AYESHA RASCOE, HOST:
More on the U.S.-China talks taking place in Geneva this weekend. The two countries are aiming to reach an agreement to resolve their trade war. I'm joined now by James McGregor in the studio. He lived in China for 30 years and is the chairman of the Greater China region at APCO Worldwide, a global advisory firm. Good morning, and welcome to the show.
JAMES MCGREGOR: Oh, thanks for having me.
RASCOE: So can you give us a sense of what's at stake for the global economy in these talks?
MCGREGOR: Oh, my. Well, if - you know, if you look at the tension that's been built between the two countries, it's almost led to a trade embargo 'cause the tariffs are so high, and both countries are so important to the rest of the world. And so how do they work their way out of this? And the way the U.S. has approached China on this by threatening China and saying, if you don't lower your tariff by noon tomorrow, I'm going to give you another one. This is China. This isn't a small country. And that has kind of united China, that they're being threatened by this administration. And China can wait it out longer than the U.S. can. And so this administration knows that, and that's why they are having these talks now to try to de-escalate.
RASCOE: Well, what do you think will be China's position in these negotiations?
MCGREGOR: I think they're fact-finding. I think they want to find out what is Trump's end game. What does he really want from them? But I think they will not make a lot - I think we're going to see some de-escalation in tariffs, just as a nominal thing to keep talks going. The thing is, what kind of a big deal can be done? If you remember the first Trump administration, they did a Phase 1 trade deal. The president wanted very high numbers, so there was all this stuff built up on all the things China would buy, which they didn't - which they didn't fulfill, but I think...
RASCOE: Yeah.
MCGREGOR: ...Everybody knew they couldn't fulfill it when they were doing the deal. The question is the systems. In order to have a big trade deal with China, you got to reconcile an authoritarian capitalist system with a market-based capitalist system. And it's - that is something they couldn't address before, and it's going to be very hard to address now. How do these two countries do business together and work together with these very different systems, both of which are successful in their own way?
RASCOE: Well, you said that China could wait this out longer. How long do they have, and what type of pain is China feeling right now?
MCGREGOR: Well, there's a lot of small manufacturers who were doing good business with the U.S. who are now stopped and trying to figure out where they go. But I talked to some friends, and they said people are not really panicked because they've seen how the administration works. They make big threats, and then they back off. And they - and also they really feel like they're under assault. The vice president was not helpful by giving a speech where he talked about, you know, we buy from Chinese peasants and they lend us some money. When you're denigrating the Chinese people as peasants - this is a very sophisticated society now with advanced technologies and science. And so they're pretty united. And they've all been schooled on the hundred years of humiliation from the West and all that.
RASCOE: Well, how long do you think these negotiations will play out? Do you think we will get some sort of agreement or framework in the next week or two?
MCGREGOR: No.
RASCOE: No?
MCGREGOR: No.
RASCOE: (Laughter) No, not at all.
MCGREGOR: This could go on for a long, long time.
RASCOE: OK.
MCGREGOR: They're going to have to find a way to make it that you can do enough business while they have a long-term talk 'cause there is no quick deal to be done. Like, in order - if they want big numbers again, it's going to have to be Chinese investments in the U.S., which are quite blocked right now. But there's a lot of impediments to that 'cause - like Chinese EVs, you know, a third of the cars in Mexico in the last year have come from China. They're flooding the world. They're not coming here. If we allow Chinese companies to come here and manufacture their electric vehicles or any vehicles, like they did with the Japanese, you've got these problems with data. We have this connected car rule here. You can't have software that will send data out of the country and all that.
RASCOE: Well, what about the pressure that the Trump administration feels to get something done, especially with people concerned you're going to have empty shelves and things of that nature if these - if this keeps going?
MCGREGOR: China's watching that. China knows that, you know, Christmas orders come in August or September, and they know that this administration's got to do something before then because they can't have empty shelves. So China's actually in a pretty good spot in that regard.
RASCOE: And so what do you think that the U.S. will likely try to get out of this, or do you have any sense of it?
MCGREGOR: They want to save face. I think the Trump administration, maybe not the president himself, but they know that the way they've pushed China is not the optimal way to deal with that country. And so they want to save face. They want to say that, we've had a small victory here and we're working it out, you know, there's a good deal and all of that, and we're on our way. But to really come to a deal, it's going to take a long time, a long time, and a lot of changes. It is a reconciliation of two very different systems, and that's the problem. That's the global problem. China's system is different than everybody else, and when it leaves China, it can be very predatory because of all the subsidies and just the way the country works.
RASCOE: That's James McGregor from APCO Worldwide. Thank you so much for joining us.
MCGREGOR: Thank you. Transcript provided by NPR, Copyright NPR.
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