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♪ ♪>>NARRATOR: Tonight…>>The trade tensions
are flaring up between the U.S. and China.>>NARRATOR: With President
Trump upping the pressure for a trade deal with China…>>President Trump announcing
plans to increase tariffs on billions of dollars worth
of Chinese goods…>>NARRATOR: “Frontline”
and NPR correspondent Laura Sullivan investigate…>>China is going to be number
one market from any perspective.>>SULLIVAN: For G.E.
or for everybody?>>For everybody.>>NARRATOR: …the forces
behind the conflict…>>We’re not in a trade war;
we’re in a techonomic war.>>NARRATOR: …both here and
abroad…>>This is a great power
struggle.>>SULLIVAN: Do you think that
Americans should be worried?>>Oh, yes, I think so.>>NARRATOR:
…and what’s at stake.>>Tariffs announced
by the Trump administration.>>China is now punching back.>>China has a ten-year,
a 20-year, a 50-year plan.>>They’ve outsmarted us. They’ve done some things
that we don’t agree with. We’ve got to fix our system
to compete with China.>>We do have a chance to see
the new cold war. I think it’s a comprehensive
confrontation. That’s dangerous.>>NARRATOR: Tonight on
“Frontline,” “Trump’s Trade War.” ♪ ♪>>Wow, that’s great. Yay!>>Air Force One landing at the Palm Beach International
In April 2017, President Trump headed
to Mar-a-Lago for the most important
diplomatic meeting of his early presidency.>>The key to Mar-a-Lago is,
once Trump got there, as often he does, he finally
focused on the schedule.>>A very large delegation of almost every relevant Cabinet
member…>>And said, “Hey, why are we
having these big meetings? I want to spend as much
one-on-one time as possible.”>>First one president arrives,
and then another.>>SULLIVAN: Within hours,
President Xi of China was on the ground,
bringing together the leaders of the world’s two largest
economies.>>One of the things that
President Trump believes– he believes in this totally– is that personal relationships
of great powers can make a difference.>>The presidents face-to-face
for the first time. (cameras clicking)>>Thank you, everybody.
Thank you.>>There was a lot of time in
the schedule with them literally one-on-one,
being together and creating the relationship
that the, the two big economies needed to have with each other.>>SULLIVAN: The leaders seemed
to connect. And so did the families.>>We wanted to make you feel at
>>Nihao.>>Hello, how are you?>>That summit was important, because the two leaders
established a strong personal relationship. I think the image is that
the two leaders sit together, and two family actually sit
together. President Xi and his wife
had a very good interaction with President Trump.>>We’ve had a long discussion
already, and so far, I have gotten
nothing, absolutely nothing. But we have developed a
friendship, I can see that.>>Come on, thank you,
thank you.>>We say, “Okay, you see,
President Trump is a president that we can work with, and he is
someone that we can talk to. He’s a reasonable leader, and maybe he can do something the ordinary conventional U.S.
leader won’t do.” So the expectation was very
high, and the hope was, maybe they can control
the situation and they can work together
to solve the problem gradually.>>Thank you.>>SULLIVAN: But long-standing
problems between the countries were
reaching a crisis. And despite the promising start
and all the optimism…>>I believe lots of very
potentially bad problems will be going away.>>SULLIVAN: …within a year,
Trump would turn on Xi, imposing billions of dollars
in tariffs and leading the United States
into a perilous confrontation.>>The fights were nasty
that came out of Mar-a-Lago. The most intense fights and
debates in the White House were about this issue
of tariffs, but tariffs as a proxy
to the great economic war with China that
we’re engaged in. There’s no middle ground. One side’s going to win,
and one side’s going to lose. And so we knew the stakes
were high. ♪ ♪ (cameras clicking)>>On the frontline of the
rapidly escalating trade war, American companies are bracing
for battle.>>SULLIVAN: Last fall, I headed
to southwestern Ohio. President Trump had fired the
first shots in his trade war with tariffs on a wide array of
imported Chinese goods, from electronics to furniture
to steel.>>President Trump turns up the
heat on China.>>SULLIVAN: I wanted to see
first-hand how these tariffs were playing out on the ground.>>As things come to a boiling
point between the two largest economies in the world, tariffs are now hitting
too close too home.>>SULLIVAN: Trump claimed the
tariffs would help American workers,
boost U.S. businesses, and bring life back to places
like this, which for decades had been hurt
by automation and, more recently,
imports from China.>>President Trump says he’s
keeping a campaign promise to bring back
steel-industry jobs.>>On the streets of Middletown, the signs of economic struggle
are everywhere.>>SULLIVAN: The tariffs on
imported steel were particularly welcome news
to struggling communities like Middletown, where I met up
with some steelworkers at a local coffee shop.>>There used to be a mall down
here. We had three city parks and
three city pools, and now there’s none.>>SULLIVAN: What did you think
when you first heard that Trump was putting tariffs
on steel?>>I thought it was, you know,
it was about time. I’ve watched the, the farmers
get their subsidies. I’ve watched the banks bailout,
the automotive-industry bailout, and I’ve just watched us
wither on the vine for the last 30 years.>>SULLIVAN: Do you think it’s
going to help the town? Do you think it’s going to help
your hometowns?>>Sure.
>>Absolutely.>>SULLIVAN: What are you
expecting to see?>>Everybody always talks about
jobs and America, and we hear that all the time. We want to see that, that
reality happen. You know, you can’t just depend
on foreign countries for, for steel. We’ve got to make it in
the United States.>>We just want China to play
by the rules.>>Right.
>>That’s it. We don’t, we don’t want
a bailout.>>SULLIVAN: So you’re saying
it’s not that you want your industry propped up?
