I’m Lucy Hockings. From the BBC World Service, this is The Global Story. This week, economic warfare broke out between the world’s two biggest superpowers. President Trump announced a new tariff, essentially a tax on Chinese goods coming into the US. And now Beijing has hit back. So can anyone really win a trade war? And what will the impact be on the rest of the world? With me today is Ritika Gupta, who is our North America Business correspondent, joining us from New York and the BBC World Service Asia/Pacific editor,

Michael Bristow. Well, if there’s one thing we know about Donald Trump, it’s that he loves tariffs. The word tariff, properly used, is a beautiful word, one of the most beautiful words I’ve ever heard. It’s music to my ears. I always say tariffs is the most beautiful word to me in the dictionary.

They are at the heart of his economic plan for the United States. During his first term, and also throughout the presidential campaign, he was very clear. He thinks tariffs are going to help make America and American people richer. And he also thinks that they’re a useful tool in helping to get other countries to do exactly what he wants.

Before we go any further, though, I think, Ritika, we need to cover some basics, like what exactly is a tariff? Do you see a tariff is a tax on imported goods from foreign countries. So Trump had proposed a 25% tax on Canada and Mexico, which have now been paused. But as an example, say you had a product that was worth $4 that would result in a $1 additional charge, so the total product costing some $5 or so.

Can Trump win a trade war with China?

President Trump repeatedly says that a tariff is a tax on a foreign country. He’s said that time and time again. Is that true? No, it’s not necessarily the country that pays for the tariff. It’s the importing business that typically pays that extra charge. However, many economists have warned that these costs will be passed on to the American consumer because your businesses, your Walmart’s, your Targets, for instance, may be facing margin pressure.

So ultimately it will be the consumer that pays. And that shows up again on their receipts when they go into their big box chain stores. So although there’s been a lot of talk about the negative impacts of tariffs for the Trump administration, there has been one big success already this week. When Donald Trump threatened to impose tariffs on Canada and Mexico, he said it was largely because of concerns about border security.

Now, both Mexico and Canada have made big commitments to increase security at their borders. So Ritika, can this be seen as a big win then for the use of tariffs? In some ways, Lucy, it’s worked. He’s showed in some ways the kind of the art of negotiating a deal because, as you say, Canada and Mexico did cede to Trump’s demands when it came to adding extra border security.

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Um, but there’s also the US trading off too in some ways. And many experts have said that you didn’t need necessarily the threat of tariffs to get some of those things done. And it also does cause concern and uncertainty about tit for tat and the escalation of a global trade war as well. And that’s what many experts and economists have been warning are the dangers of this.

The biggest target of Trump’s tariffs so far, though, has been China. And economists are worried that we could be on the brink now of a real trade war between China and the US. This isn’t a new war, though, because President Trump began this economic war with China during his first term when he was in office.

Micky, why does Donald Trump see China as such an economic threat? Yeah, it’s a really good question. And it’s not necessarily obvious why China should be an economic threat. I think first and foremost, it’s just a very, very big economy, which does a lot of trade with the United States. We’re talking about half a trillion dollars.

Also, the United States is in deficit in that trade with China. So essentially the United States imports far more goods, hundreds of billions more goods than it exports to China. So I think President Trump, what he does is he sees that, um, he saw that big deficit and he wants to do something about it because it appears as though China’s winning and the United States is losing.

Analysis: Is China prepared to turn Trump’s tariffs into a

Also, in his first term in office, there was some very specific things which President Trump complained about China for, which previous American officials have complained before, specifically stealing intellectual property, forcing American companies to transfer technology to Chinese firms. If they wanted to set up operations in China, they could only do it, say, with a joint venture.

They had to transfer their technology. Also, he accused China of currency manipulation, essentially keeping the currency at a particular level to make those exports cheaper. Micky, China has always said it doesn’t want a trade war with the US. And then we also back in 2017, I remember Donald Trump speaking at the World Economic Forum.

