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What you should know about the U.S.-China trade talks

Jennifer Pak May 2, 2018
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JASON LEE/AFP/Getty Images

Officials from the United States are on their way to China to iron out the trade tensions between the two countries. The meeting will take place Thursday and Friday in Beijing.

What’s at stake?

A lot. The US-China Business Council estimates that trade with and investment in China support some 2.6 million jobs in America.

Trade in goods alone between the two countries totaled $636 billion in 2017, according to U.S. government statistics. However, Americans are buying far more from China than the other way around, which, according to President Donald Trump, is “unfair.”

Chinese officials agree that the trade relationship should be more balanced.

What will officials from the United States and China likely talk about?

The U.S. view:

  • Level the playing field for American firms operating in China
  • Stop forcing American companies to go into joint ventures in sectors the Chinese government deems vital
  • Stop forcing U.S. companies to transfer technology as a condition of access to consumers and markets in China
  • Concerns that industrial policies, including the Made in China 2025 plan, will make it even harder for American firms to operate in China
  • More market access for U.S. businesses

The China view:

  • China is committed to liberalizing its markets, although many U.S. business groups feel the pace of reform has been too slow
  • Government and business leaders in China have either denied the existence of forced technology transfer or have said it happens between companies but deny that it is a central government policy
  • If the U.S. wants to reduce its trade deficit, it should drop export controls on a range of high tech products that China wants to buy, including optical fibers, inertial navigation systems and chipsets for supercomputers. However, Washington bans these items for fear that they would be used for military purposes.

What are the bargaining chips?

Tariffs:

The Trump administration has imposed:

  • 16-50 percent tariffs on all imported washers until 2021
  • 15-30 percent tariffs on all imported solar panels until 2022
  • 25 percent tariff on imported steel (although a number of countries received temporary exemptions, except China)
  • 10 percent tariff on imported aluminum (although a number of countries received temporary exemptions, except China)

China retaliated against the U.S. steel and aluminum tariffs with its own penalties on 128 American exports worth $3 billion:

  • 15 percent tariff on American fruits, nuts, wine, ginseng and certain steel products
  • 25 percent tariff on frozen American pig parts (head, legs, liver)

China retaliated against the U.S. tariffs on solar panels and washers by launching an anti-dumping investigation into American sorghum in February:

  • In April, the government said the investigation was not complete, but as a “temporary anti-dumping measure” imposed a 178.6 percent deposit for U.S. sorghum shipments to China

Threats of more tariffs:

  • The U.S. has threatened to impose 25 percent tariffs on some 1,300 products from China, including medical equipment, machine tools, chemicals, TVs and automobile parts (status: requires public consultation and could take months to implement)
  • China shot back with a similar list of duties on American planes, beef, whisky, tobacco, orange juice, chemicals, certain trucks and SUVs, and soybeans (status: no timeline)
  • Trump has threatened additional tariffs on China products worth $100 billion, with China vowing to retaliate in equal measure

U.S. lawmakers block Chinese investment and businesses:

  • The plan by Alibaba’s Ant Financial to acquire MoneyGram collapsed over U.S. national security concerns
  • Chinese telecom giant Huawei’s plan to sell its smartphones through AT&T was blocked also on national security concerns
  • American firms are banned from selling parts and software to Chinese telecom equipment maker ZTE Corp. for seven years after ZTE was caught illegally shipping U.S. goods to Iran and agreed to punish employees but then was found to have violated this agreement

 Economic carrots:

  • China has sped up some previously announced reforms, including abolishing foreign ownership in the auto and financial services sector, which could take up to five years to realize

What are the expectations for this round of trade talks?

Some U.S. businessmen operating in China have low expectations for this visit.

“This trade delegation had no team to go in first as far as I can tell,” Kent Kedl with consultancy Control Risks said.

He has been working in China for the past three decades and said the real work, whether in business or politics, is usually done in meetings in back rooms. Instead, this visit will be a meeting with senior people.

“I’ve never known that to work in China. You don’t get anybody to give you anything … that you haven’t negotiated [beforehand] already,” Kedl said.

The outcome depends on what the Trump administration is seeking.

Shaun Rein with China Market Research Group and author of “The War for China’s Wallet” said China is no longer stealing jobs from the United States, so he said if Trump hopes to move jobs back to America it is an “unwinnable war.”

“That ship has sailed decades ago,” he said.

He said Chinese officials will give enough “economic crumbs” to the Trump administration to placate it, but China will not simply unblock Facebook or Twitter and allow U.S. internet giants to operate freely because the leadership is keen on controlling information.

Jacob Parker, the US-China Business Council’s vice president of China operations, said it is “unlikely” that this meeting will resolve issues with intellectual property protection and ending forced technology transfer.

“Without the administration articulating clearly what it’s hoping to achieve … it’s very difficult for anyone to imagine what would be a success from the talks this week,” Parker said.

What the U.S. businesses he represents don’t want is for the Trump administration to impose more tariffs just for the sake of tariffs.

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