LEILA FADEL, HOST:
This week is tariff week if President Trump does what he forecast. The president said he was likely to impose tariffs on products from Canada, Mexico and China on February 1. That's this Saturday. Two of those countries are the United States' neighbors. And then there's China, one of the U.S.'s biggest trading partners and rivals. Steve Inskeep got a perspective from there.
STEVE INSKEEP, HOST:
That perspective comes from Qian Liu, who lives in Beijing. She's an economist and a writer who has worked advising global businesses. I first met her last year during a visit to the Chinese capital, where she spoke of how the economy has been struggling since the pandemic. We called her back to ask what shape China's economy might be in for an emerging trade war.
The government has been trying to stimulate economic growth for the past year or so. How is that working?
QIAN LIU: If you look at the official Chinese GDP numbers, it's worked miraculously. The government issued a series of stimulus package from the second half of September, and already we just had the announcement that the 2024 Chinese GDP last year achieved target for exactly 5%. Although, a lot of people feel there is a big gap in terms of the actual day-to-day lives.
INSKEEP: You mean people's lives are not reflected by the numbers the government is putting out?
QIAN: Yes, in the sense that people don't feel the economy is growing at 5%. On top of that, the unemployment rate is much higher than before, and especially for young people, so this is quite worrisome. There's another very important factor, which is the wealth effect. When the real estate was growing in the past several years, that means even if you weren't working, even if you weren't doing anything, every day you were becoming richer than the day before. So you had a very solid wealth effect for you to have the confidence to spend the money. But nowadays, your income is not growing as fast. Your unemployment probabilities is increasing a lot. And your wealth effect is no longer working.
INSKEEP: The Chinese government has put a lot of emphasis and enormous investment in trying to dominate what it sees as industries of the future - wind power, solar power, electric vehicles, electric batteries, various kinds of high tech. Are those investments paying off?
QIAN: They're definitely paying off in terms of how much China is leading if not dominating certain factors and industries in the world. But the world is getting more and more cautious of that. And China is learning to be more and more mindful of how other countries are reacting and giving feedbacks to that.
INSKEEP: What do you mean by other countries being cautious, mean worried about Chinese power?
QIAN: So take electric vehicles, for instance. Many countries have looked into this and trying to put a new ban or very high tariffs on China. So China knows that this is coming.
INSKEEP: So President Trump has talked of imposing tariffs on China broadly on February 1. Do Chinese exporters assume they will pay that extra cost, which is what Trump says? Or is this a cost they can pass onto Americans who buy their stuff?
QIAN: Of course, ultimately, it's the consumer that always pay the final price. Now, China does give a lot of subsidies, so the Chinese government would pick up a portion of this, but that would be trivial when compared to. Really, it will be ultimately the American consumers that will be paying for this.
INSKEEP: So it raises the price of products that China sells in the United States. American consumers pay more. Presumably, that means they buy a little less. Is China ready for that shock or pressure or disappointment, whatever it turns out to be?
QIAN: I will first challenge the notion that if people will be spending more. In theory, yes, when a price goes up, then you buy less. But in practice, that doesn't happen all the time. It is very, very difficult to find top quality products and with very, very affordable prices that China has managed to produce. Part of that is how China has created a very comprehensive supply chain. And that economy of scale is something that no other country in the world is able to compare and compete. I traveled to some of these coastal provinces in China where they do a lot of clusters of manufacturing. It's amazing how, say, all of a sudden you need a particular kind of screw drivers, and you can just call the suppliers. They will be able to deliver it to your door with their own trucks within 20 minutes. Again, it's the very comprehensive and scalable supply chain that China has.
INSKEEP: Well, Qian Liu, it's a pleasure talking with you again. Thank you so much.
QIAN: Thank you.
INSKEEP: That's an assessment from China, one of many we're sure to hear from both sides of the ocean if U.S. tariffs do take effect. Transcript provided by NPR, Copyright NPR.
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