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China’s trade-war revenge · The Front

• 0:03
  Speaker 1: From The Australian. Here's what's on the front. I'm Christa
• 0:06
  Speaker 1: naming it. It's Thursday, April seventeen, twenty twenty five. Half
• 0:12
  Speaker 1: of the international students enrolled at the Queensland University of
• 0:15
  Speaker 1: Technology were phantoms. The Australian is revealing today the university's
• 0:20
  Speaker 1: annual report shows the students never turned up to class
• 0:23
  Speaker 1: and then dropped out. But it's keeping mum on where
• 0:26
  Speaker 1: they came from and where they went. That exclusive story
• 0:30
  Speaker 1: is live right now at the Australian dot com dot au.
• 0:37
  Speaker 1: Chinese exporters peddling their wares at the world's biggest trade
• 0:40
  Speaker 1: fair have found a unique way of getting around the
• 0:43
  Speaker 1: White House's astronomical tariffs. And it's not the only way
• 0:47
  Speaker 1: they're exacting their revenge on their biggest market. Today, our
• 0:52
  Speaker 1: North Asia correspondent Will Glasgow unpacks why the factory of
• 0:55
  Speaker 1: the world isn't worried about the trade war.
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  Speaker 2: There's nothing a Chinese factory can't make. Let me tell you.
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  Speaker 3: The Secret has many Chinese supplies, but they just.
• 1:13
  Speaker 1: Stop a minute.
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  Speaker 4: Brooks Brother, a premium shirt bran from the States, actually
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  Speaker 4: produce most of their products on China.
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  Speaker 1: Does urble Lemon have OEO factories in China.
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  Speaker 5: Of course, yes, but because it's only five to ten dollars.
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  Speaker 1: For days, videos like these have flooded the TikTok feeds
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  Speaker 1: of American consumers. Chinese manufacturers and suppliers stand in front
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  Speaker 1: of vast workshops and stacked warehouses, and they claim to
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  Speaker 1: produce luxury clothing and accessories for some of the world's
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  Speaker 1: best known brands for a fraction of the cost.
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  Speaker 5: Our strongest suit is that we were the real OEM
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  Speaker 5: factory for those luxury brands.
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  Speaker 2: We know how to make them real, we know how
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  Speaker 2: to make them good.
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  Speaker 1: And they say they're prepared to cut the American public
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  Speaker 1: a deal. Buy direct from me, and I'll give you
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  Speaker 1: a good price.
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  Speaker 2: Ten dollars and ten dollars, oh, ten dollars.
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  Speaker 5: This need a were hot, If you'll need less contact
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  Speaker 5: with me. If you want to source both with good
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  Speaker 5: quality and low prices, ontape me.
• 2:15
  Speaker 1: The Americans are eating it up.
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  Speaker 3: They probably should have took this app away when they
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  Speaker 3: had the chance, because the Chinese manufacturers just hit them
• 2:23
  Speaker 3: folks with the Uno reverse.
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  Speaker 4: The Chinese manufacturers woke up and chose total violence today
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  Speaker 4: and I've never supported anything more in my life.
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  Speaker 2: What are the American companies going to do? Because they
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  Speaker 2: can't do.
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  Speaker 1: Anything, and some of the American TikTok creators have seized
• 2:40
  Speaker 1: the opportunity to boost their own profiles.
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  Speaker 4: Guys, if you like real Birkenstocks and you want them
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  Speaker 4: for super cheap, one tenth the price of normal, follow me.
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  Speaker 2: I'm gonna drop where I get them.
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  Speaker 4: And it was already just about to make a whole
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  Speaker 4: series talking about designer clothes and what they actually cost,
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  Speaker 4: So this would be great to amplify that.
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  Speaker 3: Listen, I don't know how this tariff thing is going
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  Speaker 3: to play out, but the way that the Chinese manufacturers
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  Speaker 3: are playing their hair absolutely well done, tends across the board.
• 3:10
  Speaker 1: The mockery of America by Chinese social and state media
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  Speaker 1: is just the latest in the escalating trade war between
• 3:16
  Speaker 1: the United States and China. In a few moments, I
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  Speaker 1: will sign a historic executive order instituting reciprocal tariffs on
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  Speaker 1: countries throughout the world.
