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U.S.-Chinese Negotiators Begin Day 2 Of High-Stakes Trade Talks

RACHEL MARTIN, HOST:

Today the people who could end the U.S. trade war with China get in a room together. President Donald Trump is expected to meet with China's vice premier. This is the highest level negotiation since the start of December. But there's a fast approaching deadline here. In March, the Trump administration is set to further increase tariffs on $200 billion worth of Chinese goods. Economies in both countries have been impacted by the trade war. So what kind of effect would yet another escalation have on businesses? Arthur Kroeber advises Fortune 500 companies on trade. He is the head of research for Gavekal Dragonomics, a financial services firm based in Hong Kong. And he joins us this morning from our studios in New York.

Thanks for being with us.

ARTHUR KROEBER: Good morning - glad to be here.

MARTIN: Do you think these talks can avert the Trump administration's next stage of tariffs?

KROEBER: Well, not the talks that are going on today - it's a very complicated set of negotiations. And I think it's probably going to go right down to the wire at the end of February or beginning of March.

MARTIN: Why?

KROEBER: Because the U.S. is asking not only for moves by China to reduce the trade deficit but for - also for deep, structural reforms in the economy, to change its mechanisms of industrial policy and technology policies. And these are things that the Chinese aren't terribly interested in doing.

MARTIN: Do you think, though, that, ultimately, that's the right position for the administration to take if it wants to actually stop the intellectual property theft of China, that it needs to demand these larger structural changes? Or it's just a Band-Aid solution.

KROEBER: No, I think it makes sense. U.S. companies - and not just U.S. companies but companies from all over the world - have had serious problems with Chinese industrial policies and tech transfer policies for a long time and various other regulations that make it difficult to do business in China. So I think it's perfectly reasonable for the U.S. to apply a lot of pressure. But the issues are so complicated. I don't think it's terribly realistic to think that you'll get a full deal solving all of these problems in a matter of weeks.

MARTIN: What is the U.S. willing to concede in order to get those big, structural changes to China's economy?

KROEBER: Well, that's a really interesting question. I think from - if you look at this from the Chinese standpoint, they're concerned because the U.S. has put very high tariffs on a large number of Chinese goods and is threatening to put more on at a time the Chinese economy is slowing.

So from their standpoint, they need a deal under which these tariffs will be removed or rolled back either immediately or in a fairly short period of time. But from the U.S. perspective, the tariffs are really what brought China to the table. They're the leverage. So from their standpoint, this is something that, I think, would be very difficult to concede. And I think that's one of the big sticking points.

MARTIN: As I noted, it is your business to advise corporations about how to navigate this moment when it comes to the trade war between the U.S. and China. What are you saying right now?

KROEBER: Well, we're saying that it's all very confusing and complicated.

(LAUGHTER)

KROEBER: And the problem...

MARTIN: Which it has been.

KROEBER: Yeah. The problem is that there are deep structural problems that will take a long time to resolve. And you have President Trump, who's a very mercurial, volatile character, who might press for a deal very quickly for political reasons but a deal that would not necessarily address all of the underlying concerns.

MARTIN: Arthur Kroeber is head of research at the economics research firm Gavekal Dragonomics. Thanks so much for talking with us.

KROEBER: My pleasure. Transcript provided by NPR, Copyright NPR.