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Trump tariff plan sparks major backlash; China's president set to rule his country for life

Aired March 5, 2018 - 14:00   ET


CHRISTIANE AMANPOUR, CNN HOST, AMANPOUR: Tonight, could the president's policy of America First actually make America last as Trump's tough talk on

tariff sparks threats of retaliation from abroad. The former US Treasury Secretary Lawrence Summers joins me here in London.

Plus, the National People's Congress opens in Beijing with delegates expected to back the Chinese president's plan to effectively become leader

for life. I discuss the perils and the pitfalls with Sino scholars in the United States and in Beijing.

Good evening, everyone, and welcome to the program. I'm Christiane Amanpour in London.

President Trump's aggressive move on tariffs are gathering speed and sparking fears of a damaging trade war and of a backlash against the very

American workers that he has vowed to protect. Today, he says he's 100 percent not backing down.

The tariff already sparked the biggest backlash yet by his fellow Republican leaders and important members of his cabinet, many of whom are

publicly coming out against the plan to impose 25 percent tariffs on imported steel and 10 percent on aluminum.

The usually supportive "Wall Street Journal" calls it "the biggest blunder of his presidency." Senator Orrin Hatch says the tariffs are "a tax hike

the American people cannot afford." And the House Speaker Paul Ryan is urging the White House not to advance with this plan.

So, why is the president so keen? My guest today, Lawrence Summers, knows a lot about the economics of all of this and, of course, the presidential

decision-making that goes into these kinds of big issues. He served as treasury secretary for Bill Clinton and as director of the White House

National Economic Council in the Obama administration. And he's joining me right here. Welcome to the program.


AMANPOUR: Is this the beginning of a trade war or is it not as significant as some people are saying?

SUMMERS: There's real risks that this is going to set off a cycle of escalation and response that could usher in a new major stretch of

protectionism. At a moment when the global economy seemed like it was coming into the groove, this could be enough to knock it off out of that


AMANPOUR: Who are the biggest losers? I mean, he has vowed to protect the most vulnerable American workers. But we're hearing that American workers

are going to be the losers, Americans consumers.

SUMMERS: There are 50 times as many people in the United States who work in steel-using industries as there are in steel-producing industries.

Fifty times! And all of them are losing because the firms they work for are now going to have 25 percent more expensive inputs. That can't be rational


Americans buy products that are consumed with steel. We always talk about real incomes. That's how much you can buy with your wages. When you push

prices up with a tariff like this, you make those real wages go down.

And that is even before you take into account of what's going to happen when the rest of the world responds. It is no accident that stocks lost

$400 billion in the hour after this decision was announced. It is shooting our economy in the foot.

AMANPOUR: Well, I want to ask you to respond directly to what President Trump has tweeted. This is over the weekend.

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and

easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

Is that correct? Is a trade war easy to win?

SUMMERS: Any answer of that kind would get a failing grade - a failing grade in any introductory economics course in virtually any college in the

United States.

Why? Trade deficits are about how much you spend. If I run a trade deficit with my grocery store, I buy much more from my grocery store than I

sell to my grocery store. That doesn't mean my grocery store is exploiting me.

Something similar is true when the United States runs a trade deficit against another country. That's a confusion.

It's a further confusion to suppose that these tariffs are going to improve the trade deficit. As I said a moment ago, they're going to screw up the

exporting of sectors that are vastly larger than the sectors that are purportedly helped.

[14:05:00] Remember I said the stock market lost $400 billion. The gain for the steel companies were probably less than 1 percent of that $400

billion cost in the stock market. So, there is no rational construction on which this is a sensible policy.

People can argue about enforcing intellectual property more. People can argue about other countries who are unfairly subsidizing products. But

just say the words, national security tariff against Canada, that's all you need to know to understand that this is probably the most irrational

economic policy that any president has introduced in the last half-century.

AMANPOUR: Well, I was going to come to that because it has been enacted, or the plan is, on national security grounds. Now, you heard Republican

leaders say this is really not a good idea. You have heard all his national security cabinet members say don't do it.

SUMMERS: That's the key point. That is the key point. Often, we have arguments in our government about what we should do for national security,

what we shouldn't do. I have never seen a policy that was opposed by the secretary of defense strongly, introduced and then justified on national

security grounds.

This is indefensible. The damage that is going to be done to our Canadian allies, our European allies, our Brazilian allies is going to do much more

to hurt our national security.

Think about this, Christiane. The military uses 3 percent of our steel and we produce 70 percent of our steel in the United States and the rest comes

heavily from countries like Canada. So, what is the national security problem that is imagined here.

