump, to show Trump that China is sincere about having a fair trade relationship with the United States, and they are improving their behavior.

CHANG: I wanted to jump off of that because Robert Lighthizer, the U.S. trade representative, did say that he wanted to persuade China to open up its markets but also to stop China from demanding American companies to share their technology in order to do business in China. How likely is it that China will relent on that point?

SUN: The Chinese officials' argument is that officially speaking, legally speaking, the Chinese government does not have such a requirement for American companies to surrender their technology or transfer their technology.

CHANG: Really?

SUN: But we also know that in practice, that is a very common practice. And when American companies try to set up ventures or joint ventures in China, they are required to have a Chinese partner, and they're required to share their technology with their Chinese partner. So the Chinese argument is not really a very strong one.

But looking ahead, this Made in China 2025 has been regarded as China's national economic development strategy for decades to come. It is a strategy that has been identified as the Chinese answer to the question, where will Chinese economy go? So this technology innovation is seen as key to Xi Jinping administration's economic policy. So I don't think the Chinese will be able to abandon that.

CHANG: And in the few seconds we have left, how much do you think this trade war is going to hurt Chinese companies that do business with the U.S.?

SUN: Well, they do hurt Chinese companies. They also hurt American companies. And the Chinese government has announced that some of the tariff revenues they are collecting will be used to compensate and offset the losses that the Chinese companies are suffering.

CHANG: Yun Sun is director of the China program at the Stimson Center. Thank you very much.

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