NOEL KING, HOST:
While this fight over immigration has been playing out, global markets have had a turbulent couple days because of tariffs and countertariffs and fears of a trade war. Now, a lot of this is about the U.S. relationship with China. And part of it is about some plans by China to advance its own economy. China has a plan called Made in China 2025. That plan is to dominate several high-tech industries over the coming years. Last month, the White House announced plans to restrict Chinese investment in the U.S. in some of these high-tech industries. And then yesterday, administration officials denied those plans.
Robert Daly is in our studios to help us make some sense of this. He's director of the Kissinger Institute on China and the United States at the Wilson Center.
ROBERT DALY: Good morning.
KING: All right, so we've got reports that the U.S. wants or plans to limit Chinese investment in certain high-tech industries in the U.S. Investment, a lot of people argue, is a good thing. So what is the U.S. worried about?
DALY: The U.S. is worried about two things. One is specific to our economic relationship with China. They're worried that China's economy is still not nearly as open as ours, that China's tariffs are three times higher than ours and that China may be investing in the United States in industries that give it intellectual property which it can use to develop its own industry through its industrial policy back in China that will help it dominate world markets and perhaps thereby weaken the United States. So there's a concern about practices that are seen as unfair, subsidies to stay on enterprises - for example, the coerced transfer of American technology to Chinese.
At the same time, there's this other issue about long-term geostrategic competition between the United States and China. The Trump administration has said that China is our greatest long-term strategic challenge. And so the Trump administration sometimes speaks as though it doesn't like China's unfair practices. It sometimes speaks as though China's own development aspirations are themselves unfair.
KING: Right. And there is the question of whether or not the United States sees China fundamentally as a threat. So how is China responding to these reports? We say we may restrict investment. China says what exactly - all right, we won't invest?
DALY: China says that it will counterpunch very hard, that it will match our tariffs for as long as it can. But because we import more from China than they do from us, China's going to run out of American imports it can place tariffs on. It can therefore go after individual American companies and make American companies and American industries, for example like agriculture, feel the pain. So China's going to counterpunch. Xi Jinping himself has been clear about that.
At the same time, China is continuing to talk about the importance of economic globalization, and it wants to lead in that. Yesterday, we had a very important announcement that the European Union, which shares our concerns, is going to pursue a bilateral investment agreement with China to address these concerns. We're not part of those talks.
KING: Is that a big deal? Should we be worried about that?
DALY: That is absolutely a big deal. We withdrew from the Paris climate agreements. We withdrew from the Trans-Pacific Partnerships. Now we're not part of what may be a new regime of trade and investment which we would have been leading at any time over the past 50 or 60 years. And now the party's being held, and we're not invited.
KING: OK. So what we're looking at here is possibly an increasingly isolated U.S. We also have a U.S. that is looking at China and this Made in 2025 plan with what appears to be a great amount of worry that China intends to surpass us technologically. Should the United States be worried about Made in China 2025?
DALY: We should be worried as long as we understand that Made in China 2025 is shorthand. It represents a whole range of concerns we have about the United States. They're economic. They're technological. They're security concerns. And yes, those concerns are real. They are legitimate. China has 20 percent of the world's population. We have 4. They have the world's largest middle class. And the gap between the size of their middle class and our own is growing, which means they become tastemakers to the world and drive markets at both the supply and the demand side. This is a relative weakening of American economic and therefore military and political power.
KING: Robert Daly is director of the Kissinger Institute on China and the United States at the Wilson Center.
Robert, thank you so much.
DALY: Thank you.
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