>> narrator: tonight... >> the trade war is on, this ist rocking the ma >> narrator: as tensions continue with china over trade... >> the latesbusiness to feel thpain of the e -china trade war... >> narrator: frontline and npr correspondent laura a llivan iestigate... >> chinas going to be the number one market from any perspective. f >> fore everybody? >> for everybody. >> nartor: the forces behind >> we're not in a trade war, we're in a techonomic war.ic >> narrator: both here and abroad... >> this is a great power struggle...yo >>u think that americans should be worrd? >> narrator: and, wh's at

stake. >> this isot just a trade war. we're talking about cold war, currency war, tech war. >> china has a 10-year, a 20ear, a 50-year plan. >> they've outsmarted us, they've done some things that we don't agree th. we've got to fix our system to compete with china. >> we do have a chance to seeld the new ar. i think it's a comprehensive confrontation. that's dangerou >> narrator: tonight on frfrtline... "trump's trade war.r" >> frontline is made possible b contributi your pbs station from viewers like you. thank you. and by the corporation for public broadcasting. major support is provided by the john d. and cathere t. marthur foundation, committed to building a more just, verdanc and ul world. more information at macfound.org. the ford foundation: working with visionaries on the frontlines of social change worldwide. at foroundation.org. additional support is provided by the abrams foundation, committed to e eellence in jojonalism. the park foundation,

dedicated to heightening pubngc awareness of critical issues. the john and helenlessner family tlyst. supporting trustworthy journalism that informs and inspires. and by the frontline journalism fund, n with major support from d jo ann hagler. >> wow, that's great. yay! >> air force o landing at the palm beach international airport. >> laura sullivan: in april 2017, president trump headed to mar-a-lago for the most important plomatic meeting of his early presidency. s, the key to mar-a-lago once trump got there, as often he does, he finally focused on the schedule. >> a very largdelegation of almost every relevant cabinet member... >> and said, "hey, why are we i want to spend aseetings? 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 leers of the world's two largest economies. >> one of the things that president trump believes-- h believes in this total-- is that personal relationships of great powersan mak difference. >> the presidents face-to-face for the first time. (cameras clickininou >> thankeverybody. ank you. >> there was a lot of time in the schedule with them literally e-on-one, being together and creating the relationship thhi the, the two big economies needed to have with each other.t >> sullivan: the leaders seemed to connect. and so did the families. >> we wanted to make you feel at home. >> nihao. >> hello, how are >> that summit was important, because the two leers established a strong personal relationship. i think the image is that the two leaders sit gether, and two family actuay sit

together. presidt xi and his wife had a very good interaction with president trump. >> we've had long discussion already, and so far, i have gotten nothing, absolutely nothing. but we have developed a friendship, can see that. >> come on, thank you, thank you. >>e say, "okay, you see, president trump is a president someone that we can talk to.e is he's a reasonable leader, and maybe he can do something the ordinary conventionau.s. leader won't do." so thexpectation was very high, and the hope was, ybe they c control the situation and they can work together to solve the problem gradually.. >> thank y >> sullivan: but long-standing problems between the countriesre weeaching 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, trp would turn on xiimposing billions of dollars in tariffs and leading the ited state into a perilous confrontation. >> the fightwere nasty that came out of mar-a-la. the most intense fights and debas in the white house were about this issue of tariffs, but tariffs as a proxy to the great economic war with grina that we're engaged in.ng there's no middlnd. 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: in fall 2018, i headed to southwestern ohio.um prident trp had fired th first shots in his trade war with tariffs on a wide array of

imported chinese goods, from electronics to furniture to steel. >> preside trump turns up the i nted to see fit-hand how t these tariris were playing out on the ground. >> as things com cto a boiling point between the two largest economies in the world, tariffs are now hitting too close too home.ru >> sullivan: claimed the tariffs would help american workers, boost.s. businesses, and bring life back to places like this, which for decades had been hurt automation and, more recently, imports from china. >> president trump says he's keeping a campaign promise to bring back steel-iustry jobs. >> on the streets of middletown, thsigns of economic struggle are everywhere. >> sullivan: the tariffs on imported steel were particularly welcome ne 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 nowee city pools, an there's none. >> sullivan: what did you think when you first heard that trump waputting tariffs on steel

