I've been covering this trade war
for almost three years now,
and oftentimes it looks very chaotic.
The China trade deal is dependent on one thing,
do I wanna pick it.
If we don't make a deal with China
I'll just raise the tariffs even higher.
Thank you very much.
And it's really hard to think back to the beginning of it,
but how it really started actually
seemed like there was a strategy to it.
Over the course of the U.S.-China Trade War,
Trump's aggressive policies and unpredictable behavior
has managed to bring the Chinese to the negotiating table.
We've come to a very substantial phase one deal.
China will continue to eat your lunch
unless somebody takes a stand,
and it just so happens that it was Donald Trump
that took the stand.
We're close.
With the promise of that phase one deal
looming on the horizon, can that same aggressive strategy
produce meaningful reform in China?
I wrote a paper during the Obama Administration
saying people are not taking China seriously enough,
and the President has to be directly involved
for American policy to actually make sense.
I think in some ways it's better to wait
'til after the election with China.
But, I'm not gonna say that.
I just think that.
Now the President is directly involved
and American policy doesn't make sense.
The reality is that the Trump Administration
has done this in a much more aggressive way
than previous administrations have.
It was an asset going into this trade war.
It may have been a liability in the end.
This is a case study
of when negotiating tactics turn from method to madness.
We can't continue to allow China to rape our country,
and that's what they're doing.
It's the greatest theft in the history of the world.
President Trump ran a successful campaign
of denouncing China's unfair trading practices.
They take our money, they take our jobs,
and we owe them $1.6 trillion.
I think it's important to understand
that the President inherited a very difficult situation,
one where we probably should have addressed
some of these problems with China a lot sooner.
But I think the President had great wisdom and courage
to step up and realize that we really can
start to make progress.
And after becoming President
his team began devising a strategy
on how they could rebalance the relationship with China.
And this man, Derek Scissors,
was part of those initial conversations.
The goal starts with we're gonna
focus on intellectual property,
which we were trying to decide how do we get the Chinese
to reduce their intellectual property coercion and theft.
They weren't gonna stop, but how can we reduce it?
How can we show we're serious about this issue,
change their behavior?
And that got pulled into the President saying,
"I want high tariffs.
"I wanna reduce the trade deficit."
Which is a completely different goal.
Putting tariffs on all firms doesn't discourage theft
and coercion of intellectual property,
'cause it doesn't punish the guilty.
It punishes everyone.
Tariffs are really the big bazooka in the trade world.
You don't like to use them normally,
or if you do use them in the trade world,
you tend to use them for short-term leverage
to try and get someone to the negotiating table.
In March 2018 Ambassador Lighthizer,
the trade representative, was testifying on Capitol Hill,
and he was kind of laying out what he called an algorithm.
The purpose of your algorithm is to pick out things
to the extent you can that are in that category.
Things that are in the category have the maximum effect
on China and the minimum effect on U.S. consumers.
The initial number that folks
at the U.S. Trade Representative's office came up with
was $34 billion.
And the President looks at it and says,
"Well, that's not big enough."
And we've seen this a lot in our reporting,
covering this trade war,
that the President really likes round numbers.
A second list of $16 billion
of Chinese goods is published,
raising the total initial tariffs to $50 billion.
And while looking back, this may seem haphazard,
it is part of President Trump's strategy.
And this is just the beginning.
I wanna tell you that.
This is just the beginning.
Donald Trump has always had two things he's
tried to accomplish through these trade wars.
One is selling it domestically to his base.
He wants to be seen to be punching China in the nose.
And the second thing is his old art of the deal approach,
and that is he likes to destabilize people
across a negotiating table.
This administration has kind of prided itself
on being unpredictable.
Kinda the notion that unpredictability
is a real strength in a negotiation
because if they don't know what they're gonna do,
somehow they're gonna give you more.
But not everyone agrees with that sentiment,
at least in regards to the larger intent
of getting a deal done with China.
To me they haven't been unpredictable at all.
I think the President has been saying
for two and a half years that he wants
to have a deal with China if he can get a deal
that is good and that is in U.S. interests.
And he's gotten a deal with Korea,
and he's gotten a deal with Mexico,
and he's gotten a deal with Canada,
and he's gotten a deal with Japan.
And we're having these negotiations with China.
Early on the maximum pressure strategy
only resulted in the Chinese
responding with tariffs of their own,
going after areas that could hurt Trump's political base,
imposing tariffs on the auto industry,
pork, and especially soy beans.
Once the Chinese stopped buying soy beans
the impact on the markets was pretty stark.
Immediately the price collapsed
and farmers started getting hit.
So when you engage in this tit-for-tat tariff war
the question is really who can
live with the pain for longer.
And obviously that is a question of political will,
and that's always gonna be the case.
And there's sort of no way around that.
Fortunately for us, President Trump
has shown that he has that political will.
For the rest of 2018 the two countries
would raise tariffs back and forth.
The U.S. would go from its initial 50 billion in tariffs
to 250 billion.
And China's total tariffs would now hit
110 billion of U.S. goods.
Eventually these tariffs would have their desired effect.
In December of 2018 President Trump
and Chinese President Xi Jinping
would meet face to face in Buenos Aires.
Start on meeting we'll be
talking about a number of topics.
At that dinner in Buenos Aires,
the two leaders agree that they won't raise tariffs
on each other anymore or at least for 90 days
while they try to negotiate a new deal.
Over the spring the two sides keep negotiating,
but the Trump Administration
seems to be moving the goalposts,
or at least that's how the Chinese see it.
