Trump extends China tariff deadline

0:04Hello and welcome to Business Matters here on the BBC World Service with me Rahul Tandon going to be another busy programme. The first half, we'll be talking a lot about relations between China and the United States, of course, the world's two largest economies. In the second half, we're going to be looking a little bit more at employment in the US as Donald Trump makes an important announcement when it comes to who's going to be running the department. Looking at labour statistics, we'll be finding out why people in China are actually paying to have pretend jobs. And we'll be talking about the end of the dial up internet.

0:39So a lot to get through guiding us through the program. We have Jennifer Pack, who is China correspondent for American Public Media. And let's be honest, Jennifer, it's a busy job at the best of times now. It must be insane with everything that's going on. Do you get a minute to rest? We try, we try. And do you succeed? Yeah, no, I mean, the thing is, the tariffs are head spinning. But actually, if you know where the base comes from, It's just long and dragged out. That's all it is. OK, there we go. First bit of analysis from Jennifer. Already, let's bring in Ali Garfinkel, senior finance reporter at Fortune.

1:21Being a senior finance reporter, I imagine, has been busy over the last six or seven months. You know, Rahul, it has been busy over the last six months, especially since I'm a senior finance reporter who covers tech. But it's not as busy as Jennifer's job, I'm willing to bet. Oh, there we go. already a competition for who is the busiest of our two panellists here on the program. We're going to start, not surprisingly, by talking about those trade relations between the world's two largest economies, the US and China, because we're getting lots of reports out of the US saying that President Trump has signed this executive order that will prevent high US tariffs on Chinese goods for another 90 days.

2:00The back and forth around trade between Donald Trump and China has now been going on for most of this year. So let's take a quick look back on this epic round. If you don't make your product in America, however, under the Trump administration, you will pay a tariff, and in some cases, a rather large one. And I said, if that tariff isn't removed by tomorrow at 12 o 'clock, we're putting a 50 percent tariff on above the tariffs that we put on. China, 67 percent. That's tariffs charged to the USA, including currency manipulation and trade barriers. Both sides now agree to reduce the tariffs imposed after April 2nd to 10 % for 90 days.

2:47We'll see what happens. We've been dealing very nicely with China, as you probably have heard. They have tremendous tariffs that they're paying to the United States of America, and we'll see what happens. We will indeed. Jennifer first and Ali, if you want to pick up off the back of it, did that bring back some memories of what's been taking place? I felt like a lifetime ago Ali You know I have to tell you whoever came up with that music well played it really feels sort of nostalgic in that way and I like framing it as an epic road because at this point if we don't laugh we cry right Well you know everybody has their own emotions when they're dealing with different stories Earlier I asked our North of America correspondent Erin Delmore why this executive order to put another pause on tariffs was so important.

3:37What stood to come next were those triple digit tariffs that we saw earlier this year in the spring when the US said that there'd be 145 % tariffs on Chinese goods coming into the US and China eventually made its way to 125 % on US goods entering China. Rahul, just to gut check that for you, that's a standstill on trade between these two economic powerhouses. That's, you know, a bit of a freezing over of trade relations. And so that really threatened to disrupt the economy, business on both sides. And we can see now that this pause has been extended. And so certainly a lot of people are exhaling at the moment.

4:15They are exhaling at the moment. What does this mean, though? This pause is there for another 90 days. We could get a deal within that 90 days. But let's be frank, Karen, because this relationship has been up and down. It could also go the other way, couldn't it? It certainly could. It could also mean that you and I are doing this again in 90 days or not. You know, it's a little interesting to look at how some of these deals or I call them, you know, preliminary tariff agreements have come to work. President Trump talked today about the good relationship he has with China's President Xi. He seems to value that a lot.

4:51There's been much ado about who invited who, where, when. But basically, President Trump says that an invitation has been extended to meet with Xi. And it would actually be very easy for the two of them to meet in October on the sidelines of the APEC conference. So that could be the next marker in this relationship when we look toward what happens over the next 90 days. It could well be. We have reports coming out from China. They say they will suspend tariffs for 90 days as well. They will retain an additional 10 % rate and will adopt and maintain all necessary measures to suspend or remove non-tariff measures taken against them by the US.