>> i thought it was, you know, itas about time. i'veatched 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 going to help the town? do you think it's going to help your hometowns? >> sure. >> absolutely.>> ullivan: what are youu expecting to see? >> everybody always talks about jobs and america, and we hr that all the time. we want to see that, that. reality happ you know, you can't just dependt on foreign countries for, for steel. we've got to make it in the united states. >> we just want china play by the ruleht >> rig >> that's it, we don't, we don't want a bailout. >> sullivan: so you're saying it's not that u want your industry propped u >> 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 thatot 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 tuben and steel, dam gaynor isn the business of buying and reselling steel. >> we buy from a bunch of steel mills. our main bread and butter is distributing steel tubing. >> sullin: trump's tariffs onul imported steel-- essentially a 25% tax-- ended up raising the ooprice of american steel, skyrocketing. gaynor's costs so how dow 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 customerand so on, down the chain. >> sullivan: do you think thate' th be a point, though,h, where the, the e consumer willay just"i, i can't afford this, this is too expensive"? >> yeah, i, i think there's, always tha trid 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 wiwi be willing to pay.op

>> and what will be willing to pay. yeah, absolutely. and i think that's the qhestion o th tariffs. is iisgoing to dgood, or is it going to do bad? likeivan: manufacture shepherd chemical were also hit hard by the tariffs, especially whenhina retaliated th tariffs of its own. s all these tanks around here produce various metal carboxylates..e >> sullivan: c. tom liepherd sells produc to china, and he also imports r materials from china. >> our sales to china have gone downand our raw materials fr >> sullivan: how bad in cost. problem is that for you?yo >> 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 noprotect the american eco, thiss a bad way to do it. >> sullivan: but despite the uneven consequences, preside trump was all in on the tariff strategy. it's a strategy he's been talking about r years, as far back as the late 10s, when

ilheirst tested the possity of becomg president. developer donald truru onew york... >> sullivan: back then, trump's target was japan and its trade acces. the fact is that you don't have free trade. we think of it as free trade, vebut you right now don't free trade. and i think lot of people are tired of watching other countries ripping off the un states. this is a great countra re he believed from the beginning that t really nothing worse than being laughe at. >> they lah at us behind our backs, they lay h at us, because of our own surpidity. japanese as laughing at the united states and taking advantage of the united states by stealing the jobs, by dumping product here. >> we let pan come in and dump everything right into our markets and everything. it's not free trade.ou ifver go to japan rightgh now and try to strl something, forget about it, oprah, ju, t's almostut it, 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 aear with china... >> he's been saying the same thing for 30 years. donald trump has a very binaryfe view of nd certainly of the world. and, and so to confront china, which he perceives as amera's most important and dangerous rival, and to be ae to use blunt instruments ainst them, and to come out and at least be le to say that you are a t wier ay are a loser, there's, it's hard to imagine anything more appealg 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 16, trump's message had finally founan 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 begoldman sachs, and, and g somebo that had been in finance for a number of years, i

d.was set to be unimpresse i was actually very impressed. now, he didn't know a lot of details. he knew almomo no policy. t what i found mostt attraordinary was, when we got to the section on china, which i kind of threw out thera two-hour meeting, almost 30or minutes orwas almiabout china. >> we have a $500 billion ficit, trade deficit w d china. >> and you've got to remember, a lot of this he was just reciting everything he'd heard from lous. >> 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 40d years. and the only thing he had form as a worldview was china. >> because we can't continue t r allow china e our country, and that's what they'rdoing. it's the greatest theft t the history of the world. >> he talked in this kind of vernacular that, that kind of hit ople in the, in the gut, and particularly when he talked about trade and jobs and jobs shifting overseas. >> sullivan: what was his messagto these peoplplon

trade? "china'so blame"? >> yeah, the message's very simple, is that, "the elite ndipped the jobs overseas, i'm going to bring them back." >> thank you, indiana. >> sullivan: that message helped propel trump to the presidency. hd once there, he assembl team of advisers on trade.te to oversee economic policy, he brought in the former pridentan of golachs, gary cohn. >> the job i had in the white house was convene everyone who basically had an opinion on an economic topic, and try and come up with a recommendation or two,twr present to the president complete diameically oppos opinions and allow the president to make a decision.>> n the roosevelt room, we would have a trade meeting every tuesday, and then we would taken some verf that into the oval in a smaller group. if you take all the other stiness on the things like the paris accord and tpp, , l this other stuff, roll it up, and put it to the factor of ten, they