>>No, not at all.>>SULLIVAN: You want your
industry…>>A level playing field.>>SULLIVAN: You want a level
playing field.>>That’s all we want.>>SULLIVAN: But using tariffs
to level the playing field has a flip side. They’ve brought unwelcome
consequences for many other U.S. businesses. I saw that not far
from Middletown.>>The state of Ohio could be
the hardest hit by this looming trade war with America’s biggest
trading partner.>>SULLIVAN: At Industrial Tube
and Steel, Damon Gaynor is in the business
of buying and reselling steel.>>We buy from a bunch
of steel mills. Our main bread and butter
is distributing steel tubing.>>SULLIVAN: Trump’s tariffs on
imported steel– essentially a 25% tax– ended up raising the price of
American steel, too. And that sent Gaynor’s costs
skyrocketing. So how did you handle that? Did you guys eat that, or did
the customers eat it?>>See, that’s the hard part. We just have to pass it along
to the customer, our customer has to pass it
along to their customer, and so on, down the chain.>>SULLIVAN: Do you think that
there’ll be a point, though, where the, the end
consumer will just say, “I, I can’t afford this,
this is too expensive”?>>Yeah, I, I think there’s
always that risk, and that’s the thing with
tariffs is, are you kind of artificially
messing with the price of, you know, what the market
dictates?>>SULLIVAN: And what people
will be willing to pay.>>And what people will be
willing to pay. Yeah, absolutely. And I think that’s the question
with tariffs. Is it going to do good,
or is it going to do bad?>>SULLIVAN: Manufacturers like
Shepherd Chemical were also hit hard by the tariffs, especially when China retaliated
with tariffs of its own.>>So all these tanks around
here produce various metal carboxylates.>>SULLIVAN: C.E.O. Tom Shepherd
sells products to China, and he also imports raw
materials from China.>>Our sales to China
have gone down, and our raw materials from China
have increased in cost.>>SULLIVAN: How big of a
problem is that for you?>>Several million dollars of,
of profit lost, in a year.>>SULLIVAN: Okay. Yeah, you’re
getting it from all sides, then.>>Yeah, that’s right. If what we’re trying to do is
protect the American economy, this is a bad way to do it.>>SULLIVAN: But despite the
uneven consequences, President Trump was all in
on the tariff strategy. It’s a strategy he’s been
talking about for years, as far back as the late 1980s, when he first tested
the possibility of becoming president.>>Our guest, the famed
developer Donald Trump of New York…>>SULLIVAN: Back then, Trump’s
target was Japan and its trade practices.>>The fact is that you don’t
have free trade. We think of it as free trade, but you right now don’t have
free trade. And I think lot of people are
tired of watching other countries
ripping off the United States. This is a great country.>>He believed from the
beginning that there’s really nothing
worse than being laughed at.>>They laugh at us behind our
backs, they laugh at us, because of our own stupidity.>>And he came to see the
Japanese as laughing at the United States and taking
advantage of the United States by stealing the jobs,
by dumping product here.>>We let Japan come in and dump
everything right into our markets and everything. It’s not free trade. If you ever go to Japan right
now and try to sell something, forget about it, Oprah, just
forget about it, it’s almost impossible.>>SULLIVAN: After Japan’s
economy cratered, Trump shifted his ire to a
rising economic power, China.>>They are ripping us like
we’ve never been ripped before. If you look at Japan,
if you look at China, where we lose $100 billion
a year with China…>>He’s been saying the same
thing for 30 years. Donald Trump has a very binary
view of life and certainly of the world. And, and so to confront China, which he perceives as America’s
most important and dangerous rival, and to be
able to use blunt instruments against them, and to come out
and at least be able to say that you are a winner
and they are a loser, there’s, it’s hard to imagine
anything more appealing to the core of his personality.>>Please welcome the next
president of the United States, Mr. Donald J. Trump. (people applauding and cheering)>>SULLIVAN: By 2016, Trump’s
message had finally found an audience. And his focus on trade
and China had found its moment.>>First time I ever met Trump,
I was, you know, coming out of Goldman Sachs,
and, and being somebody that had been in finance for a
number of years, I was set to be unimpressed. I was actually very impressed. Now, he didn’t know a lot of
details. He knew almost no policy. But what I found most
extraordinary was, when we got to the section on
China, which I kind of threw out there, of a two-hour meeting, almost 30
minutes or more was all about China.>>We have a $500 billion
deficit, trade deficit with China.>>And you’ve got to remember, a
lot of this he was just reciting everything he’d heard
from Lou Dobbs.>>We’re talking about a trade
deficit of $315 billion last year with the Chinese.>>He’s been a guy that’s
watched Lou Dobbs for 30 or 40 years. And the only thing he had formed
as a worldview was China.>>Because we can’t continue to
allow China to rape our country, and that’s what they’re doing. It’s the greatest theft
in the history of the world.>>He talked in this kind of
vernacular that, that kind of hit people
in the, in the gut, and particularly when he talked
about trade and jobs and jobs shifting overseas.>>SULLIVAN: What was his
message to these people on trade?
