China Is Better Able To Withstand A Trade War Than In The Past The United States still buys a lot of products from China, but overall China is a lot less dependent on trade than it used to be. And Beijing now has leverage over the U.S. that it once lacked.
NPR logo

China Is Better Able To Withstand A Trade War Than In The Past

  • Download
  • <iframe src="https://www.npr.org/player/embed/628315251/628315252" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
China Is Better Able To Withstand A Trade War Than In The Past

China Is Better Able To Withstand A Trade War Than In The Past

  • Download
  • <iframe src="https://www.npr.org/player/embed/628315251/628315252" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

NOEL KING, HOST:

Beijing says it will retaliate if President Trump goes ahead with plans to impose tariffs on more Chinese products. The U.S. and China are locked in what could become a full-on trade war. And China's economy is better positioned than it once was to survive. NPR's Jim Zarroli has the story.

JIM ZARROLI, BYLINE: President Trump holds a view of China that a lot of Americans have. He says, for too long, it's been able to flood U.S. markets with cheap imports. And as a result, it's amassed lots of money, which has helped turn it into an economic superpower.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: China made - anywhere, depending on the way you count - from $375 billion, we built China.

ZARROLI: It's true that China has sold a lot of products to the U.S. over the years, and it still does. The U.S. remains China's most important single market, buying $500 billion in goods last year. David Dollar, who worked on trade negotiations with China in the Obama Treasury Department, says losing access to that market would take a bite out of China's economy.

DAVID DOLLAR: For any economy to go down by 2 or 3 percentage points, that's a serious issue.

ZARROLI: And the impact would be especially serious right now because China's economy is already slowing. At the same time, Dollar says, the pain wouldn't be as bad as it once might have been.

DOLLAR: The U.S. market is very important to China, but it's less important than it was 10 years ago.

ZARROLI: For one thing, the Chinese economy has become a lot bigger and more diversified than it once was and less dependent on trade. And China now has leverage of its own against the U.S. Companies such as Apple and Boeing make big money in China. And Boston College political science professor Robert Ross says the Chinese bureaucracy can make life difficult for them if it wants.

ROBERT ROSS: All these various industries can develop problems in China. There can be health hazards at a McDonald's. Starbucks could all of a sudden come under investigation for profit issues and tax issues.

ZARROLI: China can even discourage its consumers from buying American products. Whether it would go that far is still an open question. But Ross says, if worse comes to worst, China may be better able to survive a trade war than the U.S.

ROSS: The question less is whether we can do harm to them than which one can endure the pain the better? And there are some reasons to believe that, over the short term, the Chinese are better positioned to manage this.

ZARROLI: It can do that partly because of its top-down economy. If its growth suffers, Beijing can take steps like cutting taxes or stimulating spending without having to run it by Congress. No one has to worry about midterms. Economist Linda Lim at the University of Michigan says many of China's most important companies are government subsidized, and they don't have shareholders breathing down their necks.

LINDA LIM: If you don't have to make money, that's a huge competitive advantage. So they can absorb the costs.

ZARROLI: Lim points out that China has been gradually trying to become a more independent economy, to strengthen its tech and defense industries. Ironically, she says, a trade war would accelerate the process, even if China has to suffer through some pain to get there. Jim Zarroli, NPR News, New York.

Copyright © 2018 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.