Clinical professor of international business Terrence Guay researches the competition between governments, and Chinese global investments. Guay says that China got the better end of this deal, but both sides can call it a win.
00:00China, if you looked at it, probably got the best deal in these negotiations in Switzerland.
00:05They got a lower tariff than had been imposed.
00:08And as a result of that, they now know how President Trump is willing to play this game
00:13and how far he might be willing to negotiate.
00:15So I think for China, this is probably more of a win for that country than for the United States.
00:21My name is Terrence Gay, T-E-R-R-E-N-C-E-G-U-A-Y.
00:26I am the director of the Center for Global Business Studies in the Smeal College of Business.
00:30I teach and do research in international business.
00:33I look at investment screening mechanisms and how that affects Chinese investment in countries around the world.
00:39What happened with the China trade war is that there was a resolution of sorts between the United States and China.
00:45Negotiators for both countries met in Switzerland and decided to reduce the tariffs that had been imposed by both sides.
00:52China also significantly agreed to continue to export rare earth metals, which they had restricted for a while.
00:59Those are metals that are very useful in everything from the defense industry to electric batteries.
01:06So it may be the case where tariffs are just a lot less than they were initially, which both countries can claim as a win.
01:12President Trump can say we have higher tariffs than we did before he came to office.
01:16China can say that we got President Trump and the United States to reduce tariffs significantly on Chinese goods sent to the United States.
01:24I think one of the new things that may develop as a result of this is that the trade policies that the Trump administration is imposing on many countries around the world,
01:32I think is actually going to be counterproductive with respect to our relationship with China.
01:36A lot of countries now see China as a more reliable trade and investment partner than the United States is.
01:43I was in Colombia about a month ago and learned about a lot of Chinese investment that's taking place in that country.
01:50China is making a big push to invest more in Latin America and to trade more soybeans with Brazil rather than soybeans from the U.S. Midwest.
01:57And so I think it's going to push China to further develop relationships with other emerging markets around the world,
02:05be they in Asia, Africa, or South America, and try to reduce their dependence on U.S. trade
02:11because they found that that can be very politically contentious in the United States
02:15and trying to find other trade partners might be a way for China to be more successful.
02:20That's going to put pressure on U.S. companies in these other locations around the world.
02:24They're going to have a more difficult time doing business there.
02:27The strategy, I think, of announcing big tariffs and then walking them back is probably more a psychological one.
02:33It's a way to sort of tell other countries, look, we're not pleased with you for a variety of reasons.
02:39The financial markets respond, the stock markets, the bond markets all respond as a result of that.
02:44And then it allows some breathing space for the president to bring the tariffs back down.
02:49I'm not sure that's the best strategy to be using because it creates a lot of uncertainty and confusion in the business place.
02:55Some companies might say, great, the tariff is now 30% instead of 145%.
03:01Let's import a lot of goods.
03:03Some might say, well, it might get even lower than that after 90 days.
03:07I'm not so sure that will happen.
03:09So we think we're probably going to see companies adjusting to these 30% tariffs,
03:13which as painful as they are will be manageable for a lot of companies,
03:16both companies exporting from China, companies importing from the United States,
03:20consumers in the United States paying a little bit more for their goods, sort of a sharing of the pain.
03:26Tariffs are one way to manipulate your economy.
03:29Another way to do that is through industrial policy, through supporting certain companies,
03:33having regulations that support domestic firms rather than foreign firms,
03:37state-owned companies that can compete in a different playing field.
03:40Those are much more difficult to change.
03:42And tariffs are a number.
03:43You can change those percentage.
03:45Getting a country to change its own economic policies, industrial policies for its own citizens
03:50is much more difficult for any country to ask another one to do.
