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What’s at stake in China trade talks for U.S. companies

Prospects for averting an all-out trade war grew dimmer as the second round of negotiations between the U.S. and China kicked off in Washington. The president said China had been “spoiled" by lenient U.S. trade policies for too long. Yamiche Alcindor reports and Judy Woodruff talks with David Lampton of Johns Hopkins University about questions surrounding Chinese telecom ZTE and more.

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  • Judy Woodruff:

    Prospects for averting an all-out trade war dimmed today as the second round of negotiations between the U.S. and China kicked off here in Washington.

    As Yamiche Alcindor reports, both President Trump and the Chinese appear to be digging in their heels.

  • President Donald Trump:

    We have been ripped off by China, an evacuation of wealth like no country has ever seen before.

  • Yamiche Alcindor:

    President Trump railed against existing trade deals today. He appeared pessimistic about talks aimed to head off a looming trade war.

  • President Donald Trump:

    China has become very spoiled. The European Union has become very spoiled. Other countries have become very spoiled, because they always got 100 percent of whatever they wanted from the United States, but we can't allow that to happen anymore.

  • Yamiche Alcindor:

    President Trump said conversations with Chinese President Xi Jinping have changed since initial talks earlier this month.

    Today, the president met with Xi's top economic adviser, Vice Premier Liu He. Hours before the president spoke, his economic adviser, Larry Kudlow, laid out the U.S.'s intentions.

  • Larry Kudlow:

    We have requested that China change their trading practices, which are unfair and in many ways illegal.

  • Yamiche Alcindor:

    There is word the Trump administration is demanding a $200 billion cut in China's trade surplus, and more protections for U.S. intellectual property.

    Last month, President Trump threatened to slap up to $150 billion of punitive tariffs onto more than 1300 Chinese exports. In turn, China took direct aim at the U.S.' farm industry and threatened 25 percent tariffs on soybeans, along with cars and aircrafts totaling $50 billion.

    China's commerce spokesperson said today in Beijing his country didn't want to see an increase in tensions.

    Gao Feng (through translator): Regarding the visit, we do not want to see the escalation of the trade frictions between China and the U.S. We will resolutely safeguard our own interests and will not trade our core interests.

  • Yamiche Alcindor:

    China has countered by asking the U.S. to lift the ban on giant Chinese telecom equipment maker ZTE Corporation. The company halted operations after the U.S. government restricted U.S. companies from selling manufacturing components to ZTE last month. It was caught illegally shipping goods to Iran and North Korea.

    On Sunday, the president tweeted he would help ZTE, "get back into business fast" and added, "Too many jobs in China lost."

    His tweet drew bipartisan outrage, as critics slammed President Trump for helping Chinese jobs before American jobs. Today, the president defended himself and said China's president asked him to look into it.

  • President Donald Trump:

    They also buy a large portion of their parts for the phones that they're making. They're the fourth largest company in terms of that industry. They buy those parts from the United States. That's a lot of business.

  • Yamiche Alcindor:

    But this round of talks began amid deep divisions between U.S. Treasury Secretary Steve Mnuchin and Mr. Trump's trade adviser, Peter Navarro.

    Navarro, a China hard-liner, reportedly clashed with the more free trader Mnuchin during the first round of talks in Beijing earlier this month.

    Little progress came from those discussions. But Mnuchin, who's leading this round of U.S. negotiations, has signaled he's eager to cut a deal.

    For the "PBS NewsHour," I'm Yamiche Alcindor.

  • Judy Woodruff:

    The tensions over the U.S.-China relationship are certainly a large component of the administration's trade agenda.

    The president had wanted to renegotiate NAFTA, the North American Free Trade Agreement, and get it approved by Congress, before the midterm election. The prospects of meeting that timeline seem increasingly unlikely.

    So, let's focus in on what's at issue with China.

    David Lampton is director of the China Studies Program at Johns Hopkins University's School of Advanced International Studies. And he joins me now.

    David Lampton, welcome back to the "NewsHour."

  • David Lampton:

    Good to be with you.

  • Judy Woodruff:

    So, we hear these comments from the president. We read there's this tension, and yet they're still meeting. How do you size up right now the state of U.S.-China discussions on trade?

  • David Lampton:

    Well, I think for — unless you're involved directly in the talks, there are a lot of moving parts. So, we have to admit there's a lot we don't know.

    But I think the two sides are very far apart. And the aims that the United States has as a matter of broad policy are really rather diametrically opposed to China's desires. And they may end up compromising and just to agree to buy more in the short run. But I think we're very far apart on the fundamental issues.