don't compare to these weekly nasty trade meings. ♪ >> sullivan: from the stt, the weekly trade meetings surfedrf deep divisions among trump's advisers o or how to deal with rising economic tensions with china. the two camps came to be known as the globalists and d e nationalists. on the one side, the globalists included former wall street executives like ry cohn and steve mnuchin. on the other side, the nationalists included bannon, along with robert lighthizer a a peter navarro, a hawkishrr economist whose film "death by china" caught auump's attention. >> one of the most urgent problems facing america, its increasingly destructive tradeh relationship wrapidly rising china. >> sullivan: the two campsar disagreed y over whether aggressive measures like tariffs would help or hurthe american ecomy. >> we had a mindset that to be a great power, you know, it wasn't just your military. you had to be a great onomic wer. and a great power had to

built upon, had to be built bupon a great manufacturie. to "make america great again," you've got to brin manufacturing back to the country. >> sullivan: se of the people that areofery pro-tari right now make an argument that the united stas has lost its manufacturing baseand that this is actually real people's lives at stake here. >> well, the data would show manufacturing jobs have gone down in the united sedtes, si understand where they're saying there. the flip side is, factor output, or what we produce in the united states, has actuay gone up. there's this thing called technology that's ppened in the united states. factories have changed.e but we hso created millions upon millions of jobs in new industries that didn't exist 20 years ago. >> sullivan: the split between globalists and nationalists wase about han just industrial policy. it reflected a fundamental difference over how best to confront china and what each saw

as the endgame.he >> the nationalis said, "this is a great hegemonic, yoknow, great-power struggle." it's definitely 'so 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 their economy.om >> sullivan:of your former colleagues have sat exactly where you are and said, "this is a winner-tll situation." >> yeah, i, i understand that, and that's the nationalistve us the globalist. >> sullivan: yeah. >> the globalist, okay.st as a globalist, as a market practitioner, i think that we can have a globalizeworld that works well. the question is, "can we both be complementary to each other?" i think the answer is yes. >> the arguments would get quite personal. we would get through the facts quickly, because the two sides are just never going ne what the facts are. then it ared get, then it would get personal. >> from time to me, there were people that tried to use un-footnoted, undocumented facts. e's my job to get rid of

undocumented, un-footnoted facts, and make sure that those don't enter the oval office. >> and a couple of times, we had i mean, there was up in the oval office that kelly had to... we kind ... the first couplef days general kelly was there, we had to exit and go back into the roosevelt room, and it's kind in a, it's kind of, uh, in-your-fa w couple of people. >> sullivan: where was trump while these two twrties are on different sides of this? >> he has a default position. s?s default positionons, y know, "build the wall." his default position is, "engage, engagagchina 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 firstis official there. >> sullivan: with the battle between the two camps s aying out, trump headed to beijing in november 2017. it was a royal welcoming... (band playing march) ...filled pomp and ny, and e two leadersse ed ready to work together.et (band continues playing)

their netiators agreed on a plan for china to buy llions of dollars in u.s. products, like beef and natural gas. ♪ t behind the celebrations,p' trums nationalists had devised a different plan. >> we had a couple of tricks up our sleeves. navarrand i start to dust off the, the secret weapon we had, to call a national-securityd emergency, k what we're doing on the border right now. (people applaung) to use the national-security emergency powers that are invested in the defensent departo really start to go after steel, aluminum, maybe autos, but eventually technology it's time to get it i. >> sullivan: by march 2018, thed prt was ready to take mution. >> thank you verch, 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 aga. >> sullivan: executives from the steel and aluminum indtriesnd were hastily gathered in washington. >> they were all called to the white house, had the meeting.t and at tme, the president announced what he was going to >> 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 appro ah ever. this is donender the theory of t national security. >> and we need it. we need it even for defense. if you think, i mean, we need it for defense we need great steelmakers. >> steel was important to our national security broadly. military, critic frasucture, 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 s sprised america's closest allies. it turns out, those tariffs hurt u.s. allies more than china. orat's bause allies like canada sell muche steel to the u.s. than china es. at the state department, the top china specialist quickly startep getting ints. what were some of the united states' allies saying? c >> weltainly the allies were very much taken aback that they we the target of theey 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 know, norms and institutions. ey don't understand the u.s.'s rejeion of global free tde, since this is the system that we basically set up. >> sullivan: trump had upended decades of u.s. tradcy, determined to start a fight helt as his.