AMANPOUR: Well, I was going to say that this is what we're trying to grapple with because it's the very countries that are NATO allies and

others who are going to get hurt the most.

And Europe today - well, over the weekend has come out and said basically the following. The European Commission Chief Jean-Claude Junker has

responded to the EU tariffs saying that they're going to have to respond.


JEAN-CLAUDE JUNKER, EUROPEAN COMMISSION CHIEF: So, now we will also impose import tariffs. This is basically a stupid process. Apparently, we have

to do this, but we have to do it.

We will now impose tariffs on motorcycles of Harley-Davidson; on blue jeans, Levi's; on bourbon. We can also do stupid. We also have to be this



AMANPOUR: I mean, it's almost embarrassing.

SUMMERS: They're embarrassed - I mean, the rest of the world is used to disagreeing with United States. it's used to finding the United States a

bit of a bully. It's not used to the United States doing things that don't make any sense even on the terms in which they're advocating.

National security tariffs against Canada? Raising prices for 6.5 million workers?

AMANPOUR: Six and a half million workers you just said?

SUMMERS: Work in sectors that centrally use steel compared to about 150,000, 130,000 who work in the steel industry. So, people aren't used to

seeing the United States do things that are irrational on almost any measure.

AMANPOUR: And before I get to where you come in, as well as many other issues, the presidential decision-making, the cabinet decision-making, I

want to ask you about China because, clearly, the president has signaled during the campaign that he was going to get tough on China.

But, apparently, this actually doesn't hurt China because it -

SUMMERS: This is a pin prick to China because their exports go to places other than the United States. Sure, there's - I might or might not agree

on the details, but there's a case for more aggressive trade policies with respect to China, but that is not what this is.

This is a hurt-our-allies-first policy. That is the central principle behind -

AMANPOUR: Because the Chinese only export something like 2 percent -

SUMMERS: Two percent of their exports go to - we are 2 percent of their exports.

AMANPOUR: So, what goes into this kind of dramatic - and the "FT", which is a fairly center-right economic expert newspaper has said the president

has crossed a line and is "playing with fire." What goes into the discussions that are happening in cabinet room?

And we understand that, I think, Gary Cohn, one of the main economic leaders sort of threw up his hands in frustration to all the others and

said, where are your facts.

[14:10:00] SUMMERS: Look, I wasn't in the room. But from what I understand, this was driven by the president's rage over a whole set of

things, frustrations from investigations, frustrations from bad press that he was getting, frustrations that he hadn't been able to assert himself.

Never before has the president that I've known in the two administrations I was part of, five administrations I've followed closely, I've never seen a

major presidential announcement of a policy when there had not yet been a piece of paper produced by the administration defining what that policy was

and describing that policy.

This was presidential policy on a consequential global, national security issue made out of spasmodic anger. And when you make policies out of

spasmodic anger once, people worry that you're going to make them again. And that's part of the reason this is so troubling as you may make them in

areas that have to do with real war, not just trade war.

AMANPOUR: Well, sort of kind of what Paul Krugman, the opposite version of "The Wall Street Journal", but his take today from his columns. "In

themselves, these tariffs aren't that big a deal, but if there a sign of what future policy is going to look like, they're really, really bad."

SUMMERS: Yes. That's exactly right. In the grand scheme of our $17 trillion, $18 trillion economy, these tariffs aren't that much. And even

when they retaliate on $4 billion of product, that's really not that much relative to $17 trillion.

But that's how wars start. They start with small provocations on both sides and then there's escalation and it's very difficult to contain the

escalation. It's also very difficult to contain the perception of wild irrationality. And if you can have that once, you can have it again.

So, I was very troubled to see what had happened. There are other policies that the administration has proposed that I strongly oppose, the tax cuts,

for example. Those tax cuts, frankly, quite likely would've been legislated by a different Republican administration, if there had been a

different Republican administration in power.

But I cannot imagine any administration other than this one that would have engaged in these tariff policies. These policies -- economists like me are

always against protectionist policy, but this is really crazy dumb protectionism, even if you accepted, which I don't, the idea that

protectionism was a reasonable thing.

I'm very discouraged.

AMANPOUR: It is an extraordinary moment. Larry Summers, thank you so much. Former treasury secretary, thanks for being here.

So, as you heard, when it comes to trade, one country more than any other has been the target of Trump's rhetorical wrath, and that's China.

But my next guests tell me that the promised tariffs won't bother China much as we've been discussing. And, anyway, they, in China, are dealing

with much more important things like the proposal for the rubber stamp party Congress, which starts its new session today, to change the

constitution and lift all term limits on President Xi Jinping, effectively making him president for life.

