One reason to expect a U.S.-China trade agreement very soon is political considerations, according to Barshefsky. While President Trump threatens to raise tariffs to 25% on certain goods from China, such a high rate could cause him political problems in the U.S. because China’s retaliation would inflict economic pain on voters, she said. “He can say what he wants about who pays for tariffs, but it’s the importer who pays for the tariffs, consumers pay for the tariffs.” And so while a 10% tariff on Chinese goods is “absorbable” for the U.S., it has “hurt — it’s knocked a little bit off our growth.” But a 25% tariff is a “totally different gamble.”
As a former government trade official and an expert on China, Barshefsky continues to be concerned about the balance of economic relations with the U.S. Fielding a question from the audience about how the U.S. should respond to China’s increasing economic influence globally, she said the key thing is for the U.S. “to get its own house in order – China is secondary to that.” Countries “lead from strength” and not from “being number two or three or four, or being in a corrosive or eroded position.” The U.S. should “double down” investments in what she terms are its strengths – education, R&D, a large middle class, and “the alliance structure and its importance in the projection of U.S. power and values.” More could be added to this stripped-down list, she said, but the main point is to first “get done what has to be done, including infrastructure in the U.S., then, look at China.” Bulking up in the above areas would provide “a perfect counterpoint.”