“China’s to blame”?>>Yeah, the message’s
very simple, is that, “The elite shipped the jobs
overseas, and I’m going to bring
them back.”>>Thank you, Indiana.>>SULLIVAN: That message helped
propel Trump to the presidency. And once there, he assembled
his team of advisers on trade. To oversee economic policy, he brought in the former
president of Goldman Sachs, Gary Cohn.>>The job I had
in the White House was to convene everyone who
basically had an opinion on an economic topic,
and try and come up with a recommendation or two,
or present to the president completely diametrically opposed
opinions and allow the president
to make a decision.>>In the Roosevelt Room,
we would have a trade meeting every Tuesday, and then we would
take some version of that into the Oval
in a smaller group. If you take all the other
nastiness on the things like
the Paris Accord and TPP, all this other stuff,
roll it up, and put it to the factor of ten, they don’t compare to these
weekly nasty trade meetings. ♪ ♪>>SULLIVAN: From the start, the
weekly trade meetings surfaced deep divisions among Trump’s
advisers over how to deal with rising economic tensions
with China. The two camps came to be known
as the globalists and the nationalists. On the one side, the globalists
included former Wall Street executives
like Gary Cohn and Steve Mnuchin. On the other side, the
nationalists included Bannon, along with Robert Lighthizer
and Peter Navarro, a hawkish economist whose film
“Death by China” caught Trump’s attention.>>One of the most urgent
problems facing America, its increasingly destructive
trade relationship with a rapidly rising China.>>SULLIVAN: The two camps
disagreed sharply over whether aggressive measures
like tariffs would help or hurt the American economy.>>We had a mindset that to be a
great power, you know, it wasn’t just
your military. You had to be a great economic
power. And a great power had to be
built upon, had to be built upon
a great manufacturing base. To “make America great again,” you’ve got to bring
manufacturing back to the country.>>SULLIVAN: Some of the people
that are very pro-tariff right now make an argument that
the United States has lost its manufacturing base, and that this is actually real
people’s lives at stake here.>>Well, the data would show manufacturing jobs have gone
down in the United States, so I understand where they’re
saying there. The flip side is,
factory output, or what we produce in the United
States, has actually gone up. There’s this thing called
technology that’s happened
in the United States. Factories have changed. But we have also created
millions upon millions of jobs in new industries that didn’t
exist 20 years ago.>>SULLIVAN: The split between
globalists and nationalists was about more than just
industrial policy. It reflected a fundamental
difference over how best to confront China
and what each saw as the endgame.>>The nationalists said,
“This is a great hegemonic, you know, great-power struggle.” It’s definitely two systems that
couldn’t be more radically different, right, and, and one of these
two are going to win. We need not just a trade deal, we need fundamental structural
changes in your economy.>>SULLIVAN: Some of your former
colleagues have sat exactly where you are and said, “This is a winner-takes-all
situation.”>>Yeah, I, I understand that, and that’s the nationalist
versus the globalist.>>SULLIVAN: Yeah.
>>The globalist, okay. As a globalist,
as a market practitioner, I think that we can have a globalized world
that works well. The question is, “Can we both be
complementary to each other?” I think the answer is yes.>>These arguments would get
quite personal. We would get through
the facts quickly, because the two sides are just
never going to agree what the facts are. Then it would get,
then it would get personal.>>From time to time, there were
people that tried to use un-footnoted,
undocumented facts. It’s my job to get rid of the
undocumented, un-footnoted facts, and make
sure that those don’t enter the Oval Office.>>And a couple of times,
we had blowups. I mean, there was a blowup in
the Oval Office that Kelly had to… we kind
of… the first couple of days
General Kelly was there, we had to exit and go back into
the Roosevelt Room, and it’s kind of a, it’s kind
of, uh, in-your-face with a couple of people.>>SULLIVAN: Where was Trump
while these two parties are on different sides of this?>>He has a default position. His default position is,
you know, “Build the wall.” His default position is, “Engage, engage China
in the economic war.” You know, “Get tariffs,” but he’s going to let you fight
it out.>>President Donald Trump
arrived in China for his first official
visit there.>>SULLIVAN: With the battle
between the two camps playing out, Trump headed
to Beijing in November 2017. It was a royal welcoming… (band playing march) …filled with pomp and
ceremony, and the two leaders seemed ready
to work together. (band continues playing) Their negotiators agreed
on a plan for China to buy billions of dollars
in U.S. products, like beef and natural gas. ♪ ♪ But behind the celebrations, Trump’s nationalists had devised
a different plan.>>We had a couple of tricks up
our sleeves. Navarro and I start to dust off
the, the secret weapon we had, to call a national security
emergency, kind of what we’re doing
on the border right now. (people applauding) To use the national security
emergency powers that are invested
in the Defense Department to really start to go after
steel, aluminum, maybe autos,
but eventually technology. It’s time to get it on.>>SULLIVAN: By March 2018, the
president was ready to take action.>>Thank you very much,
everyone. We have with us the biggest
steel companies in the United States. They used to be a lot bigger, but they’re going to be a lot
bigger again.>>SULLIVAN: Executives from the
steel and aluminum industries were hastily gathered
in Washington.>>They were all called to the
White House, had the meeting. And at that time, the president
announced what he was going to do.>>Next week, we’ll be imposing
tariffs on steel imports and tariffs on aluminum imports.>>SULLIVAN: What was the
reaction?>>The reaction was surprise.>>It will be 25% for steel. It will be ten percent
for aluminum.>>This moment was a seminal
moment in trade policy, because it’s the most
aggressive use of this kind of trade law
approach ever. This is done under the theory
of national security.>>And we need it.