Now, I've been talking to Minxin Pei. He is a Professor of Government at Claremont McKenna College in California and to Robert Lawrence Kuhn who is

is the author of "How China's Leaders Think" and he is host of a show on the government-run CCTV news channel in Beijing.

Gentlemen, welcome to you both. Let me start by asking you, Robert Lawrence Kuhn there in Beijing. From the Chinese government perspective,

these tariffs that the president of the United States has announced, how much does it concern Beijing?

ROBERT LAWRENCE KUHN, HOST, "CLOSER TO CHINA WITH R. L. KUHN " ON CCTV NEWS: Well, certainly, it's a concern, but I would call it a minor

annoyance as opposed to something extremely serious.

They have a lot on their plate here. The last thing they want is a trade war with the US, but they have to react to. If the US does something,

there has to be something that they will do in retaliation, but they will ratchet it down. They will signal, as you do, that they do not want to

accelerate this, but to save face and to be appropriate, they'll have to match up.

AMANPOUR: To you, Minxin Pei, how do you see this playing out?

MINXIN PEI, PROFESSOR OF GOVERNMENT, CLAREMONT MCKENNA COLLEGE: China is waiting for the other shoe to drop. Steel, aluminum tariffs will not

affect China a great deal.

China is watching what is going to happen with the so-called as 301 investigations. These investigations look into Chinese behavior regarding

intellectual property rights.

[14:15:01] If the investigations find China at fault of guilty of some practices, then the US has a wide range of options to punish China on the

trade front. If these things happen, then US-China trade war will take place.

Another thing I want to say is that US-China relations have turned a corner. This is a relationship that is headed to a long period of

confrontation (INAUDIBLE) relationships. So, what is going to happen on the trade front is part of a much larger picture of geopolitical rivalry,

if not competition.

AMANPOUR: Of course, this is happening in the atmosphere of the announcement last week that it looks like the term limits are going to be

lifted on the presidential terms and that this is going to be ratified this week, which could lead to President Xi being in office for life.

Is that what you expect? And why this change? They were very clear term limits that the past few presidents have adhered to?

KUHN: The event itself is less important than it seems. When Xi was appointed, core of the Central Committee of the party, and of the whole

party, as they say - in October 2016, when he was core, that effectively undermined the traditional collective leadership and put him in a much

superior position.

But this announcement, what it does, the intended consequences, is make it clear that he is going to be the one to see through his grand vision for

China 2050 and China 2035, this great modern socialized nation that they say, as they say, that's going to be prosperous, strong, democratic,

culturally advanced, harmonious and beautiful, if I got it all right.

And so, he wants to be the one to make that happen and, in the short term, to deal with the specific problems that China has to breakthrough interest

groups and to let anybody know that if they can think, they can wait him out for his next term, they are wrong because they can't.

AMANPOUR: Well, let me put that to Minxin Pei. I mean, what Robert Lawrence Kuhn has just said sounds all very benign and very much in the

greater interest of China and that it's no real big deal. How do you see it from your perch in California there, teaching government?

PEI: It is quite a big deal. In fact, Mr. Xi signaled his intention to break the term limits in October last year when he did not appoint a


First of all, this will really mess up the party's own term limit systems throughout the system. Let's remember that this is - the term limit

applies not just to the top person in the Chinese party state. It applies to everybody who is something in that system.

So, if the top leader does not have term limit, how are you going to persuade people throughout this hierarchy to retire after two terms. So,

there is likely to be a lot of confusion, resentment afterwards.

The other downside I see is that it is now all his show. If he can deliver, he will become China's most effective leader. But if he cannot

deliver in the next 5, 10 years, then it will be his whole responsibility.

AMANPOUR: So, let me ask you. "The Economist" in its cover article, this latest one, basically says the West got it wrong. They bet wrong on China.

They believe that it was going to move incrementally towards a more pluralistic political system and to a market economy, a much more open

economy, but they're also saying that, with this decision, China moves from autocracy to dictatorship. So, how would you sum up the type of leadership

we're about to see?

PEI: I don't care what kind of title you call Mr. Xi or what kind of label you apply to China. All we want to look at is the policies President

Xi has been pursuing, the direction in which China is moving.

I would say, if you look at the last 25 years, for roughly about 10, 15 years, China was more or less moving in the right direction. The society

was opening up. The economy was becoming more liberalized. And the engagement with the west, with the rest of the world was also moving in the

right direction.

You cannot say this about China for the last ten years or especially for the last five years when Chinese society is becoming more close, politics

is much more repressive and its foreign policy is creating a lot of tensions with the rest of world.

[14:20:00] So, if you look at those things, then you really have to ask that question, did the West get China wrong or is the direction China is

moving in both be good for China or for the rest of the world.

