STEVE INSKEEP, HOST:
Facing a threat of higher tariffs from the United States, a Chinese trade delegation tries to make a deal this week. They're in Washington for two days of talks. Before those talks could begin, President Trump's administration announced higher tariffs on Chinese imports take effect at the end of this week. These taxes, which are largely paid by U.S. firms and consumers that import the goods, are meant to respond after China allegedly backed off some of the terms of a possible trade deal. What's going on here? NPR's Rob Schmitz is in Shanghai.
Hi there, Rob.
ROB SCHMITZ, BYLINE: Good morning, Steve.
INSKEEP: How did the Chinese delegation get into this situation?
SCHMITZ: Yeah. I think it's very complicated. And I don't envy Liu He, China's lead negotiator. He's sort of become the hapless mediator between two leaders who have - both have lofty expectations from these trade talks. On the Beijing side, it appears that leader Xi Jinping was behind the refusal to commit or the backtracking on commitments. We're not sure which. That angered the U.S. There are reports that Xi himself vetoed many sections of a draft agreement, angering President Trump, who then, of course, took to Twitter to announce his retaliation.
So Liu has a stressful trip ahead of him. He's going to have to explain to his American counterparts what happened and what exactly Beijing is willing to commit to. And they're going to hash this out while the clock is ticking on significant tariff hikes that will likely have a big impact on global market.
INSKEEP: I want to understand how much pressure China is actually under. Our chief economics correspondent, Scott Horsley, has noted for us that when these tariffs are charged, it's actually U.S. consumers and businesses that pay most of the cost not China. But even with that being the case, does China face negative effects from all these tariffs?
SCHMITZ: Of course it does. It's a global economy. And these affect all imports coming from China or exports from the Chinese perspective. And at the same time, China's economy has been slipping lately. The auto industry has slipped 20% alone, so it's not great timing for Beijing.
INSKEEP: OK, so they've got economic trouble. And even if Americans - consumers pay the price, they might buy fewer Chinese goods over time, I guess.
SCHMITZ: Right.
INSKEEP: So how is all of this being described to the general public in China, where there's not a free media?
SCHMITZ: It's being described with a lot of caution. China's government controls the media. Twitter's blocked, and Beijing has been working hard to ensure the news of Trump's angry tweets threatening more tariffs were nowhere to be seen this week. And social media sites were deleting any mention of them.
I went downstairs from the NPR bureau today to talk to people on the street to try and get a sense of what they knew about the negotiations. Most people I spoke to answered my questions like this gentleman. He's a 45-year-old man. His name is Jo Jiun Hwei (ph).
JIUN HWEI JO: (Through interpreter) I don't know much about what's going on. I think it's the American president's fault. That's what they're saying on the news at least.
SCHMITZ: And, Steve, I spoke to several others who said the same thing. They just didn't know. And they didn't feel like these negotiations have an impact on their daily lives. But I did meet one person, Tan Yu (ph), an HR staffer here at a local company here who seemed to have a handle on what was happening. And here's what she said when I asked her which country has more leverage.
YU TAN: (Through interpreter) Neither of them do. It's a war. Both countries will lose. Whether it's a trade war or an actual war, I just hope both sides will resolve it peacefully. It's better for the global economy that way.
INSKEEP: Well, goodness. There are scenarios where both sides lose, where the two countries decouple, as they put it, where their economies...
SCHMITZ: Right.
INSKEEP: ...Suffer quite a lot. But are people that you talk with in China optimistic that there is a deal out there somewhere?
SCHMITZ: Well, it's interesting. I think people in the know who have an historical understanding of how China typically negotiates are not surprised about this week's events. Backing away from perceived commitments as a negotiation strategy - that's familiar to anyone who's worked in China.
And China watchers I've spoken to think that if China were truly backtracking here and digging their heels in, what's the point of sending their delegation to Washington this week? By sending Liu He, China seems to be sending a message that it's still open to negotiating and that it wants to make a deal with the Trump administration. What that deal is, though - the content of it seems to be up for grabs.
INSKEEP: Is it really hard still for China to make a deal because the Trump administration is demanding fundamental changes in the way they do business?
SCHMITZ: I think it is. I think that the big sticking points here, Steve - number one - is the sovereignty issue of enforcement. The U.S. wants to be able to enforce what Beijing promises. And I think that's the big thing. And also, the structural changes that the U.S. is asking for - that is a big sticking point for the Chinese.
INSKEEP: Rob, thanks as always.
SCHMITZ: Thanks, Steve.
INSKEEP: NPR's Rob Schmitz is in Shanghai. Transcript provided by NPR, Copyright NPR.
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