STEVE INSKEEP, HOST:
President Trump has revised a false claim about the trade war. The president imposed 25% import taxes on many goods that Americans import from China. He falsely said that China pays the taxes. Yesterday, his adviser Larry Kudlow acknowledged that American buyers pay. And this morning on Twitter, the president no longer fully denies this but adds, quote, "there is no reason for the U.S. consumer to pay." He contends that Americans can just buy from elsewhere. The president also warned China not to retaliate. And his adviser Larry Kudlow told "Fox News Sunday" he's surprised China has not.
(SOUNDBITE OF TV SHOW, "FOX NEWS SUNDAY")
LARRY KUDLOW: It's interesting the expected counter measures have not yet materialized. We may know more today or even this evening or tomorrow.
INSKEEP: So what is China thinking? NPR's Rob Schmitz has been following this story from Shanghai. Hi there, Rob.
ROB SCHMITZ, BYLINE: Good morning, Steve.
INSKEEP: I just want to note - this is a thread from the president on Twitter. It's a rather extended argument as Twitter goes. He argues that the real danger to China is that people just would stop doing business there if the trade war goes on. Is that a real risk to China?
SCHMITZ: Well, that's a risk in certain ways. Some U.S. companies who are especially exporting to the U.S. are definitely - have - they've been moving for years. They've been moving to other countries in Southeast Asia - Vietnam, the Philippines - to - you know, first because of labor costs in China but most recently because of these tariffs that started almost a year ago. So you know, that's been a trend. And of course, this new tariff hike is going to probably accelerate that trend.
INSKEEP: OK. So it's clear that Americans are paying the cost here, but there is a risk to China. So why has China not yet retaliated against the latest round of tariffs as they said they would?
SCHMITZ: Well, to answer this question, we need to go back in time to the first tariffs last year. You know, when President Trump announced the first round of tariffs last summer, China responded immediately, imposing tariffs on the same amount of U.S. products. After Trump's second round of tariffs, Beijing responded the same way.
But the third round of tariffs in September were the big ones. Those were the $200 billion worth of Chinese imports, a lot of consumer goods. And when the U.S. imposed those tariffs, China ran out of U.S. goods to impose tariffs on. It could no longer fight in this tit-for-tat way. So Beijing imposed tariffs on all remaining U.S. imports that it could, and those equaled around $60 billion.
So now that President Trump has raised this third round of tariffs, the prevailing wisdom was that Beijing would raise its tariffs by the same amount, but that has not happened yet.
INSKEEP: OK. I guess we should just remember: because the United States runs a trade deficit with China, the U.S. buys a lot more from China than it sells. And that's why China would have run out of tariffs. But China has a lot of other ways that it could restrict American business, does it not?
SCHMITZ: That's right. And I think that that's probably what Beijing has been doing right now - and that's why we're not seeing a response yet - is that they may be thinking about how to get creative in how they're going to retaliate. And that thinking process, of course, takes meetings, and it takes time.
Another reason might be that there's been a debate among the leadership in Beijing about how to respond to this. What's clear is that something is amiss here, but we don't really know what that is because China's government is so opaque.
INSKEEP: Are the talks going to continue?
SCHMITZ: Well, China's lead negotiator Liu He said so. He told China's media that the U.S. and China will hold the next round of talks in Beijing, but he didn't specify when. And of course, President Trump has been very active on Twitter, as you mentioned. He's been saying that China's backtracked on the trade agreement. He's also made more threats, saying he's asking his staff to begin the paperwork on yet another round of tariffs on the remaining $300 billion worth of everything else China sells to the U.S.
INSKEEP: OK. Rob, thanks as always for your insights.
SCHMITZ: Thanks a lot, Steve.
INSKEEP: NPR's Rob Schmitz is in Shanghai. Transcript provided by NPR, Copyright NPR.