We need it even for defense. If you think, I mean,
we need itfor defense. We need great steelmakers.>>Steel was important to our
national security broadly. Military, critical
infrastructure, and the economy as a whole. And that had never been done
before.>>Thank you very much,
everybody, thank you. Thank you very much.>>SULLIVAN:
The sweeping steel tariffs also surprised America’s closest
allies. It turns out, those tariffs hurt
U.S. allies more than China. That’s because allies like
Canada sell much more steel to the U.S. than China does. At the State Department,
the top China specialist quickly started getting
complaints. What were some of the United
States’ allies saying?>>Well, certainly the allies
were very much taken aback that they were the target
of the steel tariffs. They don’t understand the focus
on tariffs, they don’t understand
the focus on deficits, they don’t understand
the rejection of the international trading, you know, norms
and institutions. They don’t understand the U.S.’s
rejection of global free trade, since this is the system
that we basically set up.>>SULLIVAN: Trump had upended
decades of U.S. trade policy, determined to start a fight
he felt was his.>>In several meetings,
even in high-level meetings with the president,
some foreign leaders, you know, offered, they said,
“We want to help with China, we want to do this together
with you.” But he seemed to think that this
was his fight alone and that he wanted to do it
mano a mano.>>SULLIVAN: At that point, were
you disappointed? Were you frustrated?>>If you adamantly believe that
something doesn’t make sense, you’re personally disappointed, but, ultimately, it’s not your
decision to make.>>SULLIVAN: Within a month, Cohn would leave
the White House. The nationalists had won.>>President Trump turning tough
trade talk into action.>>New tariffs announced
by the Trump administration on $50 billion worth of Chinese
exports.>>China is now punching back
with an equal amount of tariffs on American exports.>>President Trump has just
slapped tariffs on another $200 billion of
Chinese exports.>>Igniting the biggest trade
war in economic history. (train bell ringing)>>SULLIVAN: This was the tariff
fight that had first brought me
to Ohio. It’s what was dominating the
headlines and the politics. But the view was much different
7,000 miles away, in China. ♪ ♪ I arrived in Shanghai last fall, in the middle of what was being
billed as the world’s largest
import expo, a week-long trade extravaganza that drew more than
a million people. It had been eight months since
Trump’s first tariffs, and I wanted to hear what
businesses at the expo had to say about the trade war. ♪ ♪ Thousands of companies from all
around the world were here… (man speaking on P.A. system) …focused on selling
their products in the growing Chinese market.>>We have actually a, a very
special Italian wine. The cream of the top
of the Italian wines.>>SULLIVAN: U.S. companies have
been doing business here for decades and seemed unfazed
by the trade war.>>China is going to be
number-one market from any perspective, and…>>SULLIVAN: For G.E.
or for everybody?>>For, for everybody.>>SULLIVAN: With 1.4 billion
customers, China’s a market U.S. companies
can’t resist.>>We’ve been in the China
market for 34 years. We have over 40 wholly owned
or joint-venture subsidiaries in the market. So very, very important to
DuPont.>>SULLIVAN: It seemed like
business as usual. So what do you think
the trade war will do?>>That’s another thing you
really just have to not worry about, because
today I met myriads of Chinese businesspeople…>>SULLIVAN: Okay.
>>…men and women, that look you in the eye, and they want to do business
with you.>>SULLIVAN: They do.>>And
you’re going to find a way.>>SULLIVAN: It was hard to
gauge if Trump’s tariffs were having any impact here. As I traveled around
the country… Nihao.
>>Nihao.>>SULLIVAN: Hello.
Some Chinese businesses told me they’d been hurt a bit,
and others not much at all. When it came to the trade war, even the government
was downplaying it. One of China’s top trade
officials agreed to talk to me.>>SULLIVAN: Why do you think
the U.S. and China are in a trade dispute
right now?>>I think we may have different
perceptions. We think that the Pacific Ocean
as, in President Xi’s words, “Big enough to accommodate
the two economies.” We do not want to have a war,
even a trade war, with any country in the world. And we do not have
the secret strategy to replace the United States
as the global superpower. ♪ ♪>>SULLIVAN: But U.S. companies
have long complained about an economic strategy
that China does use. They say it gives Chinese
businesses an unfair advantage. The government plays a heavy
hand in the market here, through massive subsidies
and support. Special economic zones,
for example, have been created to spur industries the
government believes are critical to China’s success. I found one six hours south of
Shanghai, in the industrial port city
of Wenzhou. This economic strategy is called
“The China Model.”>>The China Model is a blend
between national control and ownership of resources and
economic activities dominated by private entrepreneurs. 90% of the new jobs are
in the private sector, but all the land is still owned
by the state. Control of energy resources
controlled by the state. Control of the financial system,
basically by the state. So you come up
with this socialism with Chinese characteristics,
or socialist market economy, which is what China calls
itself.>>SULLIVAN: Here in Wenzhou,
the government has prioritized high-tech development,
providing support to companies like WM Motor
to build electric cars. In 16 months, WM built
a massive manufacturing facility that will be able to produce
200,000 electric cars a year. (music playing in commercial)>>We focus on
the intelligent smart car.>>SULLIVAN: And this is them?
These are the cars?>>Yes, this is actually
the very early-stage car…>>SULLIVAN: Freeman Shen
is the C.E.O. of WM Motor. ♪ ♪ The China market for auto sales
is now the biggest in the world. It’s also where American car
companies make some of their biggest profits. But they’re facing increasing
competition from Chinese companies, like WM. How does this represent sort of
a changing China?>>Oh, interesting. You know, when a
country upgrading the whole industrial base, the best example would be a,
a vehicle, the car industry.>>SULLIVAN: Car industry.>>Yeah, car industry
is the representative of the whole industry.>>SULLIVAN: You’re saying,
like, the, the cars are the, the bellwether of
how a country…>>Exactly, exactly– exactly.>>SULLIVAN: Why, why do cars…
>>Because, you know, it’s assembly of all kind of
technology. It’s equally software,
mechanical, lighting. You’ve got,
cybersecurity’s in there.>>SULLIVAN: So you’re saying
that countries that can build a car…>>You’ve got all kind of
industry very strong before you can build a strong
car in that country.>>SULLIVAN: And if you can
build a car, it means you are moving up
the technology chain.>>Exactly, exactly.
