>> narrator: tonight... de >> the tar is on, this is rocking the markets. >> narrator: as tensns continue with china over trade... >> the latest business to feel the pain of the e -china trade war... >> narrator: frontline and npr correspondent laura a llivan investigate... >> china is going to bthe number one market from any perspective. >>ore or for everybody? >> for everybody. >> nartor: the forces behind the conflict... >> we're not in a trade war,re we're in a techonomic war.ic >> narrator: both here and abroad... >> this is a great power struggle... >> do you think that americans should be worrd?ye >> o i think so. >> narrator: and, what's at stake. >> this isot jt a trade war. old war,lking about 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 with.we 've got to fix our system to compete with china. >> we do have a chance to see e new cold war. i think it's a comprehensive confrontation. that's ngerous. >> narrator: tonight on frfrtline... "trump's trade war.r" rontline is made possible by contributions to your pbs station from viewers like u. thank you. and by the corporation for public broadsting. major support is provided by the john d. and cathere t.hu macafoundation, committed to building a more just, verdant and peaceful world. more information at macfound.org.ou the fordation: working with visionaries on the frontlines of social change worldwide. at fordfoundation.org. addition support is provided by the abrams foundation,it cod to e eellence in jojonalism. the park foundation, dedicated to heighteng pubngc awareness of critical issues. the john and helen glessnerly

falyst. supporti trustworthy journalism that informs and inspir. and by the frontline journalism fund, with major support from n and jo ann hagler. >> wow, that's great. yay! >> air force one landing at th palm beach international airport. >> laura sullivan: 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 onhe the dule. >> a very large delegation of almost every relevant cabinet member... >> and said, "hey, why are we having these big meetings? one-on-one time as possible." >> first one president arrives and then another. >> sullivan: within hours, esident xi of china was on the ground, bringing together the leaders of the world two

largest economies. >> one of the things that president trump believes-- h believes in this total-- is s of personal relation great powersan make a difference.re >> the pdents face-to-face for the first time. (cameras clickinin >> thank you, everybody. thank you. re >> tas a lot of time in the schedule with them literall one-on-one, begether and creating the relationship thhi 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 ao . >> nihao. >> 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 antwo leaders sit getherd two family actually sit together. president xi and his we had a

very good interaction with president trump. >> we've had a long discussiony, alrend 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 cawork with, and he is someone that we can ta to. he's a reasonable leader, and maybe he can do something the ordinary conventionau.s. ader won't do." so thexpectation was veryhi , and the hope was, ybegh they c control the situation and they can work together to solve the problem gradually. >>hank you. >> sullivan: but long-standing were reaching a crhe countries and despite the promising start and all the optimism...ot i believeof very potentially bad problems will be going away. >> sullivan: ...withear, trp would turn on xi, imposing billions of dollars in tariffs

and leading the united state into a perilous confrontation. >> the fights were 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 china that we're engaged in.ng there's 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,am ican companies are bracing for battle. >> sullivan: in fall 2018, i headed to southwestern ohio. present trump 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 trumpurns up the heat on china. i ntedo see rst-hand how these tariris were playing out on the ground. >> as things com cto a boiling point between the two largestie econin the world, tariffs are now hitting too close too home. >> slivan: trump claimed the tariffs would help american workers, boost.s. businesses,er and bring life back to places like this, which for decades had been hurt automation and,y, more recenmports from china. >> president trump says he's keepina campaign promise to bring back steel-industry jobs. >> on the streets ofetown, thsigns of economic struggle are everywhere. >> sullivan: the tariffs on imported steel were particularly welcome ne to struggling communities like middletown,ow where i met up with some steelworkers at a cal coffee shop.to >> there usee a mall down here. we had three city parks and three city pools, and nows therne. >> sullivan: what did you think when you first heard that trump was putting taffs on steel? >> i thought it was, you kw, itas about time. i've watched the, the rmers

get their subsidies.i' 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 youu s pecting to see? >> everybody alwlks about jobs and america, and we hr that all the time. we want to see that, that realy 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 wt 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 t st u want your industry propped u >> no, not at all. >> sullivan: you want your industry... >> a level playing field.ul >>van: you want a level playing field. >> that's all we want. >> sullivan: b using tariffs to level the playing field has e flip side. ey've brought unwelcome consequences for many other u.s. businesses. i saw that not far from middletown. >> the ste of ohio could be the hardest-hit by this looming trading partner.merica's biggest

