China's trade war perspective

0:01NPR

0:11This is The Indicator from Planet Money. I'm Adrian Ma. As we're all probably aware by now, the world's two largest economies are locked in a high-stakes economic standoff. Let's recap. It started in early February. The president will be implementing tomorrow a 10 percent tariff on China. Then China hit back with retaliatory tariffs. China says it will counter U.S. President Donald Trump's tariffs with its own import fees. A couple months later. So we're going to be charging a discounted reciprocal tariff of 34 percent, I think. To which China responded. Saying that it will impose additional tariffs on U.S.

0:49goods from April 10th at a rate of 34 percent. And around and around, it's gone. The United States will impose additional tariffs on China of 50 percent. Beijing announced it will impose 84 percent tariffs. As it stands, the U.S. has a 145 percent tariff on Chinese goods and China has a 125 percent tariff on U.S. goods. And just yesterday, China threatened to retaliate against other countries if they cut a trade deal with the U.S. that hurts China. Now, we've heard a lot about how this trade war has been affecting U.S. businesses and U.S. consumers. But how is this trade war being felt in China?

1:29And what is the endgame for Chinese President Xi Jinping? Today on the show, NPR correspondents Emily Fang and John Riewicz bring us some answers. They bring us a view of this trade war from China. NPR correspondent Emily Fang. Hello. Hey, Adrian. NPR correspondent John Rewich. Yo, Adrian. How's it going? It is good. And thank you for joining us at what is sort of an unusual time. I'm speaking at about nine o 'clock in the evening in Washington, D.C., which is where you are, Emily. Yes. But John is in China right now. He is literally on the other side of the world. That's right. And this is perfect.

2:07I mean, you're both here because you are NPR's resident China experts. So let's get into it, starting off with a little bit of compare and contrast. So since Trump began rolling out tariffs, there's been quite a bit of freaking out in the U.S., I think it's fair to say, right? The stock market has been going haywire. Consumers have been panic buying stuff. And to top it all off, some economists are even concerned about a possible recession. So I'm curious about what is the reaction you're seeing over there? Yeah. Yesterday, I came down to Guangzhou, this town in the south, to attend the Canton Fair, which is this gigantic, it's the longest running trade fair in the country.

2:49It's been going since the late 50s. And I would say the people we talk to on the manufacturing side are sort of everyone is holding their breath at this point. An example is this guy we met named Gavin Yang. He works for a company called NUX. They supply air conditioners to the U.S. and Latin America. And he just said, up and down the supply chain, everybody's nervous. And everything is ground to a halt. They are not shipping to the United States. Production, therefore, has been paused. If nobody just knows what tomorrow is going to bring, I think that's a big part of it. It's impossible to make business decisions if you have no idea what's coming.

3:26So this is sort of like the mirror image of what we've been hearing from all these business owners in the U.S., that they're dealing with all this uncertainty. Absolutely. So the disruption is massive. And Emily, what about you? What have you been seeing from your reporting? So I'm sitting here in Washington, D.C., where the tariffs originated. And I've been watching, you know, regardless of what Chinese exporters feel, how Chinese leaders want the rest of the world to think they're feeling, which is a combination of things. It's a mixture of defiance. You know, you have leaders like Xi Jinping the head of the communist party saying uh you know the road's not going to be smooth but we're going to continue onwards uh on tiktok i've been noticing this week there have been more and more chinese factories that have been putting out videos in english telling american consumers basically saying you might never have thought about where your supply chains are but they're here in China and were the ones making your stuff.

4:27Okay. So when it comes to justifying the trade war with China, one story Trump has repeated a lot is that the U.S. has been getting ripped off by China for years. When it comes to the Chinese side of this trade relationship, what's the story they tell themselves? So it is undeniable that there have been unfair trade practices that China has perpetuated and they have dumped goods and they have stolen IP and you know all that stuff but I think a lot of Chinese if you ask them about the export market they'll say we did this stuff so you didn't have to uh and they are skeptical and incredulous when you ask them what do you think Americans would want to assemble iPhones or glue rubber soles onto shoes um I think that China feels like it has done manufacturing much more efficiently than any other country, more efficiently than Southeast Asia certainly can do right now, and at costs much lower than the U.S., and that it's dirty, hard work that they don't believe Americans would do, even if they could do it at the same cost that China does.

5:38Yeah. There's also the bigger question about China's understanding of what Trump wants, right? And by the way, 20 % of these tariffs are supposedly related to fentanyl, which has nothing to do with trade, right? Beijing has this longstanding paranoia, or maybe it's not paranoia, about the Trump administration or about the U.S. government in general just trying to hold China down. They can't deal with the fact that China is going to, at some point, potentially be the biggest economy in the world. It's got a strong military. It's a pure competitor. But China's economy has struggled a bit in the past few years, right?

6:13I mean, they've had slower growth and a real estate crisis to deal with. So do you think this kind of affects its negotiating position with the U.S.? Like the economy here has been pretty strong, according to the indicators, at least, you know, before the tariffs really started rocking things. I would be careful making the argument that because China's economy was kind of limping along before these tariffs, that they're then in a weaker negotiating position because a lot of the policies that created this plateauing economy were intentional and they're strategic. And Xi Jinping has been warning for years that there are, quote, rough seas ahead and that he's kind of intentionally willing to take a slower economy because even before the tariffs, he was trying to structurally change China's economy away from things like relying on building houses all the time or exporting cheap goods to the U.S.

7:07or creating an economy that was reliant on consumerism. And so I think what China's leaders have been telegraphing is they were kind of prepared for long-term economic pain even before another trade war with the U.S. And so a trade war is kind of just accelerating all of these structural economic changes they're trying to force through. Speaking of long-term economic pain, I mean, this is what both countries could be facing if a protracted trade war goes on. And yet neither side seems to be rushing to the bargaining table right now. How is President Xi Jinping looking at this? Basically, I think if I were China, I would say I don't really have to do anything.

7:48I kind of can let the U.S. put out, be this chaos agent and just present myself as a more stable, more calm world leader in comparison to the U.S. Anybody placing any bets on who's going to make the first call? It wouldn't surprise me if in the halls of power in Beijing, there was a lot of confidence that the Chinese system and the Chinese people can endure more pain, economic pain, than Americans can, than Donald Trump can, because he ran on this platform of bringing inflation down on day one. And if you cut off all products from China, one guaranteed outcome is that prices of stuff is going to go up.

8:30Yeah, I think the first move is probably going to come from the U.S. And it's mostly because the two countries have completely different political languages. China is all about the details, about sending little symbolic gestures that then they trust the other side to know how to interpret. Whereas the White House right now is about making these big dramatic moves to pressure the other side to corner them into a weaker negotiating stance. So simply because I think the White House has been much more melodramatic, I would expect Trump to make the first move. NPR's John Riewicz and Emily Fang, thank you so much for taking time this night slash morning to break down China with us.

9:15Thanks for having us, Adrian. Fun to cross time zones with you, John. Likewise, likewise. This episode was produced by Julia Ritchie and Cooper Katz McKim with engineering by Robert Rodriguez. It was fact-checked by Sierra Juarez. Cake and Cannon edits the show and the indicators are production of NPR.