5:28Let's bring in Professor David Daokie Lee, who's one of China's leading economists, regular advisor on economic policy to those in power in Beijing. Professor, thank you for joining us again. You're most welcome. Well, I think you're in the US at the moment, aren't you? Rather than in China. Correct, I'm in the US. Yeah, well, we'll talk about that in a second. But what do you make of this latest, I suppose, pause in the trade war for another 90 days? Were you expecting this announcement? I'm not surprised at all. I was actually expecting another pause of the terror because the Chinese side now knows President Trump very well as in the art of war says, if you want to win a war, you better understand both sides.

6:16and President Trump takes pride to be a deal maker, the art of a deal. So China has the art of war. He has the art of a deal, okay? When the art of war meets the art of a deal, we have a long game. Okay, so this is a part of a long game. Okay, who's going to win this long game? Is it going to be the art of the deal or the art of the war that's going to win? Well, actually, in the end, there will be a deal. The deal, I still believe, the deal will be a win-win. OK, for both sides. The Chinese side will get reasonably, reasonably low tariff rate. I'm talking about 10 to 15 percent. The U.S. side will get the promise and which will also will be realized, will be honored to buy a lot of American goods and also to make certain investments.

7:06For example, the TV panel power plants in the U.S. So it will be win-win in the end. Jennifer, is that the sense you're getting there in China? Well, I just wonder, Professor, yeah, I agree with what he said, but I wonder, Professor, what you think, because in the first trade war, China did the same. It agreed to buy more American products, but of course COVID hit, but then it wasn't really fulfilled. So how do you think the U.S. is going to hold China to task to make sure it upholds it? Good question. Good question. This time around, when China promises to buy a lot of American goods, I believe the U.S.

7:47side will ask China to put down payment for the imported goods right away. OK, I think China will be happy to do it this time around. Ali, we had a good question from Jennifer there. Would you like to ask an even better question to the professor? I don't know if I can ask an even better question, but I can ask you what I'm curious about, Professor. You know, you said China is well-equipped for the long game. Is President Trump well-equipped for the long game, a famously impulsive guy? And how long is this long game? Asking for a friend. Well, the midterm election is upcoming in February. OK, so it's coming in February, right?

8:30So I think between now and October or November, something has to be done. Some deal has to be a stroke, okay, by both sides, okay? So I think when I say long game, I'm talking about the end of the fall, the beginning of the winters. That's actually not that long at this point, at least not that long left. Well, in the minds of Justin Trump, he wants to make a deal within one month, right? So in the end, it's a six-month game. So it's relatively speaking a long game. Okay, lots of voices in this conversation. We've got Professor Li, one of China's leading economists. We also have got Jennifer Pack, and also we have got Ali with us as well.

9:21Ali Gaffin, who from Fortune, Jennifer Pack, obviously there working in China. And I want you all to listen to this now, because as we have this trade war, even if there's a truce between China and the US, many businesses are affected. So let's hear from One Bedroom and More is a family owned business in Seattle who supplies bedroom furniture from frames to mattresses and sheets. Blake Garfield is president of the business. We're a pretty all encompassing business where we cover from the ground up all the way through the sheets and pillows. And for a small business, developing suppliers is a challenge because we're not 100 containers a month.

9:56We're a couple of them a year. And our most popular product happens to be a mattress pad that we've been working with the company in China to make for 15 years. The wool is from Belgium. The cotton is from Pakistan. But the assembly is all done in China. And having the big tariffs put on that took our best popular product off the shelves. and we had to gamble when the pause went in that we could order a container and hope that we could figure out a way to get it here in less than 90 days and we would have failed uh it's a week away from arriving here so we got lucky that the pause happened again but it's really scary because trying to find an alternative supplier nobody can do that domestically the machinery doesn't exist here in the u.s people have outsourced all of that manufacturing already but trying to find someone in a non-tariff country or one where the tariff is stable was impossible because they wouldn't return our call.

10:50We're not big enough to matter. There we go. Blake Garfield there who brings in a lot of products, Ali, from China. And I'm sure that there in the US, you're hearing many voices like that, companies who are confused, who've been suffering because of this rising tensions between the two great economic superpowers that we have. The turn of phrase there that really stuck with me was not big enough to matter. I work with a lot of startups. I cover a lot of startups. I cover a lot of smaller businesses or sort of earlier stage businesses, some that are cross border. And that sense is overwhelmingly present.