>> sullivan: at industrial tube and steel, damon gaynor isn the business of buyingnd reselling steel. >> we buy from a bunch of steel mills. r main bread and butter is distributing steel tubing.ee imported steel-- essentially a 25% tax-- ended up raising the price of americasteel, too. and that sent gaynor's costs. skyrocketike h soow 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 t the customerr customer has to pass it along to thei customerand so on, down the chain. >> sullivan: do you think that there'll be a point, though,h, 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 tha trisk, and that's the thing with tariffs is, are y kind of artificially messingfi t with price of, you know, what the market dictates? >> sullivan: and what people wiwi be willing to pay. >> and what people will be willing to pay. and i think that'shestion with tariffs.

is iisgoing to do good, or is it going to do bad? sullivan: manufacturers like shepherd chemical were also hit hard by the tariffs, especially whenhina retaliated th >> so all these taound here produce various metal carboxylates. >> slivan: c.e.o. tom liephe sells products to china, and he also imports raw materials from our sales to china have gone edwn, and our raw materials from china have incren cost.co >> sullivan: how big of a problem is that for you? >> several millionrs 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 istr protect the american economy, this is a bad way too it. >> sullivan: but despite the uneven consequences, preside trump was all in on the tariffst tegy. it's a strategy he's been talking about for years, as far back as the late 10s, when heirst tested the possibility of becoming president.

>> our guest, the famed developer donald truru onew yo... >> sullivan: back then, trump's target was japan and its tradend actices. the fact is that you don't have free trade. we think of it as free trade, but you right nodon'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 countra >> he believed from the beginning that there's really nothing worse than being laugh at. >> they laugh at us behind our backs, they lay h at us, because of our own surpity. >> and he came to see the japanese as laughing at the united states and ta advantage of the united states by stealing the jobs, by dumping product here. >> we let japan come in and mp everything right into our markets and everything. it's not free trade. if you ever go to jaghtgh now and try to strl something, forget about it, oprah, ju, forget about it, it's almost impossible. >> sulliva after japan's economy cratered, trump shifted his ire to a rising economic power, china. >> they are ripping us likee wever been ripped before. if you look at japan, if you l look at china, where we lose

$100 billion a year with g ina... >> he's been saye same thing for 30 years. donald trump has a very binary few of life and certainly 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 against them, and to come out and at least be le to say that you are a wier and they are a loser, there's, it's hard timagine anything more appealing to the core of his personality.om >> please wethe next president of the united states, mr. donald j. trump.eo e 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. i was, you know, cout of trump, goldman sachs, a, and being somebo 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 almomo no policy. m but what i foutt extraordinary was, when we got to the section on china, which i kind of threw out there, of a two-hour meeting, alst 30 minutes or mororwas almiabout china. bi >> we have a $50ion deficit, trade deficit w d 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 at rade defi $315 billion lastst >> he's been a guy that's watched lou dobbs for 30 or 40 years. and the only thing he had former as aview was china. >> because we can't continue t allochina to rape our countr and that's what they're doing. it's the greatest theft t the history of the world. >> he talked in this kind of vernacular that, thakind of hit people in the, in the gut, and particularly when he talked abt trade and jo and job shifting overseas. >> sullivan: what was his messagto these peoplplontr e? "china's to blame"? >> yeah, the message's very simple, is that, "the elite shipped the jobs orseas, 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 prident of goldman sachs, gary cohn.n. >> 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 os two,twr t to the president complete diameically 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 stiness on the things like the paris accord and tpp, , l this other stuff, roll it up, and pur it to the faf ten, they don't compare to these weekly nasty trade meetings. ♪ ro >> sullivan:the stt, the

weekly trade meetings surfaced deep divisions among trump's o advisershow to deal with rising economic tensions with china.in 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 mnuchi on the other side, the nationalists included bannon, along with robert lighthizer a a peter navarro, a hawkish economist whose film "death bya" chaught auump's attention. >> one of the most urgent urgoblems facinamerica, its increasingly destructive trade relatiship with a rapidly rising china. >> sullivan: the two camps digreed sharply over wheth aggressive measures like tariffs would help or hurtrthe americanu 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 power. and a great power had to built upon, had to be built upon a great manacturing base.ri

