Tariffs On China Raise Concern About The Future Of U.S.-China Relations
DAVID GREENE, HOST:
After the Trump administration announced tariffs on China last week and China promised to retaliate, financial markets went into a tailspin. The Dow fell over a thousand points at the end of the week as fears of a trade war spread. At the China Development Forum held in Beijing over the weekend, executives from some of America's biggest companies warned against protectionist policies. Tim Cook, the CEO of Apple and co-chair of the event, pressed leaders of both countries to come to an agreement and avoid a trade war.
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TIM COOK: I'm going to encourage everyone that calm heads prevail.
GREENE: Larry Summers was at this event. He was treasury secretary under Bill Clinton. He was at the forum, as he goes every year. And he joins us on the line this morning.
Secretary Summers, welcome back to our program.
LARRY SUMMERS: I'm glad to be with you.
GREENE: So this is an annual event that you always go to. How different did this one feel, given the context?
SUMMERS: There's a sense of real concern about the future of the U.S.-China relationship and about what the degree of tensions can mean for the global economy. The effect - concerns are less with the immediate impact of the tariffs on the economy - though those can be disruptive in certain sectors - than the broader psychological impacts of a sense that the world's two largest economies can't get along with each other and will be seeking to pull each other down...
GREENE: Oh, say more about that because...
SUMMERS: ...In a vicious cycle.
GREENE: ...I thought that - I thought a lot of the economic - you know, the short-term impact could be something we really feel. You're saying that the tensions between these two countries broadly is your real concern. I mean, tell me why. How might that play out?
SUMMERS: Look, there's nothing good about our tariffs and their response and retaliation in terms of what it means for the economy. But these are very big economies, and even tariffs on $50 billion worth of goods wouldn't be enough to stall them or drive them into recession or even change growth forecasts in a profound way.
SUMMERS: The risk is that you'll see it cycle into escalation and retaliation. The risk is that you'll see it lead to a loss of market confidence in what's going to happen in both countries, which will then disrupt financial markets, which will disrupt economies. The risk is that if there's this much protectionist pressure in the United States at a time when unemployment is low and falling, and the economy is relatively strong, what will take place when economic conditions are less good, which surely will happen at some point? The risk is that if there's a combination of America that will have trouble taking yes for an answer and China that feels the need to be increasingly assertive in resisting foreign pressure that conflicts can only escalate.
GREENE: You're making this sound very scary. But can I just ask you, what does the United States do then? I mean, you have, for example, Elon Musk, the CEO of Tesla, saying that China is so unfair, competing with China is like competing in the Olympics wearing lead shoes. So if not tariffs, what can the United States government do to level the playing field?
SUMMERS: The United States needs to be very explicit and clear about what it wants. And it needs to focus on what is a major issue, which is the transfer of technology and the forced transfer of valuable U.S. technology to Chinese firms, and not concentrate on issues that are probably counterproductive for the American economy anyway, like steel. Look, take the U.S. actions on steel. Forty times as many U.S. workers work in industries that use steel as work in industries that produce steel. So that's a shoot-yourself-in-the-foot policy even before you get to the retaliation of other countries.
GREENE: All right, Secretary Summers, sadly, we're out of time - obviously, much more to talk about. Former Treasury Secretary Larry Summers joining us this morning. Thanks so much.
SUMMERS: Good to be with you.
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