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Does Tariff Delay Signal A Chance For Trade War Deal With China?


President Trump famously said that trade wars are easy to win. At the moment, he is finding it easier to pause. The president has repeatedly announced tariffs and repeatedly put them off amid fears of further economic damage and a trade war. And this week, both the U.S. and China are backing off. China waived tariffs on some U.S. goods. And then President Trump delayed tariffs against some Chinese goods. With that move, the president avoids imposing tariffs on October 1, which is the 70th anniversary of the People's Republic of China.

NPR's chief economics correspondent Scott Horsley is covering all this. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: What happened here?

HORSLEY: The president described his decision last night as a gesture of goodwill. And as you say, it follows up a similar, albeit smaller, olive branch from the Chinese side earlier in the day. The U.S. and China are set to go back to the bargaining table here in Washington sometime in early October. We don't have an exact date yet, but sometime in the days following that October 1 date. And it might not have been the friendliest start to those talks had the U.S. actually gone through with Trump's plan to boost tariffs on some $250 billion worth of Chinese imports.

So what the president asked last night is he's postponing that tariff increase till October 15. So it's still sort of hanging over the talks like a sword. But, as you say, we have seen this before where the president threatens tariffs and then kind of blinks as the talks actually approach - not always, though. Sometimes he actually goes through with the tariffs.

INSKEEP: That's true. There are tariffs in effect right now. What are the tariffs that the Chinese put off?

HORSLEY: China agreed to waive tariffs on something less than $2 billion worth of American exports, so not a really large amount. These were mostly things that China needs for its own industrial production - things like industrial grease and some additives to animal food - not the really marquee U.S. exports like soybeans and pork, which are still subject to big trade restrictions in China.

INSKEEP: Scott, you mentioned...

HORSLEY: Nevertheless...

INSKEEP: Go on. Go on.

HORSLEY: I'm sorry. Well, Wall Street has been eager for any sign of a de-escalation in the trade war. And so they took China's action yesterday, small though it was, as something of a breakthrough. And we saw another rally on the markets yesterday.

INSKEEP: Well, Scott, you mentioned that the president described this as a gesture of goodwill, honoring the founding of the communist state of China, which is rather interesting, and also allowing for these trade talks. But are there also concerns in the administration about the economic damage that this round of tariffs would do?

HORSLEY: There certainly are warning signs out there. I mean, in August, we saw the manufacturing sector in the U.S. shrink for the first time in three years. And just a few days ago, we had a warning from the economic forecasters at Deutsche Bank, who said unless there's a de-escalation in the trade war, we're looking at a likely recession in the U.S. next year. Now, they're not anticipating a recession because they forecast a move just like this, some backing down by both sides.

But it's important to look at the politics here as well, the political geography. Manufacturing is not a huge part of the U.S. economy. It's only about 8% of jobs nationwide. But in the counties that Donald Trump won in 2016, it's about 12%. And in the counties that he won in battleground states, manufacturing accounts for 21% of the jobs. So that might get the president's attention.

INSKEEP: Also, when Deutsche Bank says there's a chance of a recession next year, of course, the president is hyper-aware of that election being next year. There can't be much doubt about that.

HORSLEY: That's right. And yet, forecasters really aren't looking for some sort of grand agreement here at these October bargaining talks - maybe a smaller deal, perhaps some concessions by the Chinese, some concessions by the U.S. side and an agreement to undo the worst damage of the trade war.

INSKEEP: Scott, thanks for your insights.

HORSLEY: You're welcome.

INSKEEP: That's NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.

Scott Horsley
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.