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President Trump Threatens Additional Tariffs On Chinese Goods

DAVID GREENE, HOST:

President Trump is threatening to impose additional tariffs on $200 billion worth of Chinese goods. China's government is saying that amounts to blackmail and that Beijing is going to take countermeasures. And all of that has U.S. companies in China feeling very nervous. And let's turn now to NPR's Rob Schmitz in Shanghai. Rob, good morning.

ROB SCHMITZ, BYLINE: Good morning.

GREENE: So it feels like we are seeing something play out that a lot of people were predicting - a trade dispute just becoming a tit for tat with one retaliation followed by another retaliation. Is that what's going on?

SCHMITZ: Yeah. I mean, this is like a schoolyard fight - the U.S. gets angry about China's behavior, punches China, China punches back, and now the U.S. has pulled the equivalent of a switchblade out of its pocket. We're getting to a different threat level here.

GREENE: OK, different threat level, so I mentioned what President Trump is doing, threatening these additional tariffs, but what exactly is China saying in terms of retaliation? What could this mean for U.S. companies that operate there?

SCHMITZ: Well, the message this morning from Beijing was that China would retaliate with what it called quantitative and qualitative measures. The quantitative measures refers to tariffs on U.S. products. And up until now, Beijing's retaliated to U.S. tariffs in a tit-for-tat manner. So they've been countering U.S. tariffs with their own tariffs on the same amount of U.S. products. But there are limits to this, and the Trump administration seems to understand that. Beijing only imports $170 billion worth of U.S. goods, so Trump's new threat of tariffs on $200 billion worth of Chinese goods puts this sort of tit-for-tat response out of reach for China.

GREENE: There aren't enough goods for China to put tariffs on, so they have to figure out some other way to do something here (ph).

SCHMITZ: Exactly. So that brings us to the qualitative measures that Beijing is threatening, and that could mean China goes after big U.S. companies generating a lot of revenue inside of China. I spoke to The US-China Business Council's Jake Parker about this today. He represents dozens of big American companies operating in China, and here's what he said.

JACOB PARKER: That has a huge, chilling impact on U.S. companies operating in the China market because it would be outside the scope of import and export in tariffs and would instead begin to chip away at U.S. company market share in the China market, something that's almost impossible to rebuild.

SCHMITZ: And that's a market share, David, that U.S. companies have taken decades to build in the first place. So this is really worrying for them.

GREENE: Can I just drill down a little bit, Rob, on qualitative measures? What do those look like? It sounds like it could be really open-ended, giving China an opening to punish U.S. companies any way they want to. So what could those be, and have we seen them up to this point?

SCHMITZ: We have already seen them. He's told me that U.S. companies are beginning to complain that they're receiving increased scrutiny on the regulation side. But also when U.S. products enter customs into China, Parker told me that typically 2 percent of U.S. products are inspected upon entering a Chinese port. And whenever that happens, of course, they can't sell those products. Recently, since these tariff threats came through, for some U.S. products, that's gone up to 100 percent, meaning entire groups of U.S. products are no longer available. Businesses here are also worried about boycotts should Trump go through with more tariffs. China's government could easily turn this growing sense of nationalism inside of China into a more targeted anti-Americanism. And we've definitely seen that before here in China with Japanese goods when China was angry with Japan and with South Korean goods when it had a tiff with that country.

GREENE: OK. So that's the potential impact here on U.S. companies operating in China. What about big corporations, Rob, who really rely on Chinese goods in their supply chain? I'm thinking, like, Apple, for one. I mean, are they going to be hit by all this?

SCHMITZ: Yeah, and that's a tricky one for Chinese authorities because Apple suppliers employ millions of Chinese workers. So if you go after Apple's supply chain, that inevitably leads to rising unemployment, something China's government definitely does not want at a time when the economy is starting to lag. But we might see China going after Apple's market share because Apple also sells a lot of phones and tablets inside of China. And Chinese companies like Xiaomi and Huawei are big competitors of Apple, so that's a possibility.

GREENE: One other aspect of all of this, Rob, there have been a lot of - there's been a lot of speculation that this trade dispute between the U.S. and China could spill over into how the United States is dealing with North Korea after the president's big summit with Kim Jong Un. Big news in China today - North Korea's leader is actually in Beijing meeting with Chinese leaders. What are we expecting?

SCHMITZ: Yeah, great timing (laughter) - you know, this is - this could possibly anger President Trump even more because it reminds everyone that China is still North Korea's closest ally. What's interesting, too, is that Kim's visit was announced on the first day of his trip. Typically, we hear that Kim visited China after he leaves because the North is paranoid about his security. He also flew to Beijing instead of taking an armored train, which he usually does. So it seems like Kim Jong Un feels a lot safer traveling in China now.

GREENE: All right. NPR's Rob Schmitz, with a lot to cover, joining us this morning from Shanghai. Rob, we appreciate it.

SCHMITZ: Thanks a lot, David. Transcript provided by NPR, Copyright NPR.