>> in several meetings, even in high-level meetings th the president, some foreign leaders. you know, offered, they said, "we want to help witchina, we want to do this together wh you." but he seemed to tnk that thisbu was his fight alone and that he wanted to do it mano a mano. >>reullivan: at that point, you disappointed? were you frustrated? i you adamantly believe that something doesn't make sense,er you'renally disappointed, but ultimately, it's not your decision to make. >> sulliuln: within a month, cohn would leave the white aduse. the nationalistson. >> president trump turning tough trade talk into action. trump administration on $50 the billion worth of chinese exports. >> china is now punching back with an equal amountf tariffsca on ameexports. >> president trump has just slapped tariffs on another $200 billion of chinese exports. >> igniting the biggest trade war in economic history.

(train bell ringing) st sullivan: this was the tariff fight that had frought me to ohio. it's what was donating the headlines and the politics. but the view was much different 7,000 miles away, in china. ♪ i arrived in snghai in fall 2018, in the middle of what wat being billed as the world largest import expo, a week-long trade extravaganza that drew more than a million people. h been eight months since trump's first tariffs,nd i wanted to hear what businesses at the expo had to say about the trade war. ♪ thousands of companies from all ..ound the world were here. (man speaking on p.a. system) ...focused on selling their products in the growing chinese market.ct >> we have ally a, a very special alian wine. the cream of the top of the italian wines. >> sullivan: u.s. companies ieve

been doing business here for decades anseemed unfazed by the trade war. >> china is going to be number-one market from anynu perspective, and... >> sullivan: for g.e. or for everybody? >> for, for everybody. >> sullivan: with 1.4 billion customers, china's aarket u.s. companies can't resist. >> we've been in the china market for 34 years. we have over0 wholly owned or joint-venture subsidiaries in. the mark so very, very important to dupont. >> sullivan: it seemed like businessnes usual. y what think the trade war will do? >> that's another thing you really just have to not woy about, because today i met myriads of chinese businesspeople... >> sullivan: okay. >> ...men and men, that look you in the eye, and they want to >> sullivan: they do. >> and you're going to find a way. >> sullivan: it was hard to's gauge if tariffs were ving any impact here as i traveled arou the country... nihao. >>ihao. >> sullivan: hello. some chinese businesses told me

they'd beehurt a bit, and others not much at all. when it came tthe trade war, even the government was downplaying it. one of china's top tra officials agreed to talk to me. >> sullin: why do you think the u.s. and china are in n 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, th any country inhe world. and we do not have the secret strategy to reple 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, thrgh special economic zforuppor example, have been created to spur industries the governmentev be 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 conol and ownership of resources and econic activities dominad by private entrepreneurs. 90% of the new jobs are in the e private sector, but all nd is still owned by the state. control of energresources controlled by the state. control of the financitem, basically by the state. so you come up with thiswi

socialis chinese characteristics, or socialist market economy, which t china calls itself. the government has prioritized high-tech development, proding support to companies like wm motor to bld electric cars. l in 16 months, wm built a massive manufacturing ty that will be able to produce 200,000 electric cars a year. (music playingn commercial) >> we focus on the intelligent smart car.>> ullivan: and this is them? these are the cars? >> yes, this is actually the veryarly-stage car... >> sullivan: freeman shen is the e.o. of wm motor. ♪ the china market for auto sales is now the biggestn the world. it's also where american car companies make some of theirs. biggest profit but they're facing increasing competition from chinese companies, like wm.

rthow does this represent f a changing china? >> oh, interesting. you know, when a country upgrgring the whole industrial base, the best example would be a, a vehicle, the car industry. >> sullivan: car ind ytry. h, car industry is the representative of the whole industry. >> sullivan: you're saling, , the, the cars are the, the bellwether of how a country... >> ectly, exactly-- exactly. >> sulliva why, why do cars... >> because, you know, it's asasmbly of all kind of technology. it's equally software, chanical, lighting. y's in got, cybersecur there. >> sullivan: so you're sayingha that countriescan build a car... >> you've got all kind of industry very strong before you can build a strong car in at 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 vue chain. >> is going up.l, >> whe communi party has long seen the automotive industry as a pillar industry. ve and so theevoted huge amounts of resources and policies towards building up

that industry. it's all about bringing chin up into the top tier of global economies, in terms of i manufacturing capabilities and technological capabilities. you're not going to get rich, you're not going to become a i superpoweryou're just making the low-end stuff. ♪ china model is cred withponsored 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 h become a major source of tension in the trade war. t he question is, is americag complainabout the way chinainin hands economy, or is about china's legitimacy to become a osperous andpeowerful couny? our population is four times bigger than u.s. we have 1.3 billion people.

