00:00China, if you looked at it, probably got the best deal in these negotiations in Switzerland.
00:05They got a lower tariff than had been imposed.
00:08And as a result of that, they now know how President Trump is willing to play this game
00:13and how far he might be willing to negotiate.
00:15So I think for China, this is probably more of a win for that country than for the United States.
00:21My name is Terrence Gay, T-E-R-R-E-N-C-E-G-U-A-Y.
00:26I am the director of the Center for Global Business Studies in the Smeal College of Business.
00:30I teach and do research in international business.
00:33I look at investment screening mechanisms and how that affects Chinese investment in countries around the world.
00:39What happened with the China trade war is that there was a resolution of sorts between the United States and China.
00:45Negotiators for both countries met in Switzerland and decided to reduce the tariffs that had been imposed by both sides.
00:52China also significantly agreed to continue to export rare earth metals, which they had restricted for a while.
00:59Those are metals that are very useful in everything from the defense industry to electric batteries.
01:06So it may be the case where tariffs are just a lot less than they were initially, which both countries can claim as a win.
01:12President Trump can say we have higher tariffs than we did before he came to office.
01:16China can say that we got President Trump and the United States to reduce tariffs significantly on Chinese goods sent to the United States.
01:24I think one of the new things that may develop as a result of this is that the trade policies that the Trump administration is imposing on many countries around the world,
01:32I think is actually going to be counterproductive with respect to our relationship with China.
01:36A lot of countries now see China as a more reliable trade and investment partner than the United States is.
01:43I was in Colombia about a month ago and learned about a lot of Chinese investment that's taking place in that country.
01:50China is making a big push to invest more in Latin America and to trade more soybeans with Brazil rather than soybeans from the U.S. Midwest.
01:57And so I think it's going to push China to further develop relationships with other emerging markets around the world,
02:05be they in Asia, Africa, or South America, and try to reduce their dependence on U.S. trade
02:11because they found that that can be very politically contentious in the United States
02:15and trying to find other trade partners might be a way for China to be more successful.
02:20That's going to put pressure on U.S. companies in these other locations around the world.
02:24They're going to have a more difficult time doing business there.
02:27The strategy, I think, of announcing big tariffs and then walking them back is probably more a psychological one.
02:33It's a way to sort of tell other countries, look, we're not pleased with you for a variety of reasons.
02:39The financial markets respond, the stock markets, the bond markets all respond as a result of that.
02:44And then it allows some breathing space for the president to bring the tariffs back down.
02:49I'm not sure that's the best strategy to be using because it creates a lot of uncertainty and confusion in the business place.
02:55Some companies might say, great, the tariff is now 30% instead of 145%.
03:01Let's import a lot of goods.
03:03Some might say, well, it might get even lower than that after 90 days.
03:07I'm not so sure that will happen.
03:09So we think we're probably going to see companies adjusting to these 30% tariffs,
03:13which as painful as they are will be manageable for a lot of companies,
03:16both companies exporting from China, companies importing from the United States,
03:20consumers in the United States paying a little bit more for their goods, sort of a sharing of the pain.
03:26Tariffs are one way to manipulate your economy.
03:29Another way to do that is through industrial policy, through supporting certain companies,
03:33having regulations that support domestic firms rather than foreign firms,
03:37state-owned companies that can compete in a different playing field.
03:40Those are much more difficult to change.
03:42And tariffs are a number.
03:43You can change those percentage.
03:45Getting a country to change its own economic policies, industrial policies for its own citizens
03:50is much more difficult for any country to ask another one to do.
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