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  Speaker 6: Reciprocal that means they do it to us, and we
• 3:30
  Speaker 6: do it to them.
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  Speaker 3: Beijing not backing down in the face of Washington's latest tariffs,
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  Speaker 3: imposing an additional eighty four.
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  Speaker 1: Percent levy on the US starting from tomorrow.
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  Speaker 7: Donald Trump says he is open to talks with Chinese
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  Speaker 7: President Shijing Ping after imposing an even higher tariff of
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  Speaker 7: one hundred and twenty five percent on China.
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  Speaker 3: Word China is now ratcheting up its tariffs on American
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  Speaker 3: goods to one hundred and twenty five percent.
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  Speaker 1: Just in the last few moments, the BBC has confirmed
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  Speaker 1: that US tariffs against China add up to one hundred
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  Speaker 1: and forty five percent. And it's the manufacturers who are
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  Speaker 1: exacting revenge or trying to survive, depending on who you ask.
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  Speaker 6: A great channel is just a euphemistic way of saying
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  Speaker 6: an illegal channel, right, This is to get a good
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  Speaker 6: made in China into America without paying the tariffs.
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  Speaker 1: Will Glasgow is the Australian's North Asia correspondent. I caught
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  Speaker 1: him on a break from the Canton Fair in Guangzhoo.
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  Speaker 1: It's the largest trade fair of its kind on the
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  Speaker 1: planet and a kind of barometer for China's performance in
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  Speaker 1: the global marketplace.
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  Speaker 6: An example of that that I was told by a
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  Speaker 6: maker of massage machines America is the biggest market for
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  Speaker 6: his factory.
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  Speaker 2: Tied with South Korea, and so.
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  Speaker 6: The workaround that he's got for his business going forward
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  Speaker 6: is they're just looking for a partner in Vietnam. Now,
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  Speaker 6: I thought that meant and asked him, you mean you're
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  Speaker 6: going to set up a factory in Vietnam, and he said, no,
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  Speaker 6: we're just going to get a partner and we'll send
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  Speaker 6: them the stuff and then they'll put them in a
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  Speaker 6: different box and right made in Vietnam and then send
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  Speaker 6: it into America. So that's a very brazen grade channel.
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  Speaker 6: I had heard that was going on. I've heard rumors
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  Speaker 6: of that and seen reports of that. To have someone
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  Speaker 6: tell me that so directly is pretty incredible. He said
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  Speaker 6: that same arrangement is going on across the country with
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  Speaker 6: a whole bunch of different Chinese factory makers as they
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  Speaker 6: look for ways to work around Trump Administration's tariffs.
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  Speaker 1: The Trump administration has said it'll crack down on countries
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  Speaker 1: that facilitate this passage of Chinese products into the US
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  Speaker 1: via these grade channels as you've described them. Has it
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  Speaker 1: said how it plans to do that.
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  Speaker 6: The President at times has just complained about that rather
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  Speaker 6: than explaining how he would go about stopping it. And
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  Speaker 6: the most detail, and it's not much detail at all,
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  Speaker 6: was from his trade advisor Piternovaro, who said, in essence,
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  Speaker 6: if you do that, countries like Vietnam, we will punishue
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  Speaker 6: with high tariffs. It's possible after the ninety days have
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  Speaker 6: passed that in an effort to close this channel down,
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  Speaker 6: Vietnam gets higher tariffs.
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  Speaker 2: That could happen.
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  Speaker 6: That would mean the channel wouldn't exist anymore. Right, they
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  Speaker 6: could just collect the tariff from Vietnam. There wouldn't be
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  Speaker 6: any incentive for the Chinese company to do that.
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  Speaker 2: But if the model's not.
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  Speaker 6: Actually moving a factory, it's just finding someone to receive
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  Speaker 6: the good and then change the label and send it on. Obviously,
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  Speaker 6: you could imagine the American administration just ending up in
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  Speaker 6: a whack a mole exercise. So it does show the
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  Speaker 6: real complexity for the Americans in enforcing this, and of
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  Speaker 6: course it's hard to see how this could function with
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  Speaker 6: that a huge increase in the amount of staff that
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  Speaker 6: the American customs have to try to determine their origin
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  Speaker 6: because they'll be applying different tariffs based on the country
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  Speaker 6: of manufacture.