One, they refused to lift tariffs as part of any deal
and secondly Trump seems to be constantly increasing
the amount of purchases he wants to see from China.
At one point he goes from $1.2 trillion over six years
to a $2 trillion number and that just seems both impetuous
to the Chinese but also economically impossible.
By April the two sides
create a 150-page document,
and there's optimism that a deal is in sight.
And the White House was very confident
that this tough negotiating strategy from the President
has really turned out to get results
and fixed the issues that they went into this trade war for.
My understanding is that both sides
were actually discussing where the leaders would meet
to sign the agreement.
However, in the final stages of negotiating
the Chinese began to walk back
some of their larger concessions,
most importantly, China didn't wanna commit
to making legal changes for the U.S.
And I think what happened here
is that China thought that Trump wanted a deal at any cost
and that he was so out there promising this deal
that he wouldn't mind if they
took some things off the table.
That's the point where I think the President
kind of got fed up and the events in the negotiations
led to an entirely disproportionate response on his part.
In a tweet on May 5th
Trump suddenly raised tariffs
on the existing $250 billion worth of goods
and also threatened that he would tax
the remaining $325 billion worth of Chinese imports.
That tweet I read on a plane.
I was like, okay, I'm going to buy WiFi now,
and I worked the entire plane ride over there.
Days later Trump again escalated the dispute
by placing Chinese telecom giant, Huawei, on a black list.
That was the biggest slap in the face for the Chinese yet
and relations further deteriorated.
We're having a little squabble with China
because we've been treated very unfairly
for many, many decades.
But in another face-to-face meeting,
this time in Osaka, Japan,
Trump and Xi were able to negotiate
another truce on further aggression.
So covering this we often have deja vus,
and think, well we've seen this movie before.
They have a truce, it goes on for a couple months
until Trump realizes China, again,
didn't live up to its promises.
And that's when Trump
unleashed another series of tweets.
So in early August Trump decides to escalate things again
and announces that he is gonna put tariffs
on the remaining imports from China.
Importantly it's also for the first time
really gonna hit consumers.
It's gonna hit things like smartphones,
toys, kids clothes.
And this is the first time that the trade wars
are really gonna come home for a lot of Americans.
After a year and a half of all this madness
Trump's advisors told him if you want to get reelected,
you have to stop this now.
We need to find an off ramp.
And so they came to him for the first time in September
and said, "Why don't we pocket some of these wins?
"Why don't we get something good for farmers
"and do something like a partial deal?"
The August tariff threats were split up.
And the ones that would hit consumer favorites
were given a December 15th deadline,
with the hopes that a deal could be struck
by the end of the year.
A tremendous deal for the farmers.
A purchase from 40 to $50 billion worth
of agricultural products.
It's actually hard as someone
who's been following this for several years
to really care about the phase one deal.
Agriculture is not going to solve the trade imbalance,
it's not going to bring back U.S. manufacturing jobs.
For this year if you sign phase one,
you don't sign phase one, it doesn't matter,
you're not gonna get any meaningful economic changes
from the Chinese in 2019 or 2020.
One of the big questions around this trade war
is was it worth it?
The real question is are we gonna
get future phases in a negotiation?
And are you gonna get some meaningful changes in China?
And a lot of people in Washington,
certainly a lotta long-time China watchers,
feel like that's not the case.
I think we're finally having serious negotiations
with China after many years of frustration,
and I think everyone has finally started to realize
that we have actual leverage in this situation
and that we have the opportunity
to improve the type of trade arrangements
that we have with China.
20 months and many false dons later,
what have we learned about the use
of this maximum pressure campaign?
And can this strategy of unpredictability
really work over the long term?
Just so you understand, I've been very mild about it.
Very, very mild.
There's a long way I can go.
I think, number one,
this just shows that trade negotiations are tough.
And one of the kind of shortcomings of this negotiation
has been we've kind of been all over the map.
I mean, at some points this negotiation's
been all about agriculture.
Other points it's been all about
the structural issues like IPR.
The main problem the president has
is he wants us to wrap up too quickly.
The President wants this done now.
He wants to run on it.
He wants to say, I solved this problem.
So because of that, he has lost patience
with the pace of negotiations.
And he's fine with the outcome of very high U.S. tariffs.
That's one thing everyone has to understand.
The President doesn't think, oh, I'll pressure the Chinese
and they'll automatically give in.
He thinks, I'll pressure them and they'll give in
or I'll get to keep the tariffs
and the trade deficit will fall.
Both are good for me.
We're doing very nicely with China.
But I like it the way it is now because
we're taking in billions and billions of dollars
and we're giving some of that money to farmers and others.
Now that President Trump is on the cusp
of signing a phase one deal,
will his willingness to use tariffs really lead
to the fundamental economic changes
he is seeking from China?
If you wanna be a good negotiator
some element of unpredictability is useful,
but I think here we've gotten to the point
where we're so unpredictable that other countries
are kinda throwing up their hands
and trying to decide is it even really,
is it even worth doing a deal with the United States
because we don't even know
if the United States is gonna stick to the deal.
I mean, I think you have to remember that
two or three years ago we were being told
that the U.S. had very little leverage
in trade negotiations and there really wasn't a lot we
could do to get other countries to accommodate our concern.
The reality of it is is that countries understand
that this is the biggest economy in the world,
it's a great market, it's an open market,
and I think people are always gonna be interested
in making trade with the United States.
It's fair to say that tariffs
brought the Chinese to the table,
but what have we gotten out of it?
And this gets back to not so much the tool of tariffs
but the strategy.
If we don't know our own goals,
it's very hard to have a win at the end.