  • Judy Woodruff:

    So we start out very far apart, and you're questioning where we go.

    You were telling us before — we were talking about this — that you think President Trump has identified correctly some problems with the Chinese and their approach. But you were saying you think he's used some of the wrong tools. What did you mean?

  • David Lampton:

    Right.

    Well, I think the trade deficit is a problem, because it reflects barriers to U.S.' most competitive industries. China, in effect, has an industrial policy that identify key sectors for the future, artificial intelligence, electric autos, high-speed railroad.

    And it's subsidizing firms in those areas. It is creating protectionist walls to keep out competitive firms. It's financing research and development to a very hefty amount. And the U.S. feels, in the aggregate, that's disadvantaging us. It gets reflected in the trade deficit, and many of our most competitive firms don't feel they have a level playing field at all operating in China.

  • Judy Woodruff:

    Well, I think what's confusing to many people is the president started out, as we mentioned, saying we're going to impose these tough tariffs against China. China turns around and, in effect, punishes some of the U.S. agriculture and other sectors of our economy.

  • David Lampton:

    Right.

  • Judy Woodruff:

    So, you know, it's hard to see how we're moving toward coming together.

  • David Lampton:

    Right.

    I think you remember the president said trade wars are easy to win. And I think he believed China is more dependent on us, the United States, than we are on them. But the fact is, the Chinese think our capacity to tolerate pain, because we're a democratic society, is much less. And they have targeted their retaliation precisely on those parts of the political spectrum that are most vulnerable and most important to President Trump.

  • Judy Woodruff:

    They have gone after states, even congressional districts, where it's clear the president needs political support.

    Let me ask you, David Lampton, about the president, out of the blue, a tweet, statement over the weekend that he wanted to do whatever he could to help this giant Chinese telecom company, ZTE, which had earlier been identified as a company that the U.S. should worry about because of potential espionage.

  • David Lampton:

    Right.

  • Judy Woodruff:

    How are we to read that?

  • David Lampton:

    Well, I think this is confusing to almost everybody who's looked at it for — trying to find an underlying rationale.

    The fact of the matter was, we sanctioned ZTE because it had violated export controls to Iran and North Korea, among other places. We had reached an agreement, and the Chinese firm violated that. So, this was an enforcement act against specific things. Really wasn't part of the trade action.

    Apparently, President Xi and President Trump talked. He made a request. And then the president sort of seemed to rhetorically fold his hand, which then raises the whole issue of, how serious is he? You wouldn't think you would want to make a major concession or what could be construed as signaling a concession in the midst of the talks.

    So I think almost everybody was confused. It sent a bad message on law enforcement.

  • Judy Woodruff:

    And it's still unclear, I guess, where that's going to end up.

  • David Lampton:

    Right.

  • Judy Woodruff:

    Just remind us, David Lampton, what's at stake here for U.S. agriculture and for some of these big sectors, like aircraft, cars, and so on?

  • David Lampton:

    Well, firms like Boeing, for example, they assemble planes in one location, but parts come from every state in the union practically.

    And so, when China targets those industries, it's targeting a very broad swathe of American society. What else is at stake is prices in Wal-Mart, in Target for consumer goods, which will most affect many of the people at the lower part income spectrum.

    And so, I think the you have got an inflationary impact. Also, it will cost jobs, because if we raise the tariff on supplies such as steel and aluminum, then other countries that don't have those tariffs against those inputs, will have cheaper prices for their goods.

    And so I think we are going to lose some employment here.

  • Judy Woodruff:

    And we have seen the issues with American allies through all this too.

  • David Lampton:

    Right.

  • Judy Woodruff:

    Just quickly, what do you think the prospects are at this point, that they're going to work something out? Could it be through fits and starts or stumbles of one sort of another, that they come to some kind of useful agreement on trade, or not?

  • David Lampton:

    Well, I think they will reach some agreement, but it probably won't be dealing with the fundamental issue.

    And that — the fundamental issue is, are we going to level the playing field so American competitive firms have access to China? And that's what the business community really wants. The easiest thing that China can do is just use some of its foreign exchange and buy goods without fundamentally changing the terms on which it's doing trade.

    So, my guess is that we will see some big number for what China is going to purchase, but we won't make as much progress on the fundamental structural issues, the level playing field, that we need to make.

  • Judy Woodruff:

    David Lampton, thank you very much.

  • David Lampton:

    Good to be with you.

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