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Who is more vulnerable in the escalating U.S.-China trade war?

China set out to retaliate against new U.S. import taxes on Chinese goods on Tuesday by saying it would levy tariffs on $60 billion worth of U.S. goods, ranging from agricultural products and machinery to chemicals. John Yang talks with David Wessel of the Brookings Institute about the affected industries and the outlook for a resolution.

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  • Judy Woodruff:

    The trade war with China is escalating, with no end in sight soon.

    As the number of imported goods subject to U.S. tariffs keeps growing, John Yang looks at the impact and where it's hitting.

  • John Yang:

    Judy, China said today it would levy tariffs on $60 billion worth of U.S. goods, ranging from agricultural products and machinery to chemicals.

    It's retaliation against new U.S. import taxes on $200 billion of Chinese goods that is set to take effect next week.

    To explain this escalating trade tit for tat, we're joined by David Wessel. He's director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

    David, thanks so much for being with us.

  • David Wessel:

    A pleasure.

  • John Yang:

    Are we headed to a war of attrition here, a trade war of attrition?

  • David Wessel:

    It sure looks that way.

    I mean, President Trump put this new 10 percent tariff on Chinese imports. And he said, if they retaliate, I'm taking it up to 25 percent.

    Well, they retaliated almost instantly. There doesn't seem to be any quick resolution of this thing. And the president is pretty resolute.

  • John Yang:

    There were some talks about talks going on between the United States and China. Has that gone away?

  • David Wessel:

    Well, there's still some possibility that there will be low-level talks, but it looks like at this hour that the Chinese leadership has decided they're not going to send a high-level delegation here if Trump is imposing tariffs on them.

    And so it's not an atmosphere that seems conducive to negotiations. I mean, one thing that's clear is there's a split within the Trump administration between people like Peter Navarro and USTR, the trade representative, Lighthizer, who are pretty hawkish on trade.

    Steve Mnuchin, the treasury secretary, is trying to cut a deal. And the doves here seem to be losing.

  • John Yang:

    Secretary of Commerce Wilbur Ross says that American consumers aren't really going to notice this because the tariffs are so small.

    Do you agree with that?

  • David Wessel:

    No, I don't.

    I mean, Wilbur Ross is a pretty rich guy. I bet he doesn't pay that much attention to the prices of things he buys. We know that, overall, this is only going to have a modest effect on prices in the United States. But in those affected industries, in those goods, it's going to go up.

    There's an electric bike maker in Seattle, Rad Bikes, that's raised the price of their $1,500 e-Bike by $200. Washing machine and dryer prices have gone up 50 percent in the last several months because of President Trump's tariffs on steel and the tariffs on imported appliances.

    So, in those industries that are affected, the prices could go up quite a bit. Now, one thing — one silver lining, at least for some of us, is that because the Chinese aren't going to buy so much of our fruits and vegetables and nuts, those prices may actually go down for a while.

  • John Yang:

    The president says he's doing this to try to protect U.S. manufacturing jobs. Is he — is that goal achievable?

  • David Wessel:

    Well, I think that when you make it difficult for manufacturers to import things, some manufacturers will choose to make things in the United States.

    But that will be offset by those manufacturers who either can't sell things because the price of their inputs have gone up so much, or foreign producers will just move production to Vietnam or Bangladesh or Korea or India, and escape the tariffs, and we will be no better off.

  • John Yang:

    If this is a war of attrition, who's better equipped to go the long haul on this, the United States or China?

  • David Wessel:

    That's really a good question, John.

    On one hand, I think that this isn't going to bring either the Chinese or the American economies to their knees. Each one of these countries has lots of trading partners and has a pretty big domestic market.

    I think that the Chinese economy is somewhat more vulnerable now than ours. They rely more on exports and imports than we do. And their economy seems to be slowing down a bit, where ours has not yet begun to slow down.

    On the other hand, the Chinese government doesn't have to worry about elections. So if the farmers or manufacturers or exporters in China get annoyed, they can't vote out the Chinese leadership.

    Donald Trump, on the other hand, does have to worry about elections. And that may mean that we take pain less readily than the Chinese.

  • John Yang:

    David Wessel at the Hutchins Center at the Brookings Institution, thanks so much.

  • David Wessel:

    You're welcome.

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