Local expect discusses U.S.-China tariffs

MISSOULA, Mont. — On Friday, China raised tariffs on U.S. goods to 125% in retaliation to the tit for tat tariff battle brought on by the Trump administration.

Dexter Roberts, a Missoula native, is part of the think tank the Atlantic Council. Throughout his career he’s focused on China U.S. relations and China’s economy. He spoke with NBC Montana about the most recent development and the potential impacts that might be felt.

This interview has been edited for length and clarity.

Could you, in your own words, abridge this tariff saga that we’ve seen?

Dexter Roberts: Well, it started last week with what Trump was calling his “Tariff Liberation Day,” and we saw the market swoon and the world go crazy. It then quickly morphed into what it is today: basically a U.S.-China trade war. Trump obviously put a 90-day reprieve on almost all those tariffs, except, I guess, the base 10% on dozens of countries around the world. At the same time, he ratcheted up the tariffs on China to, he says, 145%. That's 125% plus the 20% that was imposed earlier this year in retaliation for China not dealing with its role in the fentanyl crisis. And then China just announced in the last 24 hours — or even overnight — that they were going to raise their tariffs as well. I think they had been at 84% before, but every day there’s a new number. Now, they’re up to 125%. China declared the tit-for-tat retaliation a “joke” and said they’re not going to raise them anymore because they now encompass basically all trade between the United States and China.

I was going to ask you: how would that 125% impact the U.S.? Do you have any idea what that could look like?

Roberts: Well, I think at this point, as the Chinese government said, everything’s affected. So if this continues, we’ll see basically all trade stop between the U.S. and China. That’s crazy. I mean, the amount of trade between the two countries, the role of China in global supply chains — including advanced technology — is very serious. So, if that is cut off, it’s going to have an enormous impact on the United States, China, and indeed the whole world.

It’s not out of line to assume Montanans are going to feel this.

Roberts: Absolutely. I can't keep track of all the times the tariffs have been upped in the last two weeks, but China already implemented, I think, 20% earlier this year due to the Trump administration’s tariffs on China. China responded by putting either 10% or 15% tariffs on a range of products, including wheat, pork, beef, fruits, and soybeans — some of those things, obviously wheat and beef, are produced here in Montana. Montana is a largely agricultural state. China is being quite strategic in how they’re retaliating. They are intentionally targeting industries and places that have shown some degree of support for Trump in the past — red states like Montana. They’re not choosing agriculture randomly; they know this directly affects areas of the United States that have been, with some exceptions, mainly Trump-supporting.

How much does that put pressure on America's economy?

Roberts: I think it puts tremendous pressure on it. I mean, first of all, we’re going to see prices soar. And you know, we heard from some Trump administration officials, in particular Treasury Secretary Steve Mnuchin, that prices wouldn't go up and that the Chinese would "eat the tariffs." That’s not going to happen. The Chinese government isn’t going to allow that. They recently called in Walmart and gave them a little dressing-down because Walmart had been going to their Chinese suppliers and saying, “Tariffs are going up, you’re going to have to take some of the cost.” The Chinese government warned Walmart that could be considered illegal and disruptive to market order, which is illegal in China. There's no reason to think that these prices won’t affect Americans — of course they will, and they already are. We’ll probably see dramatic price increases on a whole range of products, and likely see the stock market continue to struggle. We could also see job losses.

That’s in the United States, and similarly in China, you’ll see the same things for the same reasons. China is now saying 125% tariffs, and the U.S. is saying 145% tariffs on Chinese goods. I don't say this lightly, but it's a little bit like economic Armageddon. I mentioned earlier the role of China in global supply chains — it's not easy to just move factories from Shanghai or the Pearl River Delta and stick them in Vietnam. Some of that is happening, but it doesn’t happen overnight.

How is the average person, at least to your knowledge, in China being impacted?

Roberts: The economy in China is already struggling. For a lot of domestic reasons, they have excessive debt, have been too reliant on investment, and too reliant on exports — not enough on domestic demand or household consumption. The economy isn’t doing well there. People were already feeling the pain of that — there’s high youth unemployment. It’s likely to get much worse if this trade war continues between the two countries.

I did read your article on China's readiness to "eat bitterness," and the question you posed was: what about the U.S.? Could you expand on that?

