On this episode of China Uncensored,
the Chinese regime is battling the US for world domination.
And now they're fighting a trade war.
Hi, welcome back to China Uncensored,
I'm your host Chris Chappell.
Since the 90s the United States has been
"engaging" with China more and more.
Most favored nation status.
Normalized trade relations.
Entry into the World Trade Organization.
Turns out, the Chinese Communist Party used that
as an opening to hack US intellectual property,
give unfair advantages to Chinese businesses,
and, let's just say,
there's hardly a World Trade Organization rule
the Chinese regime hasn't violated.
So what can the US do?
President Trump,
who had been tweeting about these trade issues
even well before he was president...
...has doubled down on the trade war as a solution.
But who's going to win?
China or the US?
I sat down with China expert Gordon Chang to find out.
Thank you for joining me today, Gordon.
Thanks so much, Chris.
The US and China are in a trade war.
Who's winning?
It's a little bit early, in a sense,
if we think about the tariffs this year.
But the Chinese have been waging a trade war
against the United States for decades,
and look at that perspective, well,
the Chinese are winning,
because they've been stealing, for instance,
hundreds of billions of dollars of US intellectual property each year,
and there have been so many other predatory tactics
that they have used against America.
Now, we're a big economy,
we're a strong and robust economy,
they're a fragile one.
So in that sense you could say,
"Well, maybe we're still okay."
But the point is,
the Chinese have made big gains over the course of two decades,
and so we've got to understand that perspective.
Well, I know my favorite Chinese state-run media, the Global Times,
has written several articles about you,
and they say you have a biased view towards China.
Why are you so biased?
I don't think that I'm biased.
I think that I look at China realistically.
We have to understand what's going on in Beijing right now.
You've got Xi Jinping, a very aggressive, very provocative ruler.
He wants China to be bigger than it is today,
so for instance you have Chinese troops south of the line
of the actual control in the Indian Himalayas,
you have the Chinese trying to take
the Senkaku Islands from the Japanese.
The Chinese call them the Diaoyus.
They believe the South China Sea is actually blue national soil,
but everybody else thinks it's the global comet.
You go through,
there is a list of countries that are targets of the Chinese,
and they're doing all sorts of other things.
For instance, we see them lasering American planes,
blinding American pilots.
If you blind the pilot of a plane, Chris,
what you're trying to do is to bring it down.
That is an attack on the United States.
There have been a series of attacks on American planes and vessels,
and we just sort of try to shrug it off,
but China is very aggressive right now,
and very dangerous.
So there's an overall war, you might say,
between China and the US,
and the trade war is just an economic part of that.
Part of it, yes.
I mean, China has really tried to make itself strong
by building up its economy,
and by using the fruits of that to build up its military.
So, right now, China has the world's biggest navy.
That means that they are using it for purposes that us neighbors,
the international community,
the United States finds to be very destructive.
Mm-hmm.
So you called the trade war
an existential struggle for the Communist Party.
What's at stake?
What's at stake is really you could say
the dominance of the 21st century.
But the way I look at it is, the United States has an economy
which is increasingly based on innovation.
If we cannot commercialize the fruits of innovation,
we don't have very much of an economy.
So, for us, it's really the future of the United States.
You know, the economy has always been
the foundation of American strength,
so clearly that's what's at stake.
China doesn't want us to have that economy.
We don't want to be in a quote, unquote trade war with the Chinese,
we want to get along with them.
We've had a succession of US Presidents who thought that
the best interests of the Communist Party
were in the best interests of the United States.
We should engage with China.
This is really something which we don't want to do,
but we've got our backs to the wall,
so we really have no choice but to defend our economy.
Do you think a trade war is the best way to deal with
the issues of intellectual property theft,
currency manipulation, trade violations?
We tried to talk to the Chinese,
to negotiate with them,
to engage them as you say,
it just hasn't worked over the course of decades.
As Bill Clinton said.
So what we have to do is impose costs.
People don't like tariffs,
the Section 301 tariffs.
Section 301 of the Trade Act of 1974,
but the Chinese are not leaving us any choice.
And if the tariffs don't work, Chris,
we're going to have to probably go to trying to ban
Chinese imports into the United States,
things that are more drastic.
So let's hope that tariffs work, but if not,
we've got to be prepared to defend our society.
Okay. So what impact has the trade war up to now
had on the Chinese economy?
You know, we're at a really early stage of the tariffs,
where the United States has really started to impose costs,
so there is some shaking of the confidence,
but it's really, I think it's not so much you can see it in GDP,
gross domestic product numbers.
You can't see it in ours.
There's been a lot of moaning, of course,
because people are worried about the cost of consumer goods,
but the point is-
For the US.
For the US.
Also, you're going to see the same effects in China eventually.
Right now, we've imposed $50 billion of Section 301 tariffs on China.
China's imposed $50 billion of tariffs on us,
but last year we imported something
like $505 billion worth of goods from China,
so there's a lot more room for us to escalate this.
By the way, China, they've sort of run out of bullets, in a sense,
because we only sold like $129 billion worth of stuff to them,
so when they get to tariffs on $129 billion of goods,
we've still got a lot more to go on them.