right? you have 300 million people. e so chinanomy 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 accepea >> 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 eve one day, much powerful than the u.s. >> sullivan: do you think that americans should be worried? >> oh, yes, i thinso. >> sullivan: yes, thuld? >> you know, the chinese government thinking we are become stronger d stronger. >> sullivan: yeah. >> and the u.s. still numberth one, big b, right? >>ullivan: big brother. >> and hope that big brother not trying to punch me on my face. and big brotr r re thinking, you know, "this little brother someday probably will do something to me." i think that the... it is...

i think that really deon the, the intelligence of both countries' leader to make sure. worry is fine. but please, don't fight. ♪ (audience apauding) > sullivan: but back in t u.s., trump was eager to escalate the tariff fight. >> thank you very much. >> sullivan: in fall of 2018, he upped e ante by threatening ev more tariffs. >> as you u ow, we have $250 billion at 25% interest withbi china right now, and we could go $267 billion more.wa and chinwato talk very badly. and i said, "frankly, it's too early talk." can't talk now, because they're not rey. 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 tooft n china. >> they have a surplus of $375f- billwith a-- with the s beenrstates, and i that way for yrs 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... rs sullivan: but while trump was blaming his pred, we were hearing about other rsons why the problems with china had gone on so long. dozens of interviews we did in china anthe u.s. poied to an unlikely obstacle-american businesses themselves. >> they were worried the erations they had in china, whether they would lose the profitability. gg>> sullivan: one of the t problems the u.s. has had with china over the years is what'swn come to be kno as forced tech transferwhere companies chnting to do business in a say they're prprsured to give up their technology. >> china started adopting what were called indinous 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 onomy. >> sullivan: so you're sayingli they didn't compete fair. >> they engaged in predatory a protectionist policies.

they danded that many foreign companies seeking to come into their market had to do it through joint ventures with their own firms. d in many ses, requiri that their technology be transferred to empower chinese entities to become, you know, great rld companies. >> sulliva china wasn't supposed to be doing this under rules set by the world trade organizati, which it had joed in 2001. and though china says it has no official policies forcing compans to hand overch telogy, u.s. trade officials started getting complaints about thpractice just years afte cina joined the wto. but the complaine with a catch. >> companies would come in and complain. they'd have eat information, but, "oh, by the way, you can't use any of thi but solve our problem." and so that was always aal nge. >> sullivan: why did that make it harder? >> it made it harder, because yocouldn't really prove yo 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 th administratie don't even want you raising this issue too loudly."ht >> rright, 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 mon at stake. >> they had a lot of money at stake. >> sullivan: how did that... behind your back in a way,tied how did that affect, in the long run,he, the u. position against china? >> yeah, it probably emboldened chbit, right? because as more and more problems came up, individual companies were verspooked and didn't want to, you know, visibly be associated with any strong action by the u. govegoment. ♪ >> sullivan: by 2008, u.s. rompanies were facing more and momo competitionchinese companies, and chi c was becoming an economicorce. >> the chinese tonight reaching their hands out to the world iny a re unprecedented way.

>> sullivan: the china model was working, and ready for prime time. that opening cerony, do you remember it? >> i was there. >> oh, my god.hat did you see? i sat up in a high seat, and i was around all these chinese peopleho'd come in from all over the country. >> (cheeri) >>hey were beamingith pride. >> sullivan: what do you think the world saw? >> the world saw a pretty incredible place. on, "holy cow.w the world away. 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 hi >> (cheering) >> it was go-go years in beijing. everything was possible. you know, and there wastill a t of respect for the u.s. andmi the u.s. ecosystem, the u.s. financial system. and, you know, theno was stillll 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 wall street, the worssince 9/11.nc >> the worst financial crisis in modern times. >> three of the five bigst 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, bust w that with my friends was this idea of, like, "we thought you guys knew what you were doing." >> a crisis which is unraveling meownership, the middle class, and the american dream itself. >> i dinitely look athe, the financial crisis, 2007, 2008, as a, a aa really key turning point in how the leading chise thinkers saw the u.s., where the u.s. maybe was up here in termsm ofhing to emulate in certain ways, went down to here or lower, because basically the emperor has no cloth >> the aitude changed profoundly. c.e.. who used to be able to go see the, the premier, andid