Roberts: First, China is an authoritarian country. Although the leadership does have to respond to the population more than we sometimes realize, they don’t have to respond nearly as much as leaders do here in the U.S. In a democratic system, we have the midterm elections coming up — no one wants high inflation, unemployment, or a crashing stock market. Republicans certainly don’t. As we move toward the midterms, China is not dealing with that.

Second, China has this concept of "eating bitterness." It’s the ability of the Chinese people to sacrifice, often for the common good. And it hasn’t always been for the common good. There is this ability in the Chinese system to get the population to fall in line and respond to whatever the leadership — i.e., the Chinese Communist Party — says is for the national good. We saw this most recently during the pandemic. China implemented some pretty awful, draconian controls over the population, and until the very end, there wasn’t much resistance. This idea of “eating bitterness” goes back decades, all the way to the Mao era.

Is there any way to de-escalate from here?

Roberts: There is the possibility of de-escalation.

It wasn’t very long ago when the senator from our state, Steve Daines, was in Beijing and met with Premier Li Keqiang. The purpose of that visit was to discuss the possibility of a Xi Jinping and President Donald Trump summit. Both sides, I think, would still like to see that happen. If they could step away from this trade war, both Washington D.C. and Beijing have very strong reasons why a trade war doesn’t serve them well.

I mentioned earlier in Washington D.C., inflation, stock markets, and unemployment — these are not going to be popular among the American people. I think they are inevitable if the trade war continues. On the Chinese side, as I said earlier, they're in a very difficult economic situation of their own, and if you layer on top of that a trade war, the pain is going to be intense.

One of the reasons the economic relationship has been so large is that there are complementary parts to the U.S.-China relationship. China needs agriculture and food, and the U.S. is a massive producer of those. The U.S. makes airplanes, and China wants airplanes. China makes great smartphones and laptops — these are things that have a huge market in the U.S. Some of our biggest multinational companies, like Apple, are deeply reliant on China as both a market for their products and as a key part of their global supply chain.

I think it's likely that in the coming months, we’ll see a scenario where both sides find some way to step back. Both can declare victory and say they didn’t blink first. Neither side wants to give in first. China keeps saying it doesn’t want to be bullied. Trump says they’ve shafted us in so many ways, and they have to come to the table. I do think there’s a way for both sides to declare their own version of victory and step back from a lot of these tariffs. Part of the reason, I think, is because the economic pain for both sides — and frankly, for the world — is so high if they don’t.

Is there anything that maybe I forgot to ask? Anything you might want to add?

Roberts: I guess I would also point out that during the first Trump administration, we were involved in a trade war with China, albeit not one with tariffs as high as we’re seeing now. But we were involved in a trade war, and they found a way to do what they called the Phase One trade deal and step back from the brink then. Trump and Xi Jinping have met a number of times. Both sides have expressed an interest in reaching a deal in the past — not even that long ago. Things are happening so fast this year, in 2025, and both sides have signaled that they want to meet, so I don’t think that interest has changed.

And then there are things that both sides can offer each other. China can say they’ll continue to buy U.S. Treasuries, which is really important. Major purchases of U.S. Treasuries underpin the health of our economy. They can say they’re not going to devalue the yuan. They can hopefully say, I really hope they can say, that they can crack down more on the fentanyl trade — that’s obviously a key priority for the Trump administration and for everyone in the U.S. On the other side, the Trump administration could potentially stop the strengthening of investment restrictions, including those put in place by the Biden administration.

Trump could potentially at least stop the strengthening of those, he could unwind some of those. There’s been talk in the US Congress to take away something called permanent normal trade relations, which they used to call most favored nation trading status. If that's taken away from China, it sort of legitimizes high tariffs and China doesn't want them to take that away regardless. The Trump administration could say we're not going to take away permanent normal trade relations.

Finally, there may be a room, I mean, at least in the mind of the Trump administration to make some sort of compromise related to Taiwan, which I personally think would be a grave mistake. There have been sounds made by the Trump administration as if perhaps there could be a slight change in the status quo in Taiwan that would please Beijing.

I hope it's not. I hope that doesn't happen.

There’s room on both sides for the two countries to do things that would go some way towards certainly lessening tensions and trying to rebuild something of a relationship.