That's true.
Some Chinese officials have said,
"Oh, we can just do business, we can trade more with Africa.
We don't need the United States."
Do you think that's a threat?
Long term, yeah, I suppose that's the case.
If you look at sub-Saharan Africa
is the fastest growing part of the world,
but you've got to remember that last year,
China's overall merchandise trade surplus,
88.8% of that related to sales to the United States.
We now account for an outsized portion of China.
They rely on selling things to the US.
Decades down the road,
can they lessen that dependence?
Yes, they can.
But you've got to remember that
other countries are going to take
the same attitude that we've taken.
So now you see a much tougher posture on the part of the Europeans,
for instance.
I'm sure that decades down,
when Africa is really important to China,
you're going to see the same thing.
African nations are going to do the same thing we're doing,
because they, like us, are going to protect themselves.
How does this right now impact the Chinese Communist Party?
There you're starting to see very interesting symptoms,
because people in China are starting to understand
that they cannot win a long term struggle with the United States,
and that's why Xi Jinping is trying to huff and puff,
and bluff us down, but I don't think President Trump
is really going to back down in the face of that.
But what people are saying in China, is first of all,
"Well, look.
We can't beat the Americans.
So the question is, why are we taking them on?"
Xi Jinping, I think is coming in for a lot of criticism.
There's been an erosion of his influence and position.
We don't know how serious it is, but clearly it's there,
because we are seeing people openly criticizing him,
and we didn't see that six months or so ago.
The point right now is that people are saying,
"Who lost America?"
The United States, as we were talking about,
really did see it in its interest to help China.
Now, Americans don't think that way, and we're seeing
a hardening of attitudes, not only the US,
but also in places like Europe.
That is also critical,
because it means for instance that Beijing
cannot play Brussels off against Washington.
In my view of the Chinese Communist Party has maintained
its power by always saying that they can build a middle class,
that they can keep the economy going and strong.
If there is a risk to the Chinese economy,
is that a risk to the Chinese Communist Party itself,
or Xi Jinping?
Of course, because the Party has made it very clear.
They've been explicit about this,
that the Communist Party has a right to rule,
not only because it represents the wave of proletarianism,
the rest of it, but in a practical sense,
they say they have the right to rule because
they've been able to develop the economy.
They've been able to make China strong.
When China gets shaken by President Trump,
that's a problem for it.
So for instance, we had this seven year ban on ZTE Corp,
the embattled Chinese telecom equipment maker.
That was a death sentence, and what the Chinese officials said was,
"Oh my gosh.
The Americans are able to do this to us."
They started to blame us, of course,
but also Xi Jinping for creating this problem.
So that's why I think that Xi Jinping,
in order to regain the authority that he's lost,
the position that he's lost,
what he needs to do is he needs to quote, unquote
win the tariff battle with President Trump,
which means setting China into a very dangerous position,
because long term, their economy cannot stand up to ours.
We got a much bigger economy, we got a more stable economy,
we're growing faster than China is in reality.
We don't have a critical systemic debt crisis on our doorstep.
China is just not in a position to wage this struggle,
and yet Xi Jinping is absolutely determined to do so.
Speaking of Xi Jinping, and I'm in no way defending him,
but these intellectual property theft, trade violations,
none of this started with him.
That's been going on a long time.
Is it an issue that he might become the scapegoat
for some of these long term practices?
He's going to become a scapegoat for a lot of things,
and the reason is that throughout his five and a half years in power,
what he's done is he's purged a lot of people.
They call it anti corruption, but it's really a political purge-
Political opponents.
So he's created enemies.
Those enemies have been intimidated by him,
but recently they've been coming out and criticizing him in public,
which is an indication that Xi Jinping's in a little bit of trouble.
Whatever the issue is, it could be the South China Sea,
it could be Taiwan, whatever doesn't go right for Xi Jinping,
his adversaries are going to use it.
Remember, he's made himself the chairman of everything.
That means when things go well for China,
great for Xi Jinping politically.
But when things don't go well, he does not have anybody else to blame,
because he said he's supposed to be in control.
Absolute control.
That means he's absolutely responsible when things
don't go the way the Chinese want them to.
Let's talk about Xi Jinping's Made in China 2025.
How is this trade war going to affect that?
Am I still going to be able to buy a Huawei phone
with pre-installed spyware?
I don't think so, unless you go to China itself.
We've seen countries now start to say,
"Look, we're not going to allow Huawei networks for 5G."
5G is the next generation of wireless communications.
You can't buy it in Australia,
you probably will not be able to buy it in the United States as well.
I think other countries probably will follow suit.
Made in China 2025, where they've designated 10 sectors to dominate,
now 11 with the addition of 5G,
that is just one big World Trade Organization violation,
because of its numerical targets for Chinese control of its own market.
On its face, it's just not going to pass WTO muster.
When has that stopped them before?
It hasn't stopped them before, but it is also now
at the core of the US complaints against China.
You know, in the beginning when we started this tariff struggle,
President Trump was saying, "Look, I'd be happy if you reduce
the bilateral trade deficit by $200 billion."