presidhey would come, and they would have to meet a low-level official, who would bete them. it was, it was stark. but you got to remember, for, for all these years, we had, you know, we had low-voltage congressn or businesspeople coming in and, and shaking their finger in chinese, saying, "y should have all the children you want, you should do abis, you should do that." and these very c chinese tongue and say, you know, kind of, "thank you for your wisdom," because they, they needed, they needed america, they nded, they needed us, so they had to tolerate us. then all of a dden, global financial crisis, and it was payback time. it w, like, "you listen to u for a while." (crowd applauding) >> sullivan: publicly, china would promise to on its markets more tu.s. business. revealed.w chinese leader is >> 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 underi nping, it embraced an ambitious national plan, called ade in china 2025," that put even more focus on dominating key global industries. >> there is this belief that china is destined totoeturn to its former gloes, and you can't restore your, your fabled gloryf 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 dcovered china was also using other means to get ahead. >> in early january of 2010, i get a call from google, o had just announcedhathey had be hacked. >> google trtred the sabotage back to china. >> ithe course of the investigation, they actually more companies that had been targeted. >> not only was google itself targeted by the cyber-sps, butth so were at least 20 other major

corporations. >> sullivan: you thought at that time, "this is somethi bigger." >> for the first time ever, we were facing a nation-state, an telligence service, that was breaking into companie not governments, not militaries, but private-sector organization. >> in all more than 72 orgazations 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. it coming from one particular place? >> sullivan: and alperovitch was called to the white ho situation room to brief obama'ie 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. they were not taking strongery action against china, their response was, "it's complicated." >> sullivan: "it's complicated.p did theyin that? >> well, they were telling me straight out, "those same customers th are getting

victimized by china, they are the same companies that aremie in to tell us, 'don't do anything to harm the relationship with china. we want to continue doing business there. there.t to continue making mon we need that market.'" you know, the, the u.s. government listens to companies, so ithcompanies are saying, "chill," they'll chill. >> slivan: how can businesse walk into united states agencies anedcomplain about being tre unfair, if they're the ones that are preventing any action from being taken? how do they get to have it both ways? >> somimes two things can be true at the same time. i mean, their incentives are to make money. if your businesss in china, xi jinping is more importantna to you than 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 tshareholders, not to the government of the united states. (band playing "hail to the chief")>>

ullivan: neither google nor y the other companies we contacteabout cyberattacks would agree to talk to us. and chinese officials deny they've been involved 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 have made significant progress inin enhaunderstanding between our two nations. >> sullivan: obama also brokerei a major trade agreement with allies, the trans-pacific partnership, or tpp. (crowd applauding) ss was supposed to put pree on china to fix the growing two countries.ems between the but all of that would me unraveled with a new president in the white house. (march playing) trump quickly withdrew from the ofp agement.

and by the fall 2018, with his own tradeti negoations stymied, the conflict was widening. the administration tooooa tough turn, confronting china aggressively. >> ...releasing a new report tonight detailing just how big the threat china poses.li >> sn: it accused china of breaking the cyber agreement... charged with hacki.cers >> sullivan: ...angaging in widespread technologogtheft. >> this latest indictment adds tohe growingension between the u.s. and china in the middle of this fierce trade war... now, through the made in party has set its oncommunist controlling 90% of the world's most advanced industes, including robotics, intelligce.gy, and artificial >> really an extraordinary speech, attacking china on the domestic politics front,he trade front, and the military front. >> chinese security agencies have masterminded the wholesale theft of american technology. >> they don't nt to wait 20 more years to catch up. ey're just reaching into the cookie jar and taking whatever

they want... >> and using that stolen a technology, the chines communist party is turning plowshares into swords. >> that speech was not a hawkish speech, that speech was a declaration of economic war d potentially a real war. >> in china, it was read byl everybody e way up to the top. >> did the vice president issue y kind of evidence? >> sullivan: as what? >>s a harbinger of, you know, something really, really different and something that was really alarming for them. >> sullivan: why was it alarming for them? >> iwas a very unnuanced, undiplomatic speech. it was kind of a bill of indictment.an >> both chinthe united states need to make an effort to make sure that the bilateral relations do not get out of control. is this: this president will not back down. (audience applauds) >> that was the point of no return, d it's not being acknowledged enough. it was the most important speech of the whole trump administtion.