He said, we don’t want to start a trade war with China. But we did then see China responding with tariffs of its own in a kind of tit for tat way. What were they? China doesn’t want a trade war at all. The economy is based primarily on exports. So if there’s some barrier to those exports, going to other countries, then it doesn’t want them.

I had a look back at the list of, uh, reactions that China made when President Trump was in his first term in office, and there was a whole series of them. Raising tariffs by 10%, then 10% again, 25% in some cases. They also reported the United States to the World Trade Organization. They stopped buying some products, agricultural products particularly, outright, which really affected farmers in America.

As Trump’s tariffs loom, analysts say China is better

So a range of tools, uh, which China used, which, incidentally, is the kind of tools which it’s already using now with these latest, um, tariffs imposed by President Trump, similar kind of tools, not just tariffs, but also non-tariff measures to try and harm the American economy. Now, although this trade war has been simmering for several years, it really is hitting up now that Donald Trump has returned to the White House.

Ritika, can I ask you a bit more about these latest tariffs Donald Trump has introduced? What are the new tariffs on Chinese goods that he’s introduced this week? So some of the biggest tariffs are going to be on electronics, toys and appliances. Consumer electronics being one of the top goods imported from China to the US.

If you look at data that includes cell phones, TVs, your laptops, game consoles. China is also a major supplier of home appliances as well. And also footwear. You see a lot of footwear products also being imported into the US from China. And what new tariffs, Ritika, have China announced in return? The tariffs from China are actually rather minimal.

Trump win a trade war with China?

They’re seen as not such an aggressive approach. A 10-15% levies on selected goods. So part of China’s countermeasures include import taxes on US coal and LNG. That’s 10% and a 15% charge on crude oil. And as well as fuel, China has also slapped a 10% tariff on agricultural machinery and pick up trucks and some large cars.

And they’ve also announced some non-tariff measures as well, one of which is a probe into Google and an anti-monopoly investigation into that tech giant. And Micky, is there any indications yet as to how these US tariffs are going to affect the Chinese economy? Just at the moment, when the Chinese authorities need their economy, need people to be spending more money, it’s going to hit those manufacturers that sell to the United States.

So it’s definitely an unwelcome thing when it comes to China. But because they’ve been through this before, because Trump did this to them in his last term. Are they better prepared in a way? Have they got a strategy of how to deal with it sort of decoupling from the US a bit diversifying their markets as well.

Trump win a trade war with China? I don’t think decoupling is is remotely possible. We’re talking about trade, hundreds of billions of two-way trade between these two countries Um, every year there has been some attempts by America, particularly President Biden, to try and not sell certain technology products, high-end technology products to China.

But the two economies are so integrated that decoupling is really impossible. In fact, under the Biden administration, later on, officials stopped talking about decoupling and started using other words to suggest they’re just targeting, um, targeting specific areas of the Chinese economy. Is China more prepared? I think it was expecting this.

So before President Trump came into office, Xi Jinping, the Chinese leader, um, the ambassador, the Chinese ambassador in Washington, all went on the charm offensive, tried to persuade President Trump before he was coming into office. Just don’t do this. Nobody will win with a trade war. We can both win if we keep tariffs out of the equation.

So they knew something was coming. And also to a certain extent, as you suggested there, they could prepare. There are many ways in which China can hurt the American economy, which don’t involve tariffs. Well, we know that Donald Trump sees tariffs as a way of rebalancing global trade in a way that he hopes that America can stay on top and remain the world’s economic superpower.

So is he going to be successful in stopping China’s economic rise? Micky, China is selling goods, as you’ve mentioned, everywhere, not just to the US. It has been the main driver of growth in the past few decades. Surely there must be really deep concern now in China about these tariffs and that more could be coming.

This could just be the start. I mean, of course there is. I mean, the Chinese economy really isn’t doing awfully well. It needs impetus. It needs a boost from somewhere. But to a certain extent, there’s not a lot the Chinese can do about President Trump if he decides to use tariffs. And you’ve already touched on it, that tariffs are sometimes used again, are used in ways which are for non-economic reasons.

