China, U.S. Plunge Into Trade War The U.S. has imposed 25 percent tariffs on $34 billion worth of Chinese goods, including electronics and engine parts. China retaliated with tariffs of equal amount on American agricultural products.
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China, U.S. Plunge Into Trade War

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China, U.S. Plunge Into Trade War

China, U.S. Plunge Into Trade War

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AILSA CHANG, HOST:

China warned today that the Trump administration has started the largest trade war in economic history. The Chinese government said this as the world's two largest economies impose tariffs on billions of dollars' worth of each other's imports. Both sides have said they're prepared to raise the stakes, hiking tariffs even more if the other country does not back down. To give us some idea of how this is all going to play out, we're joined now by NPR's Jim Zarroli. Hey, Jim.

JIM ZARROLI, BYLINE: Hi, Ailsa.

CHANG: So how soon do you think it'll be before consumers start feeling the impact of all these tariffs?

ZARROLI: Well, I guess it kind of depends on which consumers we're talking about. The United States has imposed tariffs on up to 25 percent on a lot of different products. A lot of them are on machinery; also the parts that manufacturers use in the assembly process. These should eventually cause the price of a lot of consumer goods to go up, but it will take a while. China, on the other hand, has targeted things like electric vehicles but also a lot of agricultural products like soybeans, which is going to hurt a lot of farmers who, of course, tend to like President Trump. And that's not accidental because China is targeting its tariffs for maximum political effect.

CHANG: I can imagine. Now, President Trump says he will respond to China's response by imposing even more tariffs on China. So how is China likely going to deal with that?

ZARROLI: Well, China says the Trump administration's moves violate the rules of the World Trade Organization, which is the group that deals with global trade disputes. It says it won't be pressured. It says it's going to give as good as it gets. And it said it won't stop at tariffs necessarily. It's talked about what it describes as qualitative measures.

CHANG: What does that mean?

ZARROLI: I spoke with Monica de Bolle, who's an economist at the Peterson Institute on International Economics. I asked her what that meant. De Bolle says China can make it really difficult for American companies that want to do business there.

MONICA DE BOLLE: And they can do that by just making the bureaucracy very difficult, making customs procedures very difficult for U.S. goods. So there are a number of other things that they can do on top of tariffs.

CHANG: This could turn into a major fight between these two economic superpowers. What kind of risk is there for real economic harm?

ZARROLI: Well, the tariffs by themselves are not really a big problem right now. The United States economy is doing well. We had another really good unemployment report today. So tariffs on $34 billion worth of imports - that's not really going to push the United States into a recession. The problem, of course, is that we don't know how big this gets. These are big economies. If they want to start inflicting real damage on each other, they can do it. Monica de Bolle says we're really in uncharted territory, and it's not just because China is so big. De Bolle says China is different in another really important way.

DE BOLLE: It's not completely a market-driven economy, so the government exerts a lot of control.

ZARROLI: So China has a lot of leverage that the United States doesn't really have in that sense. One of the things it has done before is discouraged Chinese consumers from buying products from countries that the government is unhappy with for whatever reason. It's done that with South Korea and Japan. There are a lot of American companies that do sell products in China, and they would be hurt. General Motors, for instance, sells more cars in China than it does in the United States.

CHANG: Well, what kind of leverage does the U.S. have then?

ZARROLI: China needs the U.S. market. The United States buys a lot of products from Chinese companies, and China is heavily dependent on exports to the United States.

CHANG: That's NPR's Jim Zarroli. Thank you, Jim.

ZARROLI: You're welcome.

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