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Tariff Battle With Mexico Ends, But What About Trade War With China?


The tariff battle with Mexico appears to be over - at least for now. But another front in the trade war is still wide open. The Trump administration is looking for a deal that would end tariffs on more than $200 billion worth of Chinese goods. Those measures and China's countermoves are starting to show new effects on the U.S. economy. NPR chief economic correspondent Scott Horsley is with us now. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rachel.

MARTIN: So if you're a Chinese trade negotiator, what did you learn by watching President Trump in this particular dispute with Mexico?

HORSLEY: The first thing to say, Rachel, is that there are limits to this analogy. Obviously, the trade battles with Mexico and China are not identical, so they do have to be weighed independently. But there's no question China is watching what happened with Mexico for clues about the president's negotiating style. And what clue they draw really depends on how you view the Mexican agreement that was struck last Friday.

If you think Mexico caved, the message to China is Trump is serious, and China better make some changes if it wants to get tariff relief. If, on the other hand, you think Trump backed down after Mexico essentially repackaged concessions it had already made, well, that's a roadmap that China itself has used in the past.

Over the weekend, we also saw the president boasting on Twitter that Mexico is going to buy a lot of agricultural goods from the U.S. That's not anything new. Mexico was already a big customer, and so was China before this trade war all started. But that does suggest another path to win favor with President Trump is to buy a lot of farm products.

MARTIN: So we heard from the Treasury secretary, Steven Mnuchin. He spoke to CNBC over the weekend. Let's listen to what he had to say.


STEVEN MNUCHIN: We had a deal that was almost 90% done. China wanted to go backwards on certain things. We've stopped negotiating. And if China wants to move forward with the deal, we're prepared to move forward. If China doesn't want to move forward, then President Trump is perfectly happy to move forward with tariffs to rebalance the relationship.

MARTIN: What's going on there? I mean, have they really stopped negotiating?

HORSLEY: They have. Remember, this all started with concerns in the U.S. about lack of intellectual property protection in China, the forced transfer of American technological knowhow. Then, last winter, Trump and Xi met - Chinese President Xi Jinping - met in South America. And Trump agreed to delay escalating the tariffs while negotiators went to work on a deal. There were a lot of rounds of talks, both in Washington and Beijing. There seemed to be some progress.

But then, last month, the U.S. side accused China of backtracking. And since then, there haven't been any new talks. The higher tariffs have kicked in. There may be some disagreement going on within the Chinese government, just as there is here in this country, about which of those two paths Secretary Mnuchin laid out to follow.

MARTIN: Who specifically in the U.S. and China is hurting right now because of all this?

HORSLEY: Well, both countries are paying a price. In fact, the whole world is paying a price. Last week, the World Bank, led by President Trump's hand-picked president, David Malpass, warned that trade tensions are hurting global growth. Here in this country, the Atlanta Federal Reserve Bank estimates the economy grew at an annual rate of just 1.4% in the current quarter, less than half the pace of growth in the first quarter. Course, last Friday, we got that much weaker-than-expected jobs report.

China's well aware of all this. In fact, there are some reports that Chinese negotiators took a harder line last month precisely because they thought the U.S. economy was weakening and that President Trump wouldn't have the stomach for an all-out trade war. Now, that may have been a miscalculation on China's part. But there's no question that trade tensions are taking a toll.

MARTIN: Now these two leaders, Chinese President Xi Jinping and President Trump, are going to meet at the G-20. right?

HORSLEY: (Laughter) That's right. And, you know, usually there is a lot of groundwork done ahead of a high-level meeting like that. But that's not the way President Trump likes to operate. He prefers to improvise. So it's going to be Trump and Xi one-on-one. Buckle your seat belts.

MARTIN: NPR's Scott Horsley. Thanks, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.