11:30There's definitely a sense, I would say, among a lot of business owners that you have to gamble in order to work in this environment. or you really have to sort of get a sense of you can only assume where the puck is going so much, but you have to at least do your best and try because at a certain point you're not big enough to matter. And on the other side, Jennifer, we've spoken to a lot of companies in China that are exporting who have seen their orders being put on hold because of the uncertainty. Absolutely. I mean, right from the start, exporters have said it's not so much about the actual tariff rate.

12:06itself, it's stability. If it's one day going to be 10%, next day it's 125%, up to 145%, back down to 30%, there is no stability. 90 days might sound very long for a lot of people, but Christmas orders, for example, a lot of the factories are supposed to be shipping them out since last month. So all of this is disruption. This uncertainty clouds it. And to further what was already said, it's not just a matter of what's the tariff on China. In the US, they've already said they're going to tax 40 % on transshipments. They haven't given a clear definition of what that means. So for Chinese exporters who already moved to, say, Cambodia, Vietnam, they're also not sure if they're going to be taxed at the rate that that country has the tariff rate from the US or at 40%.

13:00Yeah. Professor Li, you talk there about a deal. You think a deal will happen. And in the But isn't it inevitable that even if we have a deal, these two great superpowers, economic superpowers, there will be tensions with them again pretty quickly after any deal is struck because they're both trying to dominate the global economy? Certainly. However, I do give certain credit to President Trump. He's a businessman. He's economically rational at the end of the day. So I think, and also he respects a Chinese top leader. He always calls President Xi his good friend, and he's eager to visit China. Okay.

13:42So I think the good news is that he's negotiating. He wants to put things on table. He's not somebody who just do things on his own. Okay. So at the end of the day, I think the two sides will discuss many, many things, including the issue of Taiwan, the South China Sea, and Russia issue, Ukraine issue, everything will be on the table. Okay. So I think at the end of the day, President Trump will be able to make many deals. Okay. Not only one deal on the economy, but also many deals. So I think this is an interesting time. In Chinese people are saying the fall, the autumn, is the season of change.

14:18So this coming autumn, let's stay alert. Let's stay awake. We'll all have to stay alert. It's interesting, though, you know, President Trump said Prime Minister Modi in India was his good friend, and they seem to have fallen out. So who knows how long those relationships will last. Let's move on to another part of this relationship because a deal has been reached between the US government and US chip companies allowing them to sell some high-tech chips to China. President Trump has been speaking about the agreement. He's struck with the chip giants NVIDIA and AMD that will see them give the US government some of their revenue.

14:51So I said, listen, I want 20%. So when I say I want 20, I want for the country. I only care about the country. I don't care about myself. And he said, would you make it 15? So we negotiated a little deal. So he's selling an essentially old chip that Huawei has a similar chip, a chip that does the same thing. President Trump has also been talking about the possibility that he may strike another deal, not just with the H20 chip that NVIDIA used, that would allow them to sell their more advanced AI Blackwell chip to China. The Blackwell is super duper advanced. I wouldn't make a deal with that, although it's possible I'd make a deal, a somewhat enhanced in a negative way, Blackwell.

15:39In other words, take 30 % to 50 % off of it. But that's the latest and the greatest in the world. Nobody has it. They won't have it for five years. I've been getting reaction to all of this from someone who knows this sector extremely well, who oversaw export controls on chips and other products in the first Trump administration. So how did this deal come about? My understanding is that this is something not that the companies asked because it's truly unprecedented, but this is something that was also offered to the companies. Look, we'll allow you to do this if we get 15 percent of the revenue.

16:15It's completely unprecedented. Why would the Trump administration come up with this sort of deal? You know, I think this is a question of a lot of new people in D.C. trying to figure out the laws that they're required to execute. And sometimes they'll look at the books and the laws are silent on issues. And they are thinking, look, if I'm going to license this technology to China anyway, I might as well get some money out of it for potentially for better enforcement at the Bureau of Industry and Security that administers the expert controls. And it's going to be up to Congress to provide some more clarity as to what they mean and don't mean with appropriations and legislative language.

