MARY LOUISE KELLY, HOST:
The Americans have headed home from China. This is after two days of talks aimed at heading off a trade war. But it is not clear the talks succeeded. No deal was reached, which means both sides could go right ahead and throw billions of dollars of tariffs at each other just as they have both been threatening. NPR's Anthony Kuhn has been covering these talks in Beijing. Hey, Anthony.
ANTHONY KUHN, BYLINE: Hey there, Mary Louise.
KELLY: So no deal - how is each side, the Chinese side and the American side, spinning this?
KUHN: Well, what the Chinese state media are saying is that the two sides had a frank discussion about issues including increasing U.S. exports to China, protecting intellectual property. And it said there is still a big gap between the two sides, and a lot more talks are needed. And the U.S. delegation left town here without saying a word about any outcome, which suggests that no deal was reached at all.
KELLY: Oh, really? So the U.S. side left with no final statement, no comment, no nothing.
KUHN: That's right. And we should mention that the U.S. delegation itself had very different views within it. It was led by Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, who are seen as sort of pro-business moderates compared to U.S. Trade Representative Robert Lighthizer and White House National Trade Council Director Peter Navarro, who are very tough critics of China and its economic policies.
KELLY: So divisions within the U.S. camp, it sounds like, and you say they left without a word. But we do know what the U.S. position was going in, and that is in part because somebody leaked an official document that outlined the U.S. position. What happened? What did this document say?
KUHN: This document calls for China to cut its trade surplus with the U.S. by $200 billion within two years, by the year 2020.
KELLY: Oh, wow.
KUHN: It also says that we the U.S. are going to restrict China's ability to purchase high-tech products in the U.S. And yet China is not allowed to retaliate or even challenge this move. The U.S. will not allow China to subsidize its own companies to make high-tech products.
KELLY: Just to remind people of the backdrop for these U.S. demands, the U.S. is accusing China of stealing American technology, of stealing American intellectual property, right?
KUHN: That's right. So that's why the U.S. wants to hit China with tariffs or ban it from purchasing this advanced technology from the U.S. So China therefore figures that if it can't get this stuff from the U.S., it's going to have to start making itself. And so it's devised a policy to do that called Made in China 2025.
KELLY: OK. What's the policy?
KUHN: The key here is that the government is going to offer subsidies to Chinese companies to develop things like artificial intelligence and self-driving cars and robots. The problem, though, is that when they start offering this free money, companies figure, well, we'll just try to get the subsidies and never mind if anyone wants to buy the products they make. And so they dump this glut of products on world markets. It crashes prices, and suddenly China becomes the world's largest manufacturer of things like solar panels or steel.
KELLY: So Anthony, what leverage does the U.S. have in this? If China wants to make its own high-tech products, can the U.S. prevent China from going high-tech?
KUHN: There are experts who really doubt that any economy can stop another one from catching up with it. They say the only real solution for the U.S. is to become just a more competitive economy, and that means they have to pour more funding into R&D and cutting-edge technology. And that's something that the U.S. has really been falling behind in recently.
KELLY: Well, so where do we go from here? We're ending the week with no deal, at least publicly announced, on the table. Does the prospect of a U.S.-China trade war become more vivid in the days to come?
KUHN: Well, without a deal, that raises the possibility somewhat that they might have to resort to tariffs, and nobody really wants a trade war. So the two sides said they will try to set up some sort of mechanism to work harder on this and resolve it through negotiations.
KELLY: Negotiations continue. That's NPR's Anthony Kuhn reporting from Beijing. Thanks, Anthony.
KUHN: You're welcome, Mary Louise. Transcript provided by NPR, Copyright NPR.