SCOTT DETROW, HOST:
Over the past 10 days, President Trump introduced tariffs on imports from nearly every country on the planet, then watched markets enter a tailspin, and then earlier this week, he abruptly lowered most of those tariffs - at least for the next three months - but not tariffs on products made in China. In fact, they have been jacked way up.
The minimum tariff on Chinese imports is now 145%. That is on top of preexisting tariffs from the First Trump administration and the Biden administration, which already affected the majority of Chinese imports. Though last night, the Trump administration made yet another switch and carved out an exemption for smartphones, computers and some other devices.
Those electronics aside, though, China is not having it. The country has matched each U.S. increase with its own, raising global fears of what happens next if the world's two biggest markets keep putting up more walls between each other. Joined now by NPR's John Ruwitch, who has been watching all of this unfold from his perch in Beijing - hey, John.
JOHN RUWITCH, BYLINE: Hey, Scott.
DETROW: Let me start with this. What is the mood in China, the other ground zero of this trade war?
RUWITCH: The other one, yeah - it feels a little different than it did when the first trade war - during the first Trump administration - broke out, when there was much more - panic is probably the wrong word, but sky-is-falling type of vibe.
I've been keeping an eye on two areas here where the reaction is unfolding. One is the government, and the other is from the export sector. The government's been interesting to watch because they've really been projecting defiance. I want to play a clip from a video that the Chinese embassy in Washington and other foreign ministry officials have been sharing. This is audio from 1953.
(SOUNDBITE OF ARCHIVED RECORDING)
MAO ZEDONG: (Non-English language spoken).
(APPLAUSE)
RUWITCH: So that's the voice of Mao Zedong, Chairman Mao. So the Korean war was raging in '53. And in that clip, Mao says, it's not China that decides how long this war will go on. It's the U.S. president, whoever that may be. But no matter how long it goes on, China will never yield, and it will emerge victorious. And that's really the vibe here. They're projecting the same type of attitude.
The Foreign Ministry and Commerce Ministry have been calling the U.S. a bully, saying the U.S. has been blackmailing everybody around the world. And China has literally said that it's standing up for free trade and standing up for the rest of the world.
DETROW: I mean, I think that video really underscores just how much the Chinese government is digging in here. And as I mentioned earlier, they have been upping the ante on their end, matching Trump's tariffs, right?
RUWITCH: Yeah, they have. It's a new approach for China. In the first trade war, they imposed some tariffs on the U.S., but it wasn't matching. It wasn't the same magnitude. And they always did retaliate, but going toe to toe is something new. Here's Gabriel Wildau, an analyst who follows China's political economy at the consultancy Teneo.
GABRIEL WILDAU: I think Chinese leaders, like a lot of leaders around the world, have come to the conclusion that the real objective behind Trump's tariffs is to assert dominance and to force other countries to come head in hand pleading for a deal. And Beijing's just not willing to play that game.
RUWITCH: National pride is at stake. They're talking about free trade ideals, and they don't want to set a precedent. It's worth pointing out that China's being careful not to escalate here - right? - beyond the rhetoric. The government here is saying that they don't want a trade war, that trade wars and tariff wars are lose-lose but that they will fight if they have to. And all their steps have been reactions. That's also worth noting. They're not going on the offensive.
After they raised tariffs on Friday, they actually said they're not going to be raising tariffs anymore if Trump continues to raise tariffs because there's no point in it, but they will protect China's interests and rights. That may take the whole trade war into a different direction. There will be economic fallout, but China does feel like it's willing to take it. Here's Wildau again.
WILDAU: They would rather absorb some economic pain now as a way to draw a line and signal that they're not going to be bullied, rather than placate Trump now in the expectation that he would only come back later with new demands.
DETROW: Interesting. OK, so that's the government. What about the export sector, though? Businesses that sell abroad - how are they reacting to?
RUWITCH: Sure. Our producer Aowen Cao found a freight forwarder in the city of Yiwu which is in Zhejiang Province. It's famous as an export hub. There's a massive wholesale market there. Jiang Kun is the guy's name.
JIANG KUN: (Non-English language spoken).
RUWITCH: He says, basically, lighter tariffs - you know, raising the tariffs at lower increments, like the initial 10% and then 10% again earlier this year - that was manageable. That was shared among exporters, shippers, customers. These tariffs are just a different thing altogether. It's too fast and too high.
JIANG: (Non-English language spoken).
RUWITCH: He says he has customers who are hitting paws on shipments to the U.S.
JIANG: (Non-English language spoken).
RUWITCH: And the shipping takes time, right? It takes a few weeks. Nobody can say what policy is going to look like tomorrow, let alone three weeks from now, when the products land in America. So businesses are already looking for other markets, potentially abandoning the U.S. market altogether, he says. And they're doing that because they have to keep their factories running and keep workers paid.
DETROW: I mean, when you say that, let's just play that out to its logical conclusion. So many goods come from China that are sold in the U.S. Could we have a situation where these goods stop flowing altogether to the United States?
RUWITCH: Well, that's what Jiang Kun thinks is happening now, and others also think it amounts to basically trade decoupling. I mean, to get goods into the U.S., someone has to pay the tariff, right? And analysts say this tariff is way bigger right now, obviously, than the average profit margin on any Chinese import.
There are workarounds, of course. Transshipment is one of them. That's where a product is basically made here in China. It touches another country - maybe it's assembled there - then ships to the U.S. It might have a Made in Thailand or a Made in Vietnam tag on it. Chinese companies may continue that trend of doing that. They may continue also to build capacity in these other countries. It kind of depends on what happens with Trump's tariff deals with those countries.
Jiang Kun says the shipping disruption is real, though. It's going to have a whiplike effect eventually, if these tariffs are lower. There's going to be overstocked warehouses, misplaced shipments. Remember all the chaos in shipping during the pandemic.
DETROW: All of these long-term decisions that need to be made as the policies change day by day - I mean, that - so that's the government. That's the companies. Let's talk about the other big factor here, Chinese workers. What does this do for them?
RUWITCH: Workers in China is kind of a complex issue. Yes, you know, companies that go out of business because of this - that may happen - or move their production elsewhere, shut down in China. That may happen. That's bad for the workers here in China. At the same time, though, there are sectors of industry in China that have worker shortages now, that actually have a hard time hiring people, and Chinese industry is becoming increasingly automated. So how it all shakes out, we don't know.
DETROW: Yeah. Big picture, what should we understand from your perspective? You're somebody who's covered China for a long time now at this point. What should we understand about Beijing's ability to maintain a steadfast approach compared to the United States, where we have seen this go backwards and forwards based on the markets?
RUWITCH: Yeah, from Beijing's perspective, I do think there's a little bit of an, our political system versus your political system, thing going on here, and Xi Jinping is very confident that the Chinese system can weather this storm. It's prepared for the economic downtick from this trade war. And right now, you know, the decision-making that's happening here, it's political. It's not in China's economic interest to have a trade war. It's not in China's economic interest to have 125% tariffs on the U.S. It's a political interest.
DETROW: That is NPR. John Ruwitch in Beijing. John, always good to talk to you.
RUWITCH: You're welcome. Transcript provided by NPR, Copyright NPR.
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