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  Speaker 1: Officially, around fifteen percent of China's exports go to the
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  Speaker 1: United States, but it also sends partially finished goods to
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  Speaker 1: regions like Southeast Asia and Mexico who add the bells
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  Speaker 1: and whistles and then sell those products into the US market.
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  Speaker 1: Top officials say they're not concerned if that evaporates, because
• 7:33
  Speaker 1: they'll just diversify their foreign trade. But Will says there's
• 7:36
  Speaker 1: a lot more at stake than Beijing is letting on.
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  Speaker 2: Oh.
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  Speaker 6: Look, privately it's definitely worried, but publicly it's presenting a confident,
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  Speaker 6: unruffled demeanor.
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  Speaker 2: Now the trade data shows that's lunatic. Right.
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  Speaker 6: America is the biggest trade destination for Chinese goods. So yes,
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  Speaker 6: they're getting on doing business with everybody and trying to grow.
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  Speaker 2: Those are the markets.
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  Speaker 6: But they can't just grow so much that one fifth
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  Speaker 6: or thereabouts.
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  Speaker 2: From America wouldn't hurt, right.
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  Speaker 6: But by speaking to the factory owners themselves, this stuff matters,
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  Speaker 6: and you wouldn't be taking that risk unless the market
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  Speaker 6: really mattered and there was big profit to be made,
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  Speaker 6: you know.
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  Speaker 1: And the thing is, it's Chinese workers who'll bear the
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  Speaker 1: brunt if it all goes south.
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  Speaker 6: The research for analysts at Goldman Sachs estimate between ten
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  Speaker 6: to twenty million workers in China are vulnerable to or
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  Speaker 6: whose jobs are very much determined by Chinese trade into America.
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  Speaker 2: So that's a huge number.
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  Speaker 6: Now, of course, China is an enormous country, but it's
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  Speaker 6: not nothing, and unemployment here has already been ticking up because.
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  Speaker 2: Of broader economics slowdown and.
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  Speaker 6: Other problems in the property sector that.
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  Speaker 2: Have gone on for years.
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  Speaker 6: So job losses increase because of trade troubles with China's
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  Speaker 6: biggest partner won't help again. China wants to project confidence
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  Speaker 6: because it doesn't want to be forced into negotiating with America,
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  Speaker 6: and it doesn't want Trump thinking that it's vulnerable and weak,
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  Speaker 6: so it needs to make a deal. So it's trying
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  Speaker 6: to show the opposite. And right now you see quite
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  Speaker 6: a gap between the confidence of the Chinese government and
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  Speaker 6: the real world lives of the business people that's speaking.
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  Speaker 1: About coming up while Chinese vendors are confident Trump's tariffs
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  Speaker 1: won't stick. On Monday, President Hi Jimping touchdown in Vietnam,
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  Speaker 1: the later stop on his tour of Southeast Asia. It's
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  Speaker 1: part of Beijing's efforts to promote China as a defender
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  Speaker 1: of international trade. The Chinese capital government officials are drawing
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  Speaker 1: up plans to hit America where it hurts. Here's will Glasgow.
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  Speaker 6: This is one they've identified as a real superpower that
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  Speaker 6: Chinese have. They dominate the production of heavy rare earth minerals.
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  Speaker 6: These businesses are very environmentally damaging. The margins allows the
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  Speaker 6: often you have to put a lot of investment to
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  Speaker 6: make not very much, so that's been the reason only
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  Speaker 6: China's had it and no one else has. But there's
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  Speaker 6: huge strategic advantage will benefit to them because without them,
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  Speaker 6: a whole bunch of industries can't work. So some of
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  Speaker 6: what Beijing's rolled out is a regime that allows it
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  Speaker 6: to restrict. It hasn't yet announced or implemented a restriction
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  Speaker 6: on these things to America, but it's giving itself a
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  Speaker 6: regime to allow that. So it can really hurt the
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  Speaker 6: American economy if it pressed goal on that. And these
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  Speaker 6: are inputs that America's car industry literally couldn't operate without.