>>SULLIVAN: You’re coming up.>>The value chain, basically.
>>SULLIVAN: The value chain.>>Is going up.>>Well, the Communist Party
has long seen the automotive industry
as a pillar industry. And so they’ve devoted huge
amounts of resources and policies towards building up
that industry. It’s all about bringing China
up into the top tier of global economies, in terms of
its manufacturing capabilities and technological capabilities. You’re not going to get rich, you’re not going to become
a superpower if you’re just making
the low-end stuff. ♪ ♪>>SULLIVAN: The state-sponsored
China Model is credited with transforming the country’s
economy. China’s middle class is now
bigger than the entire United States. And its economy is growing twice
as fast. This success has become a major
source of tension in the trade war.>>The question is,
is America complaining about the way China handles
economy, or is about China’s legitimacy
to become a prosperous and powerful country? Our population is four times
bigger than the U.S. We have 1.3 billion people.
Right? You have 300 million people. So China’s economy should be
four times higher than the U.S. economy.
Now we are only…>>SULLIVAN: That would be
difficult for people in the United States to accept.
>>Yeah, of course, I know, this is, this is difficult to,
to accept, right? Today we are only 60%
of the size of the U.S. I think we do have the right
to be at least as powerful as the U.S. and even, one day,
much powerful than the U.S.>>SULLIVAN: Do you think that
Americans should be worried?>>Oh, yes, I think so.
>>SULLIVAN: Yes, they should?>>You know, the Chinese
government thinking we are become stronger
and stronger.>>SULLIVAN: Yeah.
>>And the U.S. still number one, big brother, right?
>>SULLIVAN: Big brother.>>And hope that big brother not
trying to punch me on my face. And big brother were thinking,
you know, “This little brother someday
probably will do something to me.” I think that the… it is… I think that really depends on
the, the intelligence of both countries’ leader
to make sure. Worry is fine.
But please don’t fight. ♪ ♪ (audience applauding)>>SULLIVAN: But back
in the U.S., Trump was eager to escalate the
tariff fight.>>Thank you very much.>>SULLIVAN: In fall of 2018,
he upped the ante by threatening even more
tariffs.>>As you know, we have $250
billion at 25% interest with China right now, and we
could go $267 billion more. And China wants to talk
very badly. And I said, “Frankly,
it’s too early to talk.” Can’t talk now,
because they’re not ready. Because they’ve been ripping us
for so many years.>>SULLIVAN: Trump’s position
was that it was time to hit back, and that prior
administrations had been too soft on China.>>They have a surplus of
$375 billion– with a B– with the United States, and it’s been that way for
years and years and years. I don’t blame China,
I blame our leadership. They should have never
let that happen. And I told that
to President Xi…>>SULLIVAN: But while Trump was
blaming his predecessors, we were hearing about
other reasons why the problems with China
had gone on so long. Dozens of interviews we did
in China and the U.S. pointed to an unlikely
obstacle– American businesses themselves.>>They were worried about the
operations they had in China, whether they would lose
the profitability.>>SULLIVAN: One of the biggest
problems the U.S. has had with China over the years
is what’s come to be known as forced tech transfer, where companies wanting to do
business in China say they’re pressured to give up
their technology.>>China started adopting what
were called indigenous innovation policies
to make sure that their own companies,
state-owned or otherwise, were going to be the ones who really were the leaders
in the new economy.>>SULLIVAN: So you’re saying
they didn’t compete fair.>>They engaged in predatory
and protectionist policies. They demanded that many
foreign companies seeking to come into their
market had to do it through joint ventures
with their own firms. And in many cases, requiring
that their technology be transferred to empower
Chinese entities to become, you know, great world companies.>>SULLIVAN: China wasn’t
supposed to be doing this under rules set by
the World Trade Organization, which it had joined in 2001. And though China says it
has no official policies forcing companies to hand over
technology, U.S. trade officials started
getting complaints about the practice just years
after China joined the WTO. But the complaints came
with a catch.>>Companies would come in
and complain. They’d have great information,
but, “Oh, by the way, you can’t use
any of this, but solve our problem.” And so that was always
a challenge.>>SULLIVAN: Why did that make
it harder?>>It made it harder because you couldn’t really
prove your case.>>SULLIVAN: So you saw the U.S.
business community not only say, “Don’t use my name,” but
they would say to your office and the administration, “We don’t even want you raising
this issue too loudly.”>>Right, right, right.>>SULLIVAN: “Because if you
raise this too loudly …”>>”They’re going to think
it’s us, and we will be hurt.”>>SULLIVAN: And they had too
much money at stake.>>They had a lot of money at
stake.>>SULLIVAN: How did that…
sort of having your hands tied behind your back in a way, how
did that affect, in the long run, the, the U.S.
position against China?>>Yeah, it probably emboldened
China a bit, right? Because as more and more
problems came up, individual companies
were very spooked and didn’t want to, you know,
visibly be associated with any strong action
by the U.S. government. ♪ ♪>>SULLIVAN: By 2008, U.S.
companies were facing more and more competition
from Chinese companies, and China was becoming
an economic force.>>The Chinese tonight reaching
their hands out to the world in a really unprecedented way.>>SULLIVAN: The China Model
was working, and ready for prime time. That opening ceremony,
do you remember it?>>I was there.
>>SULLIVAN: What did you see?>>Oh, my God. I sat up in a high seat, and I was around all these
Chinese people who’d come in from all over the country.
