CGTN Europe spoke to Professor John Quelch, Executive Vice Chancellor of Duke Kunshan University, about the tariffs announced by the US President Donald Trump.
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00:00Let's just pursue the tariff story a little further with Professor John Quelch,
00:05Executive Vice-Chancellor at Duke Kunshan University near Shanghai.
00:09Professor, good to see you and welcome.
00:11Just putting aside Mr. Trump's concerns about controls on the U.S. border and fentanyl,
00:17might these trade tariffs work in terms of narrowing America's trade deficit with its partners?
00:26Obviously, with respect to China, President Trump indicated in his first term his desire to reduce trade dependency on China
00:37and to encourage U.S. companies to develop a China plus one or China plus two type strategy.
00:45So we're seeing more of the same.
00:48It's a playbook that has already, I think, shown itself to be relatively ineffective from an economics point of view,
00:59the law of comparative advantage being what it is.
01:02These tariffs simply do not make sense in terms of adding to inflation, adding to consumer prices, disrupting supply chains, etc., etc.
01:12But from President Trump's point of view, they are the attention-getting device that wakes up everybody
01:22and forces deals to be negotiated, not just on trade, but on other issues as well.
01:30So with respect to the European Union and NATO, no doubt the tariff threat is going to be linked to defense spending by NATO countries
01:43as part of an overall effort to rebalance or reset the relationship.
01:50So I think... Go ahead, Jamie.
01:54When Mr. Trump speaks of pain for American consumers and American consumers feeling it in their wallets,
02:01I mean, what does that mean in terms of the dollars in their pockets? Give me a ballpark figure.
02:08Yeah. So the estimates are roughly $1,000 a year per household in extra costs associated with these tariffs.
02:19That, of course, does not take into account adjustments that might be made or cost savings and deficiencies on the part of suppliers
02:30that might reduce the amount of cost increase that has to be passed through.
02:37When the first round of tariffs in the first Trump administration were levied against China,
02:43Chinese manufacturers actually absorbed a significant proportion of the cost and became, ironically,
02:51became even more efficient as manufacturers than they were before the tariffs.
02:57So it's not necessarily the case that the full extent of the tariff is passed through to the end consumer
03:04because there will be adjustments that can be made.
03:07But, you know, if you like avocados, you're probably going to be paying a lot more for your avocados.
03:16Let's fast forward. Let's talk about endgame in all of this.
03:20What does endgame look like in this trade war? Let's call it that.
03:26Yeah. So China's response has been so far very muted.
03:33Interesting. Typically, China responds with a very deliberate, proportionate response to whatever the U.S. imposes.
03:47That is the history from the first Trump tariff war with China.
03:52But to this point, China, unlike Canada and Mexico, has not publicly responded.
03:58And my guess is that there is quite a lot of conversation behind the scenes as to what a more substantial agreement might look like
04:09that would cover a range of other issues, non-tariff barriers as well as the tariffs.
04:17So I think we can be a little bit encouraged by that.
04:22There's no doubt that Canada and Mexico politically had to respond very quickly.
04:28But the Chinese response being more muted, I think, is perhaps encouraging that we're going to see more holistic deals being made rather than tariff only deals.
04:42John, good to see you. Thank you for that.
04:44Professor John Quelch talking to us from Shanghai.