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U.S.-China Talks: How Did We Get Here?

AILSA CHANG, HOST:

Tonight's high-stakes trade talks between the U.S. and China come just hours before the Trump administration is set to raise the stakes by imposing higher tariffs on $200 billion worth of Chinese imports. The threat of an all-out trade war has rattled financial markets. The Dow fell again today, though not nearly as sharply as earlier this week. NPR's Scott Horsley joins us now with some perspective. Hey, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you, Ailsa.

CHANG: Now, before this week began, people were pretty optimistic about a trade deal. But now it looks less likely. What is going on?

HORSLEY: That's right. Just a week ago, Treasury Secretary Steve Mnuchin and U.S. Trade Representative Robert Lighthizer were wrapping up another round of talks in Beijing. And the word we got from the White House was that those talks had been productive. There were hints that the two sides were closing in on a deal. The expectation was that they would be finishing it up maybe this week here in Washington.

CHANG: Yeah.

HORSLEY: But the administration says China started to walk back from commitments it had made earlier in the negotiations, and that was confirmed over the weekend in some communications. That's when President Trump threatened to increase tariffs as of midnight tonight. Here's how the president put it this afternoon.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: We were getting very close to a deal, then they started to renegotiate the deal. We can't have that. We can't have that. So our country can take in $120 billion a year in tariffs, paid for mostly by China, by the way, not by us. A lot of people try and steer it in a different direction. It's really paid - ultimately, it's paid for by - largely by China.

CHANG: Is that true?

HORSLEY: Not really, no. China might absorb some of the costs the tariffs. But economists say the lion's share is actually paid by U.S. businesses and consumers. And also, that figure that trumps using there - $120 billion - that's assuming that the U.S. would charge a tariff of 25% on virtually everything we import from China, more than $500 billion worth of goods last year. Now, as of midnight tonight, we're only talking about boosting tariffs on about half that total.

CHANG: OK.

HORSLEY: But if no agreement is reached, the president says he's going to add tariffs to everything else we get from China.

CHANG: So what would that mean for the economy if Trump follows through on this threat?

HORSLEY: It would certainly mean a jolt, which is why you're seeing some of this nervousness in the stock market. And we've been on this precipice before. You know, tariffs were supposed to go up back in January, then again in March. Both times the administration held off to give negotiators more time. The U.S. is - has been trying to get China to change its behavior on things like protecting intellectual property. If the tariffs do go from 10 to 25% at midnight as scheduled, it's going to mean higher costs for a lot of Chinese goods.

But the real pain would be if Trump follows through on that threat to hit all Chinese imports, including a whole lot of consumer items, the kind of things you find on the shelf at Walmart. That's when this would really pinch consumers in the pocketbook.

CHANG: Why did China back away from its earlier commitments, do we know?

HORSLEY: We don't know for sure, but there seems to be some jockeying here over, you know, who's really got the upper hand at the bargaining table. The Wall Street Journal suggests China may have read some of Trump's recent tweets as a sign that Trump is less confident about the U.S. economy. And that would have given Beijing an opening to drive a hard bargain.

On the other hand, Trump might be feeling emboldened by the strong growth we saw in the first quarter, the good jobs report last week. And that's why he's trying to play hardball here. Of course, both countries' economies would suffer a hit if there is an all-out trade war.

CHANG: That's NPR's Scott Horsley. Thanks, Scott.

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


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