>>(cheering)>>They were beaming with pride.>>SULLIVAN: What do you think
the world saw?>>The world saw a pretty
incredible place. I think it blew the world away. On… “Holy cow.” And all of a sudden, they just do this incredible
opening ceremony. (crowd cheers) They know how to put on a show. It was like the biggest
coming-out party in history.>>(cheering)>>It was go-go years
in Beijing. Everything was possible. You know, and there was still
a lot of respect for the U.S. and the U.S. economic system,
the U.S. financial system. And, you know, there was still
a lot of respect for the big banks,
and the idea that the U.S…. they understood how to run a
financial market. And then… the crash happens. (closing bell ringing)>>A meltdown on Wall Street,
the worst since 9/11.>>The worst financial crisis
in modern times.>>Three of the five biggest
investment banks are gone.>>You can see it in some
of the policy circles and the, sort of
the academic writings, the Chinese think tanks, but I just saw that with my
friends was this idea of, like, “We thought you guys knew
what you were doing.”>>A crisis which is unraveling
homeownership, the middle class, and the American Dream itself.>>I definitely look at the,
the financial crisis, 2007,
2008, as a, as a really key
turning point in how the leading Chinese
thinkers saw the U.S., where the U.S. maybe was up here
in terms of something to emulate in certain ways,
went down to here or lower, because basically the emperor
has no clothes.>>The attitude changed
profoundly. C.E.Os. who used to be able to
go see the, the premier, and president, they would come, and they would have to meet
a low-level official, who would berate them. It was very stark. But you got to remember, for, for all these years,
we had, you know, we had low-voltage congressmen
or businesspeople coming in and, and shaking their finger
in Chinese, saying, “You should have all the
children you want, you should do this,
you should do that.” And these very capable
Chinese people would just bite their tongue
and say, you know, kind of, “Thank you
for your wisdom,” because they, they needed, they
needed America, they needed, they needed us,
so they had to tolerate us. Then all of a sudden,
global financial crisis, and it was payback time. It was, like, “You listen
to us for a while.” (crowd applauding)>>SULLIVAN: Publicly, China
would promise to open its markets more
to U.S. business.>>The new Chinese leader
is revealed.>>SULLIVAN: But internally, it
would double down on the China Model.>>(speaking Chinese) (translated): China needs to
learn more about the world. The world also needs to learn
more about China.>>SULLIVAN:
And under Xi Jinping, it embraced an ambitious
national plan, called “Made in China 2025,”
that put even more focus on dominating key global
industries.>>There is this belief that
China is destined to return to its former glories, and you can’t restore your,
your fabled glory if you’re not the leading
country in all sorts of areas, be it
military, be it technology, be it, be it manufacturing. ♪ ♪>>SULLIVAN: But early on, U.S.
businesses discovered China was also using other means
to get ahead.>>In early January of 2010, I
get a call from Google, who had just announced
that they had been hacked.>>Google traced the sabotage
back to China.>>In the course of the
investigation, they actually realized that
there were many more companies that had been targeted.>>Not only was Google itself
targeted by the cyber-spies, but so were at least 20 other
major corporations.>>SULLIVAN:
You thought at that time, “This is something bigger.”>>For the first time ever,
we were facing a nation-state, an intelligence service, that
was breaking into companies, not governments, not militaries,
but private-sector organization.>>In all more than 72
organizations were hacked by spies, dating back to 2006.>>SULLIVAN: The Google hack led
to revelations about dozens of other Chinese cyberattacks.>>…dubbed Operation
Shady Rat. Is it coming from one
particular place?>>SULLIVAN:
And Alperovitch was called to the White House Situation
Room to brief Obama’s top national security
officials.>>I briefed them on what we
were seeing with both Aurora, Night Dragon, Shady Rat.>>SULLIVAN: What did they say?>>My impression was none
of this was a surprise. And when I pressed them on why
they were not taking stronger action against China,
their response was, “It’s complicated.”
>>SULLIVAN: “It’s complicated.” Did they explain that?>>Well, they were telling me
straight out, “Those same customers that are
getting victimized by China, they are the same companies
that are coming in to tell us, ‘Don’t do anything to harm the
relationship with China. We want to continue doing
business there. We want to continue
making money there. We need that market.'”>>You know, the, the U.S.
government listens to companies, so if the companies are saying,
“Chill,” they’ll chill.>>SULLIVAN: How can businesses
walk into United States agencies and complain about being treated
unfairly, if they’re the ones that are
preventing any action from being taken? How do they get to have it
both ways?>>Sometimes two things can be
true at the same time. I mean, their incentives are to
make money. If your business is in China, Xi Jinping is more important
to you than Donald Trump or Barack Obama. And it’s, it’s not that these
are bad people who don’t care about America, but their incentives are
to shareholders, not to the government
of the United States. (band playing
“Hail to the Chief”)>>SULLIVAN: Neither Google nor
any of the other companies we contacted about cyberattacks
would agree to talk to us. And Chinese officials deny
they’ve been involved in such practices. But by 2015, American businesses
and government officials were increasingly alarmed. In negotiations
with President Obama, Xi pledged that China
would not engage in economic cyber-hacking.>>I believe that we have made
significant progress in enhancing understanding
between our two nations.>>SULLIVAN: Obama also brokered
a major trade agreement with allies, the Trans-Pacific
Partnership, or TPP. (crowd applauding) It was supposed to put pressure
on China to fix the growing
economic problems between the two countries. But all of that would come
unraveled with a new president
in the White House. (march playing) Trump quickly withdrew
from the TPP agreement. And by the fall of 2018, with his own trade negotiations
stymied, the conflict was widening. The administration took
a tough turn, confronting China aggressively.>>…releasing a new report
tonight detailing just how big the threat
China poses.>>SULLIVAN: It accused China of
breaking the cyber agreement…>>Chinese intel officers
charged with hacking U.S. businesses…>>SULLIVAN: …and engaging in
widespread technology theft.>>This latest indictment adds
to the growing tension between the U.S. and China
in the middle of this fierce trade war…>>Now, through the
Made in China 2025 plan, the Communist Party has set its
sights on controlling 90% of the world’s most
advanced industries, including robotics,
biotechnology, and artificial intelligence.>>Really an extraordinary
speech, attacking China on the domestic politics front,
the trade front, and the military front.>>Chinese security agencies
have masterminded the wholesale theft
of American technology.>>They don’t want to wait 20
more years to catch up. They’re just reaching into the
cookie jar and taking whatever they want…>>And using that stolen
technology, the Chinese Communist Party is
turning plowshares into swords.>>That speech was not
a hawkish speech, that speech was a declaration
of economic war and potentially a real war.>>In China, it was read
by everybody all the way up to the top.>>Did the vice president issue
any kind of evidence?>>SULLIVAN: As what?