16:55During that first Trump administration, when you were working on export controls, did you consider these sorts of deals? Were they discussed? No, absolutely not. Were you surprised when Donald Trump talked about the Blackwell chips, which are much more high tech, much more in that world of AI, and floated the possibility of allowing a deal that could see some of those chips go to China? Yeah, part of it is surprising, part of it isn't. We've seen the president do this before. He throws out grenades, they're verbal grenades, to see how the markets react, to see how the public reacts, and then makes his decision.

17:33But to take the wider point here, and you have sat in rooms with the Chinese and had discussions with them when you were part of the first Trump administration, haven't you? Do you think this idea of saying, hey, OK, we'll give you some chips, maybe not the most high tech chips, also allows the US to have an idea of what China's doing? Absolutely not. Once things go to China, I think it is really a black box. We don't have a good sense of what China is going to do, especially chips that don't need our own company software to run. They're just chips that can be run on China's Chinese developed software.

18:08So I really do think that we've got to be very careful about what we sell to China. And I want to make a point clear because I hear this argument repeatedly. Well, if we get China dependent on our chips, they're not going to indigenize. What I often remind people to say is repeat that back to me as if you were the Chinese. The Chinese are basically going to say, we're not going to indigenize anything and we're going to be hooked on American-made technology. That is, of course, not what they're going to do. They're not going to do to themselves what they did to us in magnets. They have every intention of indigenizing and high-tech capabilities.

18:41And during the interim measure where they're getting their technologies to meet our levels or exceed, they're going to buy ours. And another point that's worth stressing, China restricts market access to American companies. It does not want us to sell in China what it can produce in China. So to the extent that China is letting any American company's goods, services to seep into China, it's because it needs it. And I think when it needs it, it's not purely economical. It's a stopgap measure until China develops it on its own and then the doors close. Nazak Nilegakta there, who, of course, served in the first Trump administration.

19:20Let's bring Professor Li back in. What do you make of what, Nazak? Many Americans say that as well, that, you know, you don't let American companies in unless they're bringing technology that you can copy. Well, two very simple points. Let me remind you of our audience. Number one, these high tech chips are actually mostly used in non-military areas such as AI, AI machine learning. The military equipment actually use different kinds of chips. They use chips which are slower, bigger, but more reliable. Second point, okay? Absolutely, when the U.S. restricts certain products to the Chinese side, this is a stimulus for Chinese indigenous innovation, okay?

20:07Meanwhile, when the U.S. loosens up its restriction to China, It will not stop China's side from indigenizing, indigenous innovation. However, it slows down. It slows down China's process of indigenous innovation simply because the profit, the room of profits is much lower, right? With restrictions, there's huge profit for indigenous technology. Okay, so I think, again, I think President Trump is learning. He's now smarting up. It's learning. I'm serious. I give credit to them. Professor, you're quite a fan of us, I have to say. Over the programme, since we first have you on, you seem to have a growing appreciation of the US president.

20:53It's always a pleasure having you on the programme, Professor Lee. Thank you so much for joining us. I want to end this first. I'll have our thoughts from both Ali and Jennifer. Ali, were you surprised at this deal? I was very surprised. Yeah, no, I so my sort of reaction to this was kind of twofold. The first was to be kind of ill at ease with it. There are a couple of sort of underlying conditions that are concerning. The first is that part of this, the undercurrent of all of this about national security concerns, this really undermines that argument in a lot of ways. And also in being unprecedented, it also does establish a precedent that you can implicitly sort of give the government a cut and subsequently gain access to markets that are otherwise restricted.

21:40And I don't know how I feel about it, but it definitely made the hairs on my back stand up a little bit, which says something about what a nerd I am probably. But it definitely seems like it is part of sort of a wider geopolitical shift. It certainly does. Jennifer, briefly, if you don't mind, because we're heading to the news. It's not wrong for the Chinese to have a look at a product and then try and make it themselves. Most countries would do that, wouldn't they? Oh, absolutely not. But at the same time, even though now the U.S. has approved China buying these chips, it also is a bit wary because now why are you letting us buy it now?