We talked about Mexico and Canada sending, uh, reinforcements to their borders to stop illegal immigrants and, and illegal drugs from, from getting over that border. So really he’s using economics to solve political problems. Perhaps, and President Trump has mentioned this previously, China can help with the war in Ukraine because it has influence with Russia.

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China’s trade with Russia is is really just gone through the roof since Russia invaded Ukraine, um, hundreds of billions of dollars worth of trade, um, between those two countries. So perhaps President Trump could persuade China to use its influence with Russia over the war in Ukraine, um, in return for dropping tariffs.

So that’s politics being changed through economic means again. Everyone talks about President Trump being very transactional and he likes a deal. What’s Xi Jinping like? Like, if the two of them are on a call? Well, in some respects, quite similar. I mean, I think China, China doesn’t always, uh, say out loud what its policy is, what its foreign policy aims, what it’s trying to do.

In fact, very rarely does it say. But I think if there is an overarching philosophy when it comes to China and Xi Jinping, and the Communist Party generally, it’s trade with the rest of the world. Trade has made us rich, and trade will make you rich as well if you trade with us. So in that respect, it is transactional.

You know, we benefit, you benefit. Win-win is a constant refrain from Chinese officials. Trade is, as the Chinese see it, and most economists, most traditional economists, would agree with the Chinese, it benefits both sides. I trade with you. You win, I win. Ritika, one of the things that economists say about tariffs all the time is that it creates price rises that ultimately end up being bad for consumers.

Do you think that these new tariffs and the potential of a tariffs war with China could really impact consumers in America? That is something that economists warn of, is that ultimately the consumer pays the price for these higher tariffs, even if the companies initially pay for the tariff. There’s a lot of pressure on margins for companies as their costs rise.

And then ultimately the consumer ends up paying. So there is a likelihood that is what economists have been warning. And it is also seen as counterproductive in some ways to one of the key objectives that President Donald Trump had, which was to keep the cost of living for Americans low. And then there’s also the issues of the monetary policy side and what it means for the Federal Reserve.

If inflation rises and then it means that their interest rate policy would be impacted, whether they have to lift rates and how that could impact the economy and economic growth. Ultimately, Micky, we’ve got President Trump and Xi Jinping on the phone together. Do you think that Xi Jinping will bend at all, will give in to Donald Trump? They will give something. Definitely.

China will give something because of all the reasons I explained before. The export economy is vital for the Chinese economy as a whole. They will not want that disrupted, particularly to one of their biggest markets. And if you look back at what, um, China did previously in the first Trump presidency, they did make concessions.

A Trade War May Not Go Trump’s Way. China Has His

Some kind of deal, uh, was enacted in the end. Now, you could argue whether China didn’t renege on those terms of that deal, it might well have done. And that’s certainly what President Trump would argue. But China is just as determined when it comes to politics. And it too, I think, would be prepared not to go to the whole hog to appease President Trump. They have got their red lines.

And I think they’ve got some really, um, good measures or some measures which could potentially hurt America in a way that President Trump wouldn’t want. And they’re in it for the long haul. They don’t have, um, a limited time frame. They’ve got a longer time frame.

So I think they will give some ground, but not as much as President Trump would want. And I know it’s been a holiday in China, so we haven’t seen the full response to this, but has there been any sort of increase in nationalism? We saw it immediately in Canada with Justin Trudeau coming out and big signs coming out, say, buy Canadian, and Canadians booing the Star-Spangled Banner at sports matches.

Any kind of nationalistic fervor in China as a result of this? In this case, they won’t want to, the Chinese Communist Party, try and drum up nationalistic fervor at this early stage, because they’ll hope it’s all resolved without too many problems, without getting everybody angry in a way which makes it then difficult for the government to back down and do some deal with Donald Trump.

But I think in the future, if this continues, that nationalist fervor will certainly play a part and stiffen the resolve of the of the Communist Party. Ritika, thanks so much. Thank you. Thanks, Micky. Thank you. If you want more episodes of the Global Story, you can find us wherever you get your podcasts.