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AMY GOODMAN: This is Democracy Now!, democracynow.org. I’m Amy Goodman, with Nermeen Shaikh.
NERMEEN SHAIKH: We turn now to look at U.S.-China trade relations, after President Trump and Chinese President Xi Jinping agreed to a one-year trade truce during their meeting in South Korea. Trump agreed to cut fentanyl-related tariffs to 10%, while Beijing agreed to postpone export controls on rare earth minerals and crack down on fentanyl trafficking. China also agreed to resume buying American-made soybeans.
On Thursday, Xi talked about the importance of China-U.S. relations.
PRESIDENT XI JINPING: [translated] I always believe that China’s development goes hand in hand with your vision to make America great again. Our two countries are fully able to help each other succeed and prosper together. Over the years, I have stated in public many times that China and the United States should be partners and friends. This is what history has taught us and what reality demands.
AMY GOODMAN: Xi was speaking through a translator.
We’re joined now by Nancy Qian, professor of economics at Northwestern University, co-director of Northwestern University’s Global Poverty Research Lab and founding director of the China Econ Lab.
Welcome back to Democracy Now!, Professor Qian. What was most significant to you about this deal that was made between President Trump and Xi?
NANCY QIAN: I think the thing that really stands out to me, and probably many others, is simply that they met. You know, geopolitical competition has been increasing steadily since Trump won. It escalated during Biden, and even more so during Trump two. So there was a real concern about how this competition is going to play out. You know, are we going to end — in a worst-case scenario, are we going to end up in conflict? Or can we get a dialogue going? So, I think the fact that they met at all has to be a good thing, right? Talking means not fighting. Talking means hopefully more talking. And I think that’s the biggest takeaway for all of us.
NERMEEN SHAIKH: Professor Qian, what do you think prompted this meeting now?
NANCY QIAN: You know, China and the U.S. has been kind of playing shadow boxing and all-out boxing for years. You know, all the levers and buttons that they can push and pull in order to compete have sort of been played out. They’ve been pushed, and they’ve been pulled, right? So, at this point, it’s sort of like: What now? Tariffs, are we going from 100% to 200% to 300%? You know, we’ve gotten to a point where it doesn’t really have meaning anymore. So they sort of have to talk.
AMY GOODMAN: So, if you can talk about the different points of this agreement — for example, the soybeans? Isn’t this all a creation of Trump? I mean, he’s caused the problem and then solved it, right? He increased the tariffs. China said they were going to cut off buying soybeans from the U.S. — they’re a major buyer of those soybeans — which really endangered American soybean farmers, and was buying it from Argentina, that Trump is bailing out to the tune of $20 billion at least. Explain what were these issues, from fentanyl to soybeans and beyond.
NANCY QIAN: So, 20% or so of U.S. soybean exports go to China. China is a really big buyer. So, when Trump raised tariffs on the Chinese goods, you know, the Chinese retaliated in many ways. One way was to say, “We’re not going to buy agriculture exports from the U.S.” And this was really smart on the part of the Chinese. Not only do the Chinese have a lot of economic power and being such major buyers of American agricultural products, you know, these are also farmers — American farmers are also in red districts. These are the places that voted for Trump. So they were tactically trying to reduce political support for Trump economic policies from Trump’s red political base.
And it’s not just soybeans. As you’ve alluded to, it’s many other things. So, one thing that we don’t think about much in the United States is whey. So, for those of us who don’t know what whey is, it’s a protein that comes from milk. In the U.S., we don’t really consume much of it. It’s usually — we see it in the form of protein shakes — right? — for people who want to go to the gym or body builders. But in China, it’s a nutritional supplement that’s used by school children, the elderly. And it turns out that 40% of whey exports go to China from the U.S. So this is just another product that China has a lot of economic power over.
And what’s happening since, you know, Trump has increased tariffs, actually, it goes further back than that. Since Trump won, the U.S. and China have been preparing themselves for more escalation, more economic competition. And the way that China has been doing it is to build up food reserves, so that they don’t need to rely on U.S. exports, and to build up economic relationships with countries like Argentina and Brazil, so that they can import foods from these other countries in case they get into a tat with the United States.
So, I think what we’re seeing in terms of soybeans is just one of the strategies that’s being tested out, right? So, China is seeing: How much power can we get by pulling our economic levers in terms of how much we import from American farmers? And the U.S. is trying to figure out: How much political support will we lose if American farmers are hurt? And what we’re seeing now is these things being played out, and that’s why we see the shifts back and forth, because it’s part of a larger political and economic experiment.
NERMEEN SHAIKH: And, Professor Qian, I mean, there’s also the question — the fact that China trades more with more countries in the world, 70% more countries China has trade with than the U.S. If you could talk about 70%, 150 countries? If you could talk about the significance of that?
NANCY QIAN: So, that’s a really great point. You know, one of the things that we need to remember when we talk about trade between China and the U.S. is that these are very large and diverse economies. And trade, in total, is only a part of the economy, not to mention trade with each other. So, while they can really hurt each other by reducing trade with each other, they also have many options to other countries.
So, for China, 20% of its GDP relies on exports. And as you say, China trades with many countries other than the United States. That said, though, the U.S. is China’s largest trading partner. So, out of that, those 20% exports, 15% goes to the U.S., and around 15% goes to the EU, you know, and EU is going to contain a lot of those 70 countries, right? And at the same time, the U.S. relies on China much less than China relies on the U.S. in terms of exports and trade, because trade, in general, is only 25% of the U.S. total GDP.
So, I think, you know, as you’re trying to figure out how to compete with each other, the governments of both countries are looking at these numbers and trying to say, “Well, you know, on the one hand, we want to keep trading with each other, because, otherwise, we’re going to suffer a lot, and maybe we’ll lose domestic political support. On the other hand, you know, what are the other things we can do?” So, for the U.S., you’re thinking, “How can we shift our reliance on China to other countries? Right? And how much can we rely on domestic economy, our domestic economy, to keep us going?” And China’s thinking, “These 70 other countries that we’re trading with, how much can we build up trade with them to substitute what we’ll lose with the U.S.?”
AMY GOODMAN: Professor Qian, we want to thank you for being with us. Nancy Qian is professor of economics at Northwestern University in Chicago, co-director of Northwestern University’s Global Poverty Research Lab, also founding director of the China Econ Lab. We will link to your piece for Project Syndicate headlined “Americans Can’t Win from Trump’s Trade War.”