They're not talking about that anymore.
They're talking about China's industrial policy,
which is Made in China 2025.
They're talking about subsidies for state-owned enterprises.
They're talking about things that go to the core
of the Communist Party's economy.
So Made in China 2025 is now a critical issue
in the discussions between the US and China,
when they occur.
They're not occurring very often, by the way,
but the point is that the US has now decided
to focus in on the critical issues,
not just sort of the thing about trade deficits,
which were superficial at best.
So this is expanded in scope.
It's kind of more fundamental.
Absolutely more fundamental.
That is the exact word for this.
This has become structural, fundamental.
We're not looking at things that are peripheral anymore,
and that's a problem for China.
because Xi Jinping and a lot of other people are not in the mood
to change Made in China 2025.
They are willing to not talk about it,
they try to downplay it in the media,
but nonetheless, they're not giving up on it,
which means that as long as President Trump is around,
he's going to be banging on them in this.
And I think it's even just more than Trump, because
there's a bipartisan consensus now in the United States
that something's got to be done about China.
Yeah. I remember even Chuck Schumer said he'd like
to give Trump a pat on the back over the initial tariff.
If you look at Congress, Trump's support on tariffs
is found mainly in the Democratic Party.
There's a number of reasons for that,
but everyone's coming along, because, yeah,
people don't like tariffs, they moan about them,
complain about them, but the question is,
what you going to do about China's theft of US intellectual property?
This is an existential threat for the American economy,
which means it's an existential threat for the country as a whole.
What are the possible risks for the US economy?
How is this going to affect your average American?
I think that what we could see, for instance,
consumer prices will go up on things.
But you've got to remember,
this is overblown.
So for instance, take this mug.
A lot of them are made in China.
Not that one.
Not this one, and I congratulate you for that.
Thank you.
The point is, most mugs in the US are made in China.
Prices are going to go up on mugs at some point,
but it really doesn't matter.
The reason is that mug manufacturers can easily
move their supply chains out of China.
We're starting to see that already for a number of reasons,
not only because China's no longer
the low cost manufacturer in the world,
but also because companies are worried about the security
of their supply chains because of the quote, unquote trade war.
So you're seeing companies now actively take steps
to move their supply chains out of the People's Republic.
Also, there's one company that going to have a really hard time,
and that is Apple,
because their supply chain is firmly fixed in China because of Foxconn,
their contract manufacturer.
Even Apple at some point will be able to move if it gets bad enough.
The other effect is we won't be able to sell soybeans to China.
Soybean farmers are sort of up in arms, but the point is,
there are only so many soybeans in the world
at this particular moment, Chris.
So if China doesn't buy US soybeans,
they've got to buy them from, basically Brazil.
That means Brazil is not going to sell to its traditional customers,
which means the US is going to sell to Brazil's customers.
By the way, that tentative agreement that President Trump
negotiated with the European Union,
part of that deal is that Europe buys American soybeans.
So soybean farmers are going to be hurt a little bit,
but not too much.
By the way, a lot of people in Iowa,
they're not going to be planting soybeans this year.
They're going to be planting corn or other things.
That high fructose corn syrup we all love.
Yes, and I got a sweet tooth.
But the point is,
what we're going to see is American farmers adjust.
And yes, there will be problems to the US economy,
but you cannot have maintained decades of misguided trade policies,
economic policies with China and expect we can get out of this
without any cost.
We're going to have to do this,
because the overriding reality is that China is harming our economy,
and it's doing so in a malicious manner.
We can compete with anybody fairly.
If they compete fairly and they win, that's one thing.
But that's not what's happening now, Chris.
What we're seeing is China, one WTO violation after another.
One violation of their bilateral agreements with us after another,
and these are critical.
They're not just superficial, unimportant violations,
they go to the core of our trading relationship with China.
We've got to do something.
That's why this is not just a Trump issue,
this is an American issue.
Americans understand they need to protect their economy.
I mean, we're talking hundreds of billions of dollars
in the loss to American companies and workers.
So clearly, this is unacceptable.
We've accepted it for far too long,
and basically Americans are saying now,
"No, we're not going to accept it."
That's why people may not like the tariffs
under Section 301 of the Trade Act of '74,
but the point is what else you going to do?
If those tariffs don't work, as I mentioned,
we're going to have to do things which are even more drastic.
But at the end of the day,
we're going to make sure that we defend our economy.
So what's the end game?
I think the end game is a long struggle with a very willful Xi Jinping,
but it's a struggle that we, because I mentioned we don't want,
but it's a struggle that we have no choice but to wage.
So we will wage it, and I think that China, long term,
as I mentioned, even the Chinese understand
they cannot win that struggle with us.
Well thank you very much for joining me today, Gordon.
If somebody wants to learn more about you,
or read some of your work, where can they go?
I archive my pieces at my website, gordonchang.com,
and on Twitter, @GordonGChang.
Great. We'll put a link in the description below.
Thank you again for joining us, that was very insightful.
I really appreciate the opportunity, and thank you, Chris.
Enjoy the mug.
Thank you.
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