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  Speaker 6: Its evs couldn't function without. Even its fighter jets could
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  Speaker 6: be built and operated. So you can imagine just a
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  Speaker 6: huge economic knock on effect if Beijing press go on that.
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  Speaker 2: And it's a.
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  Speaker 6: Real clear example of China trying to give itself leverage
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  Speaker 6: in this ongoing trade tussle with America.
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  Speaker 1: But getting the Trump administration back to the negotiating table
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  Speaker 1: might be more difficult than the Chinese Communist Party anticipated.
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  Speaker 1: On Tuesday, White House Press Secretary Caroline leave It read
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  Speaker 1: verbatim this statement from the President.
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  Speaker 5: Look, the President has made his position on China quite clear,
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  Speaker 5: although I do have an additional statement that he just
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  Speaker 5: shared with me in the Oval Office. The ball is
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  Speaker 5: in China's court. China needs to make a deal with us.
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  Speaker 5: We don't have to make a deal with them. There's
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  Speaker 5: no difference between China and any other country, except they
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  Speaker 5: are much larger. And China wants what we have. What
• 12:00
  Speaker 5: every country wants what we have the American consumer, or
• 12:04
  Speaker 5: to put in another way, they need our money.
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  Speaker 1: Still, the Chinese manufacturers spooking their wares at the Canton
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  Speaker 1: Fair this week are feeling confident their government's brand of
• 12:14
  Speaker 1: hardball could just.
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  Speaker 6: Work for these manufacturers. They've been in this business for decades,
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  Speaker 6: and the supply chain down here in Guangdong and the
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  Speaker 6: south of China, and this is called the factory of
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  Speaker 6: the world, it's just extraordinary that they're set up down here.
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  Speaker 6: It's such a sophisticated, huge operation, but all run on
• 12:34
  Speaker 6: tiny margins. The only way it works is by a
• 12:37
  Speaker 6: huge volume that they turn out. But in essence, it's
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  Speaker 6: a business model that makes absolutely no sense in America.
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  Speaker 2: This is what the manufacturers are all very aware of.
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  Speaker 6: And then from that comes a confidence that he's going
• 12:51
  Speaker 6: to have to walk it back. That's very much been
• 12:53
  Speaker 6: emboldened by the carve out he's given.
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  Speaker 2: Smartphones and laptops.
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  Speaker 6: While I don't see see a lot of this business
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  Speaker 6: coming back to America, in fact, I see almost none
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  Speaker 6: of it.
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  Speaker 2: The margins make no sense.
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  Speaker 6: If the president did keep a regime where tariffs and
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  Speaker 6: China were very high, but on say Vietnam, Indonesia, Mexico,
• 13:15
  Speaker 6: other countries with lower labor costs, they were lower or
• 13:18
  Speaker 6: stayed where they are right now. And if in addition
• 13:20
  Speaker 6: to this, he got the tools, however, he would do
• 13:24
  Speaker 6: this to stop to crack down on those grade channels.
• 13:28
  Speaker 6: If he could crack down on that, then if he
• 13:31
  Speaker 6: can stick to it. With the passage of years, as
• 13:34
  Speaker 6: people look to replace factories, it seems inevitable that things
• 13:38
  Speaker 6: would move from China into other parts. But right now,
• 13:42
  Speaker 6: the great comfort the people in the guangzul trades world
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  Speaker 6: see is that predictability and long term thinking is not
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  Speaker 6: what they're seeing coming out of Trump's White House, and
• 13:53
  Speaker 6: they just don't see a smart, long term plan to
• 13:57
  Speaker 6: replace them. For now, he hasn't convinced that he's serious
• 14:00
  Speaker 6: enough about doing it, But ultimately that's his decision and
• 14:03
  Speaker 6: it's going to depend a lot on how American consumers behave.
• 14:17
  Speaker 1: Will Glasgow is The Australian's North Asia correspondent. You can
• 14:21
  Speaker 1: read all his reporting and analysis of China's trade moves
• 14:24
  Speaker 1: right now at the Australian dot com dot au