DON GONYEA, HOST:
Trade tensions have flared up between the U.S. and China ahead of an expected meeting later this month between Presidents Trump and Xi Jinping. The economic superpowers are already engaging in aggressive moves in a bid to gain leverage in trade talks. NPR's international affairs correspondent, Jackie Northam, has been following these developments and joins us now. Hi, Jackie.
JACKIE NORTHAM, BYLINE: Hi, Don.
GONYEA: Jackie, things seem to be moving toward a U.S.-China trade deal, but now tensions are rising again. What triggered this latest shift?
NORTHAM: Well, you know, things have deteriorated very quickly. I spoke with Mary Lovely, and she's a specialist on China's economy at the Peterson Institute for International Economics. And she said recently, the U.S. greatly expanded the number of Chinese companies that would no longer be able to access U.S. technology products. So, you know, semiconductors and software and the like. And it's a way of preventing that technology being used for China's military. Earlier this month, Beijing retaliated hard. It announced it would implement sweeping restrictions on critical minerals, which Lovely says the U.S. both wants and needs.
MARY LOVELY: Critical minerals, like the rare earths, are so important to so many different things that we consider vital, not only for armaments, jet fighters, but cars and everyday items. So if this actually took place, it would be a very fast and brutal rupture of U.S.-China trade.
NORTHAM: And, Don, the Trump administration was outraged at this news. And Trump threatened to call off talks with Xi Jinping and add an additional 100% in tariffs on China.
GONYEA: So by withholding rare earth exports, it sounds like China is hitting America's pain point. But this tactic sounds very familiar here.
NORTHAM: Oh, yes. Beijing is essentially showing that, like the Trump administration and the previous Biden administration, it is quite willing to leverage its lead in sophisticated technology. And, you know, Mary Lovely says Beijing is simply engaging in tit for tat to get what it wants.
LOVELY: It's kind of in your face, right? And it is very extreme. So it's kind of like, we could go very far and really cause you, the United States, a lot of trouble. We're going to say we're not going to do it for a couple months. We're going to see where this goes.
NORTHAM: And that's the issue, you know? Does this continue to escalate or does it calm down?
GONYEA: And already, we've seen some other retaliatory measures over the past week by both sides. What can you tell us about that?
NORTHAM: Well, you know, China currently produces more than half the world's ships. And Trump wants to make the U.S. a shipbuilding nation again, so on Wednesday, he announced fees on any vessel made or owned by China. Not surprisingly, China followed suit. I spoke with Peter Tirschwell, and he's a maritime trade specialist at IHS Markit. It's a global information and analytics firm. And he said these fees are forcing shipping companies worldwide to readjust their routes and schedules, which will have an effect on the economy. In other words...
PETER TIRSCHWELL: When barriers to trade go up, that means costs go up. And that means those costs have got to be absorbed somewhere in the supply chain.
NORTHAM: And Tirschwell says the fees will cost big shipping companies hundreds of millions of dollars.
GONYEA: So given these retaliatory moves on both sides, what are the chances of Trump and Xi Jinping meeting later this month at a summit scheduled in South Korea?
NORTHAM: Oh, most people think the chances are still good. You know, despite all of these moves, both sides do ultimately want a trade deal, but they want the other side to blink first.
GONYEA: That's NPR's international affairs correspondent, Jackie Northam. Thanks, Jackie.
NORTHAM: Thanks, Don. Transcript provided by NPR, Copyright NPR.
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