>>As a harbinger of, you know, something really,
really different and something that was really
alarming for them.>>SULLIVAN: Why was it alarming
for them?>>It was a very unnuanced,
undiplomatic speech. It was kind of a bill of
indictment.>>Both China and the United
States need to make an effort to make sure
that the bilateral relations do not get out of control.>>Our message to China’s rulers
is this: This president will not back
down. (audience applauds)>>That was the point
of no return, and it’s not being
acknowledged enough. It was the most important speech of the whole Trump
administration. ♪ ♪>>SULLIVAN: Early on, the focus
of the trade war had been on tariffs and reviving
20th-century industries. But it’d now become
about far more. About who will dominate
the cutting-edge industries of the 21st century. So I headed to Silicon Valley, where the battle was being
waged.>>The fear inside this White
House is that China is using its vast financial resources
to leap ahead, technologically, of the United States.>>SULLIVAN: The Trump
administration was trying to restrict China’s access
to valuable technology developed by American companies.>>First up, though,
this morning, the Trump White House
announcing a pivot.>>Using existing law related
to national emergencies to restrict Chinese investment
in sensitive technologies.>>SULLIVAN: On Sand Hill Road, I met one of the most
experienced high-tech bankers in the valley, who was troubled
by what he was seeing. He told me about a flood of
calls he started receiving from Chinese investors
about five years ago. He remembered one Chinese
investor in particular.>>He’d been sent to invest
in technology; could I help? And I said, “Well, what kind
of technology?” And he, he had difficulty
answering the question. And if I pushed him hard,
clearly in the end, it would be artificial
intelligence, semiconductors. Maybe things having to do with
automotive.>>SULLIVAN: The Chinese
government’s top priorities.>>The Chinese government’s top
priorities, right. And, and then I said, “Well,
how much do you have to invest?” And he claimed that he had
access to a billion dollars.>>SULLIVAN: A billion dollars?
>>Yeah. And then I met a private equity
firm that had $15 billion from some entity
in the Chinese government.>>SULLIVAN: How much money?
>>$15 billion.>>SULLIVAN: With a B.
>>Yeah, and they told me that their only,
their only mandate was to invest in semiconductors.>>SULLIVAN: What did you think
of that?>>I thought, “This is…
I don’t know if this is good.”>>SULLIVAN: I mean, you’ve been
at the heart of Silicon Valley financing…
>>Yeah.>>SULLIVAN: For 35 years.
>>Yeah.>>SULLIVAN: What do you think
is happening here?>>I think China is doing
its absolute best to make itself self-sufficient, from a technological
point of view. They realize that in order
to accomplish that, they either have got to start
pedaling faster on their own, or they’ve got to buy
a lot of technology. (talking softly in background)>>SULLIVAN: That one.
Thank you. At Stanford University, I found
investors and entrepreneurs grappling with China’s
high-tech ambitions.>>Silicon Valley is very much
at the heart of the trade war.>>SULLIVAN: Why do you say
that?>>The U.S. needs to keep
a technological advantage. Silicon Valley, it’s generating
a lot of the innovations that are powering the U.S.,
in terms of all sorts of different technologies.>>On this chart, in terms…>>Somebody from the business
community said, you know,
“We’re not in a trade war, we’re in a techonomic war.” And I think that’s what we
probably are really worried about.>>A lot of Chinese
technology companies invest heavily in 5Gs…>>Now there are areas where
they’re actually, you know, quite competitive, and some
areas where they even seem to be maybe having an, an edge.>>And you know what? Chinese companies already
working on 6Gs.>>SULLIVAN: Despite their
worries about China, people here also depend on
Chinese investments and were concerned that
the Trump administration would go too far. Do you think the administration
had good reason to clamp down on investments
from China in Silicon Valley?>>I think so, but there’s
a difference between, “Yes, there’s a problem,” and
the response being measured, appropriate, and grounded. I think they, they may end up
operating to our detriment broadly
economically, but also, without the ability
to collaborate, it’s going to be very difficult
for the U.S. to keep up.>>Business used to be the
ballast in the relationship, because American companies
made money, American consumers got cheap
goods, kept inflation down. China got know-how, capital,
et cetera. The business relationship is now
the major conflict, ’cause we’re both going for all
the technologies of the future. We’re both racing for global
leadership influence. So now business is, is an
irritant, and it’s the conflict. ♪ ♪>>SULLIVAN: As I drove around
the valley, I could see the challenge
of this high-tech conflict. Chinese businesses
are visibly present, tightly connected
to the economy. And few people I met here thought the Trump
administration’s hard line on China would be good for
anyone in the long run.>>The endgame here is the
decoupling of the American and Chinese
economies.>>Which, by the way, is already
underway, and it’s going to continue.>>I think there are people who
think that sealing ourselves off is, is ultimately
the best solution.>>SULLIVAN: To break China and
the United States’ economies apart.