AMANPOUR: Robert Lawrence Kuhn, you clearly disagree.

KUHN: Well, first of all, I do think this is a big deal. We need to look at this in a more fine-grained manner. People seem to do it very coarse-

grained in terms of the political controls and political stringencies that have been put on society.

But you have to look at other things too. You have to look at the anti- poverty campaign where, under Xi Jinping, roughly - final 100 million people, about 30 million more to go by 2020. There won't be any more

extreme poverty in China.

You have to look at rule of law which is under appreciated in the West what is being done. It's not being done to supersede the party the way in the

US system, but for 99 percent of the people, the control of the courts is now away from the local party, the reform in the system in terms of the


There are many very specific things that are going on that are very good for China's development. So, it's important to look at both sides, the

political side which I agree with what the Minxin says, but there are many other positive things going on.

It's complex - China is a complex society. It now has one leader. And as we've said, he will be responsible for the successes and the failure.

There's no place else to look.

AMANPOUR: Well, what I'd like to do now is play you a piece of tape, some sound that was taken from President Trump addressing Republican donors over

the weekend.


DONALD J. TRUMP, PRESIDENT OF THE UNITED STATES: Don't forget China is great and Xi is a great gentleman. He's now president for life. President

for life! No, he's great. And look, he was able to do that. I think it's great. Maybe we'll have to give that a shot someday.


AMANPOUR: So, Minxin, do you think President Trump was joking or how do you read and analyze what President Trump said?

PEI: Well, I think, on the surface, he, obviously, was joking, but it certainly reflects some kind of admiration he has for strong leaders in

non-democratic systems. And this is consistent with his past rhetoric, past behavior toward the strong man in non-democratic systems. So, I'm not


AMANPOUR: And, Robert Lawrence Kuhn, how do you think that is being digested by President Xi and the leadership there?

KUHN: Well, I don't think they take President Trump's comments too seriously. Trump may have been joking, but he is obviously envious.

I think one has to be wary if one is in China if the only prominent person that gives applause to this new policy is Trump. So, China is not going to

be motivated one way or another by what Trump says. They have their own approach.

AMANPOUR: If this is also kind of hunky dory, why then do you think President Xi or the leadership, whoever it is, went so heavy-handed after

this announcement last week, I mean banning references to "Winnie-the-Pooh" because some people think his shape looks like that famous cartoon there,

banning references to the letter N, all these kinds of things that just bolster what's been going on, which is increasingly repressive,

increasingly anti-dissent, and an increasing collective - rather, an increasing surveillance state. Why go through banning those kind of - what

we think is silly?

KUHN: What I'm saying does not say that everything is hunky dory. What I'm saying is that there are two big sides to this picture. One are the

accomplishments that can happen, which a great many - a high percentage of the Chinese people support.

And the other side are the unintended consequences which is the brittleness of the system. China is super-sensitive to anything that affects its

leaders or the party and will jump.

They're very sensitive to what happened to the old Soviet Union. They have studied that very carefully and they will be extremely repressive to

anything that threatens the system.

And it's an experiment to see if that is possible, if you can have such absolute control and eliminate dissent and put anybody with a remote kind

of dissent in prison or whatever and restrict the media; and to do that at the same time that you're promoting innovation.

In the work report of the government today, there were two or three major sections on innovation. It was one of the biggest changes that China wants

to do in terms of universities and science and technology and freeing up businesses, eliminating red tape and bureaucracy. So, it's a huge program

to focus on innovation.

[14:25:14] Can you do that at the same time you're having this political control that you've described correctly? That is an unknown experiment.

It's the first time it's been tried.

AMANPOUR: And just to sum up, what concerns you most about Xi and his latest moves, Minxin?

PEI: My concern is that he has bet a great deal of his political capital, very hardline nationalistic foreign policy that does not take into account

the interests of the US, and how this policy has really put China and the US on the collision course and whether he can walk back from that policy.

Of course, he has enough political power to walk away from the policy, but he will also pay a huge cost. So, we are all waiting to see whether he can

make some strategic adjustment right now to avoid getting into a long-term conflict with the US.

AMANPOUR: Minxin Pei in California, Robert Lawrence Kuhn in Beijing, thank you both so much for joining me on this really important day.

PEI: Thank you.

AMANPOUR: Important indeed, not just for what it says about leadership in China and China's relationship with the rest of the world, but also, of

course, what will be the boomerang effect of President Trump's tariff announcements.

And that's it for our program tonight. And remember, you can always listen to our podcast, you can see us online at and follow me on

Facebook and Twitter. Thanks for watching. And goodbye from London.