♪ >> sullivan: early on,he focus of the trade war had been on tariffs and reviving i 20th-centuustries. 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, r whthe battle was being waged. >> the fear inside this ite house is that china is using its vast financial resources to leap ahead, technologically, of theit ed states. >> sullivan: the trump administration was trying to restrict china's access tool valuable tecy developed by americam companies. >> first up, though, this morning, the trump white househo announci a pivot. >> using existing law reted to national emergencies to restrict chinese investment in sensitive technogies. >> sullivan: on sa hill road, i met one of the mosthi experience-tech bankers in the valley, who watroubled by whate was seeing. he told me about a flood of rolls he started receivingrt chinese investors about five

years ago.he emembered one chinese investor in particular. >> he'd been sent to invest in technology; could i help? and i i id, "well, what kind of technology?" and he, he had difficulty answering the question. and if i pushed him hard,in clearlhe end, it would be artificial intelligenc semiconductors. maybe things having to do with . automotive >> sullivan: the chinese government's top'sriorities. >> the chise government's top priorities, right.op 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 gornment. >> sullivan: how much money?. >> $15 billi >> sullivan: with a b. >> yeah, and they told me that their only, their only mandate dis s invest in semiconductors. >> sullivan: whayou think

of that? >> i thought, "this s ... i don't know if this is good." >> sullivan: i mean,ou've beenf at the heartlicon valley financing... >> yeah. 35 years.n: f >> 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. thth 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 e.yo thank u. at stanford universi, i found investors and entrepreneurs grappling with chi'sbi high-tech ons. >> silicon valley is very much at the hea h of the trade war. >> sullivan: why do you say at? >> the u.s. needs to keep a technological advantage. silicon valley, it's generating a lot of the innovations thatha e wering the u.s., in term 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 d i think that's what we prably are really worried >> a lot of chinese tetenology companies invest heavily in 5gs... >> now there are areas where they're actually, you know,it quite compe, 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 t far. do you think the administration had good reason to clamp down on investments from china in n valley? >> i think so, but there's a difference between, "yes, there's a problem," and theer response being m msured, appropriate, and grounded. i think they, they may end up operating to our detriment br,dly economically, but al without the ability to collaborate, it's going to be very difficult for the.s. to keep up. >> business used to be the ballast in the relationship,

because american companies made moy, american consumers got cheap goods,s,ept inflation down. ina t know-how, capital, et cetera. the busine relationship is now the major confct, 'cau we're both going for all the technologies of the future. we're both racing foal leadership influence. so now busins is, is an irritant, and it's'she conflict. ♪ >> sullivan: ai drove around the valley, i could see the challenge of this high conflict. chinese businesses are visibes t, tightly connected to the econy. and few peop i met here thought the trump administration's hard line on ina would be good r anyone in t long run. >> the endgame here is the decoupling of the americ and chinese economies. >> which, by the way, is already underway, and it's going to continue.hi >> i t there are people who think that sealing ourselves ofs is ultimately the best solution. >> sullivan: to break china d

the united states' economies apart. >> yea but that seems so sad, because we could do so much for each other. your goal is to stop china to accomplish thaty,re not going because they'll, ty'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 couou become more powerful in the world marketplace than, than the united states. s.>> the better goal is for us e spend n beming more powerful ourselves, i think. ♪ sullivan: that was a sentiment i'd been hearing throughout my reporting on the trade war. and back in oh, where i'd first seen the impact of the oriffs. >> the future isn the line for more workers at general motors. >> sullivan: people were making the same point in the facef seemingly unstoppable economic forces. >> a large american factory rcopped production today... >> sullivan: in 2019, the gm plant in lordstown stopped producing cars. (horn honking, crowd sing)

a major hit to auto workers. >> this s ant 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 e that general motors, which is ininsting billions of dollar all-electric, emission-free, green cars, will decide to build them right here. ar horn honking) >> we've got tfix our system to compete with china. we've got to internalize some of this blame and not spend a our time bming 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 agrs they've made, but they're focused and moving ahead. >> cna has a plan. th a 50-year plan., a 20-year, i mean, we really need to get serious about this in, in terms of electric cthicles, in terms of, of new technology, in terms

