Will China back down?

Katie Martin (0:06)

Pushkin. There is still only one story that matters in markets, and it's Donald Trump's trade tariffs. And look, there's a lot of noise, a lot of confusion. But one thing is now pretty clear. The focus here is very much on China. US imports from China now carry a tariff of 145%.

Last time we recorded this podcast, it was 125 It is pretty hard to keep up. Now, the way the US administration is behaving, it's as if China has no leverage here. Just keep ratcheting up the pain and China will buckle. Today on the show, we're gonna tell you why that's not quite right. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT HQ in rather rainy London. And joining me down the line from New York City, from the mighty Unhedged newsletter, he came here to kick ass and chew bubblegum and he's all out of bubblegum. It's Aiden Reiter.

Aiden Reiter (1:11)

I actually am out of bubblegum, as you mentioned. It's Passover and usually my family gives me kosher bubblegum for Passover to get me through the week of not being able to eat a lot of things. And this year, I don't have any.

Katie Martin (1:24)

Was not aware that kosher bubblegum was a thing. So every day is a school day on the Unhedged podcast, boys and girls. Aiden, tell me, how much kosher bubblegum does the US import from China?

Aiden Reiter (1:38)

I can't imagine the kosher variety is made in China. But I also don't know how much bubblegum we import from China, but there is a lot of other imports from China.

Katie Martin (1:47)

As a whole, a lot of imports from China. And your glorious president, Mr. Donald J. Trump, has been obsessed with imports from China for longer than you've been alive. This is like a core pillar of his personality.

Aiden Reiter (2:00)

Yeah, since the 1980s, he's been obsessed with tariffs. Unclear how that economic thinking totally got into his orbit. But then, since 2001, he and plenty of others have accused China of not truly abiding by WTO rules, using unfair trade practices.

Katie Martin (2:15)

So wait, wait, wait. WTO, for the uninitiated, it's the World Trade Organization. And China was admitted in, I'm going to say, 2005?

Aiden Reiter (2:24)

2001

Katie Martin (2:25)

Oh, 2001 The idea is that people accused China of paying fast and loose since then, they haven't been playing by the rules, they've been gobbling up global manufacturing. We can argue all day about whether that's fair or not, right?

Aiden Reiter (2:38)

Yeah. I mean, there's arguments to both sides. There's people who accuse them of stealing patents from other countries, of subsidizing their own manufacturing, which is technically against some elements of WTO rules. Regardless, you know, Americans have been upset about this for a long time, and Donald Trump and the Republicans have been especially upset about it.

Katie Martin (2:56)

So help him.

Aiden Reiter (2:57)

And in 2018, he hit China with the first round of big tariffs, the kind of the testing waters for what we've seen today. So he hit China with tariffs on various specific manufacturing imports, and then also steel and aluminum tariffs both on China and Europe and the rest of the world.

Katie Martin (3:13)

Washing machines, right? You've got to be in his bonnet about washing machines.

Aiden Reiter (3:16)

Washing machines, yeah. But plenty of hard to manufacture things that we also don't happen to manufacture in the United States. China responded a little bit, but not too much. Anyway, going into this administration, we all felt pretty confident that Trump would hit China with additional tariffs. If you read into the various papers put out by people in his circle before this election, they all said, yes, we're going to do tariffs on China and we're not going to negotiate with China.

Katie Martin (3:40)

Yeah.

Aiden Reiter (3:40)

So it was very clear that they wanted to take a maximal approach to China from the beginning, but it is surprising how fast it ratcheted up.

Katie Martin (3:46)

There's maximal and there's maximal, right? So we will all remember the kind of flip chart type things that Trump had in the Rose Garden on April 2nd, when he was announcing these so-called reciprocal tariffs on the rest of the world, on so-called Liberation Day. I hope you can hear the little bunny ears that I'm putting either side of those words. But China got a particularly tough treatment. And then when Trump rolled back on some of the toughest tariffs on most of the rest of the world, he kept them on China and pushed them higher and higher again and higher and higher and higher.