'China Has Some Tough Decisions to Make' says Former U.S. Trade Negotiator

Interview on MSNBC's "For Facts' Sake"

Wendy Cutler on MSNBC talking about US-China trade tensions.

Following is a transcript of a television interview that Wendy Cutler gave to MSNBC.

MSNBC: Joining us now to take a closer look is Wendy Cutler, former Acting Deputy U.S. Trade Representative, involved in the negotiations for the Trans-Pacific Partnership, which the U.S. has pulled out of. She’s currently Vice President of the Asia Society Policy Institute. Wendy, thank you for being with us.

Wendy Cutler: Thank you.

MSNBC:The fear Americans have right now is that the President seems ready to impose tariffs on the remainder of all U.S. imports from China. China doesn’t import as much stuff—its goods or services—that they can even put countervailing tariffs on, so what happens next?

Cutler: China has a range of options, but no easy decisions to make. As you mentioned, the U.S. is on the cusp of imposing another $200 billion worth of sanctions, and China’s responded with only $60 billion worth of tariffs. But the question is ‘How will China augment that?’ and ‘Will they?’ And they have a number of options: Number one, they could impose even higher tariffs on that $60 billion so, instead of applying, for example, a 25 percent tariff, they could double it to a 50 percent tariff. They could also start harassing our companies by delaying their shipments at the border, by rejecting their applications for mergers, [by] stepping up regulatory inspections in plants. They could also instruct a boycott of U.S. products in China. So, they have a range of options, but the key is that these aren’t easy decisions for China, because many of these decisions will hurt China as well.

And we’re China’s biggest customer, so China has constraints that are different from the U.S. constraints.

MSNBC: There’s also a diplomatic issue, right? We’ve got this ongoing thing with North Korea and the President, on any given week, either compliments China for its help in coming to terms with North Korea or criticizes China for not doing enough. But the bottom line is China, by most people, is accepted to be a pretty strong leverage point with North Korea.

Cutler: Correct. And we need China’s help with respect to North Korea. That’s one of the reasons in the past that the President was very effective with North Korea. And now there’s questions whether China’s even still imposing the sanctions it agreed to impose against North Korea with the same vigor. And many people believe this is all attached: you have a relationship with a country and it’s hard to cabin off the effects of a trade war [from] other issues.

MSNBC:  And look, I certainly don’t want to minimize the things that everybody agrees China does that aren’t right on the trade front, and should be fixed. I do worry about the fact that China is one of the biggest holders of U.S. currency, U.S. bonds. If China were to decide to do something else with those and sell them, that would put downward pressure on the U.S. dollar, or would it?

Cutler:  I mean, it would have adverse impact on the U.S. economy for sure, but let’s keep in mind that it would also hurt China. So, I don’t think China’s going to go down that route. I think they have many other options besides that route, and they’ll want to find a measure that is not going to hurt them as much or more than it will hurt the U.S.