22:17Because didn't you say it was national security risk? And so it was asking NVIDIA, hey, do you have backdoors to this? And there's, you know, can you trace and track and shut down these chips? So there's a bit of weariness. But let me tell you, who's the winner? Chinese companies, because you know what? Yes, they're using Huawei chips, but they would really much rather have an alternative because in a lot of the tech sectors, they're competing with Huawei technology. Okay, a lot more coming up from both our guests, Jennifer Pack and Ali Garfinkel, in the second half of the program. There may be tensions between the US and China, but so far, no tensions between our guests from both countries.

23:03Welcome back to Business Matters here on the BBC World Service with me, Rahul Tandon. We've got Jennifer Pack with us, who's China correspondent for American Public Media based in Shanghai. And we have Ali Garfinkel, senior finance reporter at Fortune, who is based where, Reminders, Ali? In Los Angeles in West LA, Venice Beach. Oh, very good. Very nice part of the world to live in. Quickly, before we move on to talk about employment, just to close that first half where we talked about relations between the US and China. Ali, around you, it's sort of anecdotally, because we've had such tensions between the US and China, do you think it's changed people's opinions in the US about China?

23:44Is there a lot of worry, do you think, about China? I don't know is the real answer I think it depends on the person I definitely think one thing is indisputable and it's that China certainly comes up more often like when people will hear what I do for a living they'll ask me what I think about China which wasn't the case a few years ago I definitely think there is concern I also think there is a lot of um I think there's also still a sense that um there's maybe a lack of information or that people will have parts of the story. Because in a lot of ways, I will say, and this is why I admire what Jennifer does, you know, it is actually a hard story to follow in so many ways, particularly for an audience, say, in Southern California that isn't familiar.

24:28Give us a Chinese perspective, obviously tighter control over information there. But anecdotally, when you speak to people about the US and these tensions, what do they say to you, Jennifer? I don't think that it has changed from the first trade war, to be honest, and from people on the streets to exporters to officials from the top. They see this as a move to suppress China's rise, that China is rising and the U.S. is going down. And these are the measures they're trying to react. And in many ways, they echo what Professor Lee had said earlier, which is there is this sort of admiration on this side of the world where they actually do see Trump as a business person.

25:12They actually see him as, we could call it quote unquote unrational, but they say he's a businessman. So there's got to be a deal some way down the road. But at the same time, they know that their own country and their own and the leaders are going to ask them to, you know, keep trying to, you know, be self-reliant and make sure that for the critical industries, especially, we're not reliant on anyone else. Interesting to hear both your thoughts there. Let's move on and have a look at what's going on, the labour markets of both the US and China. And then let's start by talking about statistics, because Donald Trump says he's nominating the conservative economist E.J.

25:50Anthony as the next commissioner of the Bureau of Labor Statistics. Now, I'm sure many of you recorded earlier this month, President Trump fired his predecessor, Erica McEntarfer, accusing her without evidence of manipulating figures, which showed a sharply weakening jobs market. So just to remind us, Ali, that that was a huge moment, wasn't it, when he sacked the commissioner of the Bureau of Labour Statistics? It absolutely was. And as nerdy as it sounds, the Bureau of Labour Statistics actually has a long history as a political hot potato. So it was a huge moment. And it also in certain ways wasn't surprising because it was part of concerns around data, around weaker than expected jobs reports.

26:35And President Trump has a long history of questioning data that doesn't necessarily serve him, calling it rigged. And this is certainly part of that wider discourse for him, I would say. OK, let's bring in you talked about this being a political hot potato. So let's bring in somebody who's been in that position. Erica Groshen served as United States Bureau of Labor Statistics Commissioner under President Obama is now a senior labor advisor at Cornell University's ILR School. Thank you so much for joining us on Business Matters, Erica. It's a pleasure, Rahul. Glad to be here. Well, was it a hot political hot potato when you were there?

27:16uh well so the bls uh is in charge of releasing some of the most highly charged statistics but um it really does depend on how the uh on how the administration handles things right so uh while i was at bls i wouldn't say that there was a lot of controversy about any of these statistics we produced, those were taken at face value, and we just moved on. Yeah, the BLS is the Bureau of Labour Statistics. You didn't have President Obama on the phone to you saying, listen, Erica, I didn't like those figures you just put out there. No, that didn't happen. And I mean, the closest that that got was I heard from the the chair of the Council of Economic Advisors at the time,