Peter Lewis: Asia Business Correspondent on Donald Trump reportedly considering slashing tariffs on China

New reports indicate Donald Trump is considering slashing tariffs on Chinese goods by more than half.

No announcements have been made yet- but tariffs could reportedly come down to between roughly 50 percent and 65 percent, according to one senior White House official. 

Asia Business Correspondent Peter Lewis says China has signalled it's open to trade talks - as officials believe this is the US blinking first in the trade dispute.

"They see it as vindication of President Xi's strategy - which is to hang tough and not to be bullied and not to negotiate under duress."

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
Now, the Wall Street Journal is reporting that Donald Trump
is considering slashing tariffs on Chinese goods by more than half. Now.
No decisions have been made just yet, reportedly, but that
would mean that tariffs could come down to between fifty
and sixty five percent. China, on the other hand, has
signal it's open to trade talks but won't negotiate under
juris now. Peter Lewis is our Asia business correspondent with
US Now have.

Speaker 3 (00:37):
Peter Good Evening, Heather.

Speaker 2 (00:40):
It doesn't I meaning nothing is set in stone just yet,
but it feels like things are calming down.

Speaker 3 (00:44):
Yet they are calming down, But I think from China's perspective,
the way they're presenting this, particularly that Wall Street Journal
reports which suggested tariff's on China could be halved, they
say it as Trump blinking first and it being a
vindication of presidency's strategy, which is to hang tough there,

(01:06):
as you said earlier, not to be bullied, and not
to negotiate under juss Now. Scott Besson's the US Treasury
Secretary yesterday said that Trump hasn't offered to just remove
tariffs on his own. There has to be a mutual
the escalation and tariffs sort of come off together. Well,
China has made it very clear that that isn't going

(01:28):
to happen, and it does appear that the White House
is misreading the room again here, China's view has been
very much, you put these tariffs on. We didn't ask
for this, we didn't start this trade war. Therefore, you
are going to have to take them off, and once
you do that, we are then open to negotiations. But
this idea that there's going to be some mutual reduction

(01:51):
in tariffs over time is not what China has been saying.
And furthermore, they sort of see it as a sign
that this is an administration in the US that is
in some disarray. It doesn't have a trade or economic policy.
You have taris put on one day, then spended the next,
then exemptions, a whole bewildering array of exemptions announced. This

(02:14):
is very much giving the impression to China that there
isn't a coherent trade policy or strategy. It's being made
up as they go along on the whim of one
man in the White House.

Speaker 2 (02:25):
What is China prepared to give.

Speaker 3 (02:28):
Well, it's prepared to try and see if there can
be some more balanced trade. It agrees that, you know,
there are some problems in the global economy, and it
can offer to buy more things from the US. But
the problem is that if the ultimate aim here is

(02:49):
to reduce the US trade deficit with China and either
put it into balance or bring it in somehow into surplus,
China has made the calculation quite correctly in my view,
that there is going to be pain on both sides,
but China and its consumers are far more willing and
far more able to bear that pain. Because if you

(03:10):
want to reduce the trade deficit, you have to bear
in mind that trade is one side of the coin.
On the other side of the coin, they are all
the capital flows, and these have to balance. So if
you reduce the trade deficits, what it means is that
there is less money going into the US, So Americans
are going to have to save more. They're going to

(03:31):
have to buy less not just the foreign goods but
of their own but of their own goods, and there's
going to have to be more domestic investment into manufacturing
in the US. Now, we know that Americans love to spend,
and they love to spend on borrowed money. They've been
doing it for years, So this is going to be
a major change if they want to reduce the trade deficits.

(03:53):
And it's also going to have implications for the dollar
because I said that capital flows are the other side
of this. If you have a lower trade deficit, then
there is less demand for the dollar around the world,
and you cannot damage China's trading care abilities without also
damaging its ability to either want or require US dollars.

(04:14):
So this is going to weaken the US dollar over
time and ultimately threaten its status as the world's reserve currency.
Is the US really prepared to pay that price? I
suspect not.

Speaker 1 (04:25):
Yeah.

Speaker 2 (04:25):
Peter, Hey, thank you as always really appreciated. Look after yourself.
That's Peter Lewis, our Asia Business correspondence.

Speaker 1 (04:31):
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