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Months After Talks Broke Down, U.S.-China Trade Negotiations Resume

DAVID GREENE, HOST:

Trade talks between the U.S. and China are starting up again after a break that has lasted two months. President Trump is not exactly sounding optimistic. He spoke about this round of negotiations to reporters last Friday.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: I don't know if they're going to make a deal. Maybe they will; maybe they won't. I don't care because we're taking in tens of billions of dollars' worth of tariffs.

GREENE: Now, we should be careful here and note that assessing the economic effects of tariffs is pretty complicated. Most economists agree that the higher prices consumers pay outweigh any government revenue being collected. But let's talk all this through with David Rennie. He joins us from Beijing. He's The Economist's Beijing bureau chief. David, welcome back to the program.

DAVID RENNIE: Hello.

GREENE: So this trade dispute has been going on, I mean, for some time now. What has brought the two sides together in Shanghai today?

RENNIE: Well, you have the meeting of the two leaders in Osaka, who agreed that they needed to start talking again. But what's remarkable is that the Chinese side, as you say in your reports - President Trump is talking this down (ph); so is the Chinese side. So there's this sense that both sides know that at some point this can't carry on forever, that this could be very, very damaging to the two economies. But neither side really seems to be anywhere close to the kind of concessions that might unjam this really nasty standoff.

GREENE: OK, so it sounds like, listening to President Trump there, he's just - it's not just playing an expectations game; I mean, it seems like pretty dim expectations overall for anything really big to happen here.

RENNIE: Yeah. We get a stream of pretty senior Americans out to Beijing here, and it's really interesting how very consistent the messages that Chinese leaders are giving them, and it's a kind of two-part message. One is that they don't actually believe that President Trump himself wants to destroy the Chinese economy. They don't even really believe that President Trump wants to decouple the American economy from the Chinese.

So they don't think of President Trump, funny enough, here as the most dangerous hawk in Washington, for all that President Trump presents himself as this great kind of basher of Chinese cheating.

The figures that really worry the Chinese - and they tell American visitors this all the time - is the hawks that they see swirling around President Trump. So their big fear is that President Trump will be hijacked by trade hawks and national security hawks, who they genuinely believe want to bring China down and stop China becoming a great successful modern power. And so you have this very paranoid mood here in Beijing at the moment.

GREENE: So interesting. So they think even if they were to work out some sort of deal with President Trump, they have this feeling that others in Washington would stop a deal from actually meaning much to the Chinese and making much of a difference.

RENNIE: That's right. And one thing that's fascinating - I've actually sat in on a couple of kind of track-two meetings with former senior American officials who worked for President Obama when they met the Chinese. The Chinese have this line where they say, you know, we know this is all about American domestic politics. We know that President Trump is worried about, you know, his voters in the farm states. He wants them, you know, selling soybeans to us again. So we're sure that when the election comes round, we can do a deal.

But then having said that very confidently, you know - you wait a couple of minutes - they go, he does need a deal, doesn't he? So you've got this moment where this autocratic, communist regime here is trying to play kind of political analyst and guess what effect American domestic politics has on President Trump. So they're really anxious people right now.

GREENE: But it's not just politics, or it is politics because it matters to a lot of voters in the United States. How much does it matter? I mean, if there is some sort of breakthrough, if there's a deal, will American farmers and others here and also people in China really feel the effects of a new agreement?

RENNIE: So you need to break it down. If you're talking about the specifics of, like, this tariff or that tariff, actually, the markets, you know, are sort of surviving it at the moment. But remember - there is an agenda. The Chinese are not wholly wrong; there are people very close to President Trump, such as his chief trade envoy who's here in Shanghai today, Robert Lighthizer, who really does think that the way that China kind of manages its economy, the very approach that China takes to globalization, is completely unsustainable and completely unfair because China's just got too big and too rich to behave that way.

So even if President Trump may or may not be as focused on kind of narrow, domestic farm state interests as the Chinese believe, it is true that there are other people in Washington, including in Congress, who really do want China to change the way that it behaves as a kind of capitalist superpower, and that really could change the way that China has to manage its economy.

And you're seeing now - you know, think of companies like Huawei, the high-tech telecoms giant, which doesn't know whether it will or will not be able to buy very high-tech components from American firms. You know, if Huawei is not allowed to buy those components, that means they're going to either die or have to completely reinvent the way they do business. So for China, this could be existential. But they don't know; maybe it's not.

GREENE: All right, those trade talks between U.S. and China, as we said, getting started again, resuming after a two-month break today in Shanghai. David Rennie is the Beijing bureau chief for The Economist, and he joined us on Skype. David, thanks.

RENNIE: Thank you. Transcript provided by NPR, Copyright NPR.