of manufacturing, and make sure that our government is supportive. >> we didn't do what china'sg. do we didn't look at,t,where are the industries of the future? where do... what kind of traing do we need? what kind ofeopldo we need? what kind of incentives do business need to do" this is where, actually, the chinese system that 've always looked d dn on actually has an advantage now. ♪ ul >>van: in washington, through the spring of 2019, president trump was hopeful about getting an agreement on at least some of the difficult and long-standing issues. >> we are rounding the turn. we'll see what happens. we have a ways to go, but not very far. >hat's still left to ftree to, sir? >> we have things, we have things. we're talking intellectual-property protection and theft, wre talking about certain tariffs... >> sullivan: deste challenges, he said a deal is possible. >> this is the granddaddy of them all, and we'll see if it

happens. it's gotot.>> sullivan: but whel is made, trump's trade war has heightened the economic conflict. i hink i'll quote my chinese friends... >> sullivan: and the specter of a prolonvalry looms large. what does trump want from china? what did the camp in the whitehouse that you were in, what do you want? >> i believe you need... you need aually a change of the top leaders in the chinese communist party.ul ulvan: hva on earth... >> i think the goal into china is quite simpl is to bring them... iso break the back of this totalitarian mercantilist economic society... >> sullivan: y're talking about regime change. >> well, first off, nobody in the white house is talkiokitbout that? and the president would neidr even consider that. they're talking about a trade deal and some fundamental economic change. i'm sang, 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, beral, docratic west.

one of those two systems is going to be the system at the end of the day (man speaking chinese) >>rade wars can get out of conts l pretty fast. >>he arrest of a top executive at chinese telecom... >> this is really the united states ramping things up against huawei. >> tensions in the south chinate sea es. >> taiwan has become a hot-button issue >> our next major war could be fought against china. >> this is my optimistic scenario, that we wie a managed tension. but we do have the, uh, pessimistienario. 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, with the ussr. but we will have another typ of cold war that nobody have ever experienced. buvei think it's a comprehen confrontation. that's dangerous. that's really dangerous, and if that hapns, if that happens,

it will last for quite a long time. then that's a tragedy for everyonenei think. ♪ >> most people outside of flinta lothe lead iue, but the killer has beelegionnaire's. >> narrator: a frontline exclusive inveigation. >> i plotted out each one of those deaths, just to see if anything stood out. and in fact it did. >> narrator: what did chigan officials know? >> a lot of people didn't want us to exposehawas happeningy and whit was happening. >> narrator: a coverup?re a >> test the water. they should have tested the water. >> go to pbs.org/frontline fore the latest on ade war... >> ...trump personally raised the pressure on china... >> ...and more reporting plom our partners at npr. >> some of the p

that are very pro-tariff right now make an argument that the united states has lost its manufacturing base. >> we have also created miions upon millions of jobs in new industries that didn't exist 20 years ago. >> connect to the frontlineac community on febook and twitter and watch frontline anytime on the pbs video app or pbs.org/frontline. >> frontline is made possible by contributions totoour pbs station from viewers like you. thank you. and by the corporation for public broadcasting. major support is provided by the jo d. and catherine t. macarthur foundation, committed to building a more just, verdant more information a. macfound.org. the ford foundation:is working withnaries on the frontlines of social change worldwide. at fordfouation.org. additional support is provided by the abrams foundation, committed to excellence in journalism. dedicated to heightening public gess of critical issues. the john and helssner

family trust. supporting trustworthy journalism tt informs and inspires. t and frontline journalism fund, with major suppo from jon and jo ann hagler. captioned by media access group at wgbhg access.wgbh. >> for more on this and other "frontline" programs, visit r website at pbs.org/frontline.bs ♪ to order "frontline's" "trump's trade war" on dvdis shoppbs, or call 1-800-play-pbs. this program is so available amazon prime video.

♪ ♪ you're watching pbs. ♪ ♪ -you've said you'd favor middle-class tax cuts. -the froe is just up here. that's where the river... -she took me out to those wetlands. -i think we're off to a great start. ♪

♪ ♪ ♪ ♪ ♪ [ lively conversations ] waithere we go.

patron: thank you, my dear. waitress #2:thing else to drink, or just the water?