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Global Markets Fall As U.S.-China Trade Tensions Rise


Stock markets around the world fell today, a day after President Trump said the U.S. was preparing to levy tariffs on an additional $200 billion of Chinese exports to the U.S. That is on top of the tariffs already announced. China has, again, threatened to retaliate. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: The U.S. is already on course to begin collecting tariffs on July 6 on $50 billion worth of Chinese goods. And the Chinese are set to respond in kind. In a statement from the White House late yesterday, President Trump said this new round of tariffs is necessary because of a lack of progress in talks with China. Former acting U.S. trade representative Wendy Cutler says that's unfortunate.

WENDY CUTLER: He's clearly frustrated with China's failure to respond to the issues that we put on the table with respect to intellectual property and technology issues. And he's ready to escalate the dispute with China even if it means retaliating in the hundreds of billions of dollars.

YDSTIE: In fact, Trump also said, if necessary, he's willing to punish up to $450 billion worth of Chinese goods. That would cover almost all the annual U.S. imports from China. The president defended his action today in a speech before the National Federation of Independent Business.


PRESIDENT DONALD TRUMP: We have no choice. This should have been done many years ago. We have no choice. China has been taking out $500 billion a year out of our country and rebuilding China.

YDSTIE: Because China does not import enough from the U.S. to match the tariffs the U.S. is imposing, China says it will also retaliate in qualitative measures. Cutler says that could mean harassing U.S. companies doing business in China.

CUTLER: Everything from withholding parts for a company so they can make their final product; we're talking about holding off approvals for certain products and factories. So these type of measures can actually in many respects have a greater impact than simple tariff increases.

YDSTIE: Cutler says she's also worried this latest tit for tat means the trade conflict is getting harder and harder to resolve.

CUTLER: When two sides are being so public about what they're willing to do and how they're willing to hurt each other, it's hard then to move off the ledge and to get back to the negotiating table.

YDSTIE: The Chinese are very concerned about backing down and losing face, says Cutler, and so is President Trump, she says. So far, the actual U.S. tariffs already imposed on washing machines and solar panels and those set to take effect on July 6 would not hurt the U.S. economy much. But that could change, says Mark Zandi of Moody's Analytics.

MARK ZANDI: If, however, the tariff increases include all the things that the president has been talking about, that would do real damage, cost the economy about a half a point on growth, 500,000, 600,000 in jobs a year from now at the peak impact.

YDSTIE: And Zandi says there is a chance it could tip the U.S. economy into recession.

ZANDI: Seems like a outlier, a real low-probability event, but it does now have a probability.

YDSTIE: Already, Zandi says, U.S. consumers are being hit with higher prices on products facing tariffs. For instance, if you need a new washing machine...

ZANDI: And you go down to your local appliance store, you're going to pay almost 20 percent more for that washer today than you would have a couple months ago because of the tariffs on that equipment.

YDSTIE: Zandi says he thinks President Trump's strategy is unlikely to improve U.S. trade with China or with U.S. allies like Canada, Mexico and Europe. And he thinks the president's threats are already doing long-term damage.

ZANDI: Our allies are now thinking about how they can do more business with each other as opposed to doing business with us. The uncertainty this is creating is making it bad for their businesses. So I think they're going to - they're going to pull away from us.

YDSTIE: And Zandi says less trade with Europe, Canada and Mexico will erode U.S. growth and leave the country poorer in the future. John Ydstie, NPR News, Washington.

(SOUNDBITE OF MALA RODRIGUEZ'S "NINA") Transcript provided by NPR, Copyright NPR.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.