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A Trade War Between The U.S. And China Has Begun

Jul 6, 2018
Originally published on July 6, 2018 6:21 am
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STEVE INSKEEP, HOST:

A trade war with China is on today. At 12:01 Eastern time today, the United States fired the first shots in that war by imposing tariffs on $34 billion worth of Chinese goods. So a trade war that had been discussed, that had been threats, that had been words, is now real. And China has responded, hitting American goods with equivalent tariffs. This is a real economic gamble by President Trump. The world's two biggest economies are now involved in these trade actions, and NPR's Rob Schmitz has been following the story from Shanghai. Hi there, Rob.

ROB SCHMITZ, BYLINE: Good morning, Steve.

INSKEEP: OK. So just talk us through the practicalities here. President Trump uses authority that he's been given by Congress to raise taxes, raise taxes on things that Americans import from China. China responds on American products. What happens then?

SCHMITZ: Well, then, you know, these tariffs will be passed on to consumers, both in the U.S. and China, as the companies whose products are targeted stop exporting and start to scramble to find new markets for their goods. That, of course, will mean higher prices for a range of products. Eventually, this is going to have a big impact on the flow of goods worldwide, as well as jobs. I spoke to longtime Beijing attorney James Zimmerman about this today, and here's what he said we can expect.

JAMES ZIMMERMAN: What we can expect is disruption in supply chains. We can expect job losses and a decline in investor and consumer confidence. And that's going to impact the stock market. And the impact on U.S. business is going to be - in my opinion, will be substantial.

INSKEEP: I'm glad that he mentioned supply chains, Rob, 'cause it's not that China sells me directly a product as a consumer. They're selling something to an American company. The product might even go back and forth between the U.S. and China and other countries several times. So how will U.S. businesses be affected here?

SCHMITZ: Well I've spoken to folks in the U.S. business community here, and they're telling me that China's government is already targeting their products in ways that sort of go beyond tariffs in unofficial ways. You know, they've seen customs officials inspecting more shipments of U.S. goods, slowing down business in other ways. On the Chinese side, China's government is now targeting Chinese tourism to the U.S. The Chinese embassy in Washington has issued a warning to Chinese tourists to be careful of shootings in the U.S., to watch out for customs agents, robberies and things like that. It's a clear message from them that Beijing has the power to prevent its tourists, as well, from spending money in the U.S.

INSKEEP: It's kind of like the soft equivalent of a tariff to respond on U.S. tariffs. Suppose it could end well. How would it end well? What is the best scenario here?

SCHMITZ: Well, I suppose the best scenario would be for China to say, yes, you're right. We'll give in and start treating U.S. businesses fairly and stop forcing them into joint ventures and stop requiring them to transfer their technology to China. But, you know, that's not really what's happening here. China's responding, as we've seen, with equivalent tariffs, and it's made no discernible moves towards changing these policies that seem to anger the Trump administration.

INSKEEP: Where you are in China, how are people on the streets or on social media or elsewhere responding?

SCHMITZ: I think there's a lot of confusion, Steve. You know, the Trump administration fired the first shot in this trade war. China's government insisted it's being forced to retaliate. So Chinese people I've spoken to say that this is U.S. aggression against China. And at least in urban China, you know, these are people who drive American cars. They wear clothes with U.S. labels. They use iPhones and they use iPads on a daily basis. So they're thinking, look, you know, we're buying American goods. Why is America targeting us? And that confusion can easily lead to a sense of anti-Americanism if this trade dispute gets worse.

INSKEEP: NPR's Rob Schmitz in Shanghai. Thanks.

SCHMITZ: Thanks. Transcript provided by NPR, Copyright NPR.