>>Yeah. But that seems so sad, because we could do so much
for each other. If your goal is to stop China
from advancing, you’re not going to accomplish
that anyway, because they’ll, they’ll just
innovate around you. Why would you want to stop
anybody from making progress? I, I don’t see that. What I think our goal should be
is to…>>SULLIVAN: Some people would
say because they could become more powerful in the
world marketplace than, than the United States.>>The better goal is for us to
spend time on becoming more powerful
ourselves, I think. ♪ ♪>>SULLIVAN: That was a
sentiment I’d been hearing throughout my reporting
on the trade war. And back in Ohio,
where I’d first seen the impact of the tariffs.>>The future is on the line for
more workers at General Motors.>>SULLIVAN: People were making
the same point in the face of seemingly
unstoppable economic forces.>>A large American factory
stopped production today…>>SULLIVAN: Earlier this year,
the GM plant in Lordstown stopped producing cars… (horn honking, crowd shouting) the latest hit to auto workers.>>This plant can’t close. When it first opened, it was the
largest plant under one roof in the world.>>(chanting)>>SULLIVAN: With China
aggressively pursuing next-generation technology, the talk in Lordstown that day
was how this plant could be transformed to keep
the U.S. competitive.>>My personal hope
is that General Motors, which is investing billions
of dollars in all-electric, emission-free, green cars, will
decide to build them right here. (car horn honking)>>We’ve got to fix our system
to compete with China. We’ve got to internalize some of
this blame and not spend all our time
blaming it on China. They’ve outsmarted us, they’ve
done some things that we don’t agree with,
they’ve done some things against the agreements
they’ve made, but they’re focused
and moving ahead.>>China has a plan. They got a ten-year, a 20-year,
a 50-year plan. I mean, we really need to get
serious about this in, in terms of electric vehicles, in terms of, of new technology,
in terms of manufacturing, and make sure that our
government is supportive.>>We didn’t do
what China’s doing. We didn’t look at, “Where are
the industries of the future? Where do… what kind of
training do we need? What kind of people do we need? What kind of incentives do
business need to do this?” This is where, actually,
the Chinese system that we’ve always looked down on
actually has an advantage now. ♪ ♪>>SULLIVAN: Over the past
several weeks in Washington, President Trump has been upping
the pressure to get an agreement
on at least some of the long-standing issues.>>We are rounding the turn. We’ll see what happens. We have a ways to go,
but not very far.>>What’s still left to agree
to, sir?>>We have things,
we have things. We’re talking
intellectual-property protection and theft, we’re talking about
certain tariffs…>>SULLIVAN: Despite challenges,
he says a deal is possible.>>This is the granddaddy of
them all, and we’ll see if it happens.>>SULLIVAN:
But whether a deal is made, Trump’s trade war has heightened
the economic conflict.>>I think I’ll quote
my Chinese friends…>>SULLIVAN: And the specter of
a prolonged rivalry looms large. What does Trump want from China? What did the camp in the
White House that you were in, what do you want?>>I believe you need… you
need actually a change of the top leaders in the
Chinese Communist Party.>>SULLIVAN: How on Earth…
>>I think the goal into China is quite simply,
is to bring them… is to break the back
of this totalitarian mercantilist economic society…>>SULLIVAN: You’re talking
about regime change.>>Well, first off,
nobody in the White House is talking about that, okay? And the president would never
even consider that. They’re talking about a trade
deal and some fundamental economic
change. I’m saying, one of these two are
going to… this, either, this,
this mercantilist, totalitarian system that
has a network effect, or the kind of, you know,
liberal, democratic West. One of those two systems is
going to be the system at the end of the day. (man speaking Chinese)>>Trade wars can get out of
control pretty fast.>>The arrest of a top executive
at Chinese telecom…>>This is really the United
States ramping things up against Huawei.>>Tensions in the South China
Sea escalate.>>Taiwan has become
a hot-button issue.>>Our next major war could be
fought against China.>>This is my optimistic
scenario, that we will have
a managed tension. But we do have the, uh,
pessimistic scenario. We do have a chance to see
a so-called… I don’t like the term,
but the new cold war. I don’t think like the one
the U.S. had with the USSR. But we will have another type of
cold war that nobody have ever
experienced. But I think it’s a comprehensive
confrontation. That’s dangerous. That’s really dangerous,
and if that happens, if that happens, it will last
for quite a long time. Then that’s a tragedy
for everyone, I think. ♪ ♪>>Go to
for more reporting on “Trump’s Trade War”.>>Some of the people that are
very pro-tariff right now make an argument
that the United States has lost its manufacturing base.>>We have also created millions
upon millions of jobs in new industries that didn’t
exist 20 years ago.>>Then visit the “Frontline”
archive where you can stream more than 200 “Frontline”
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at>>Today we officially opened the United States embassy
in Jerusalem.>>…Jerusalem claimed by both
Palestinians and Israelis as their capital…
>>What a glorious day.>>…Violence erupted after
thousands of Palestinians marched towards the border…>>Our brave soldiers are
protecting the borders of Israel as we speak.>>…the death toll is now more
than 60…>>NARRATOR: “Frontline”
investigates what happened. “One Day in Gaza.” ♪ ♪>>For more on this and
other “Frontline” programs, visit our website at ♪ ♪ To order “Frontline’s”
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or call 1-800-PLAY-PBS. This program is also available
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