to "make america great again," you've got to brinma facturing back to the country. >> sullivan: se of the people that are very pro-tari right low make an argument that the united stas ha its manufacturing base, and that this is actually real ople's lives at stake here. >> well, the data woulshow manufacturing jobs have gone down in the united sedtes, so i understand where they're saying there. the flip side is factory output, or what we produce in the united states, has actua hy gone up. there's this thing called technology that's ppened in the united states. factories have changed buwe 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 trabout more than just indl policy. it reflected a fundamentaler dice over how best to confront china and what each saw as the endgame.na >> the nats said, "this is a great hegemonic, you know,

great-power struggle." it's definitely 'so systems that couldn't be more radically dierent, right, and, and o of these two are going to win. we need not just a trade deal,d we nndamental structural changes in their economy. >> slivan: some of your form colleagues have sat exactly where you are and said, "this is a nner-takes-all situation >> yeah, i, i understand that, and that's the nationalist versus the globalist. >> sullivan: yeah., >> the globaliay.st 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. quite personal.nts wouldet we would get through the facts quickly, because the two sides are just nev going to ag ne what the facts are. then it uld get, then it would get personal. >> from time to time, there were pehat tried to use un-footnoted, undocumentedot facts. it's my job to get rid of the undocumented, un-footnotedsu facts, and mak that those don't enter the oval office.ou

>> and ae of times, we had blowups. i mean, there was a blowup in to... we kind ... the first..d couplef days general kelly was there, we had to exit and goth back introosevelt room, and it's kind in a, it's kind of, uh, in-youfa with a couple of people. >> sullivan: where was trump while these two twrties are on offferent sides of this? >> he has a default position. s?s default positionons, you know, "build the wall." his default positi is, "engage, engagagchina in the economic war." you know, "get tarif," but he's going to let you fight it out. >> president donald trumpal arrived in china for his first ficial visit 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 pling march)pl ...filled pomp and ny, and e two leadersrk seemed ready to ogether. (band continues playing)

their netiators agreed on a plan for china to buy billions of dollars in u.s. products, like beef and natural gas. ♪ tst behind the celebrations, trump's nationalad devised a different plan. >> we had a couple of tricks up our sleeves. navarrand i start to dust offof the, the secret weapon we had, to call a national-security emergency, kind of what we're (people applaung)er right now. to use the national-security emergencpowers that are invested in the defense department to reallytart to go after steel, alumim, maybe autos, but eventually technology.'s ime to get it i. >> sullivan: by march 2018, the president was ready e action. >> tha you very much, everyone. u we have withs the biggest steel companies in the united states. they used to be a lot bigger, but they're going to be a lot va sullivan: executives from the

steel and aluminum industriesnd were hastily gathered inin washon. >> they were allalled to the white house, had the meeting. and at that time, the president announced what he was going to do., >> next we'll be imposing tariffs on steel imports andff taon aluminum imports. >> sullivan: what was the reaction? >> the reaction was surprise. >> it will be 25% for steel. it will be ten percent forit uminum. >> this moment was a seminal moment in trade policy, becauseg it's the mosessive use of this kind of trade law appro ah. ev this is donender the theory of 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.mp >> steel wastant to our national security broadly. miliry, critic frastructure, and the economy b a whole. and that had nevn 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 rt u.s. allies more than china. that's bause allies like canadaell much more steel to the u.s. tn china does. at the state department, the toi china spec quickly started getting complaints. what were some of the united states' allies saying? ie>> well, certainly the a were very much taken aback that they were the target of e steel tariffs. they don't understand the focus on tarifey don't understand the focus on deficits, they don't understand the rejection of the international tradin you know, norms and institutions. ey don't understanthe u.s.'s rejeion of global free trade, since this is the system that we basically set up. >> sullivan: trump had upended decades of u. trade policy, felt was his. start a fight he >> in several meetings, even in high-level meetings with the tesident, some foreign leaders.

you know, offerey said, "we want to help with china, we want to do this together wh 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 disappoint? were you frustrated? >> if you adamantly believe that something doesn't make sense, ntyou're personally disapp, but ultimately, it's not your decision to make. >> sulliuln: within a month, cohn would leave the white house. the natialists had won. >> president trump turning tough trade talk into action. >> new tariffs announced by thet trump admition on $50 billion worth of chinese exports. >> china is now punching backnt with an equal f tariffs on american exports. >> president trump has justta slapffs on another $200 billion of chinese exports. st igniting the biggest trade war in economic y. (train bell ringing) tarifflivan: this was th

fight that had first brought 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 shanghai in fall 2018, in the middle of what wat being billed as the world's largest import expo, a week-long trade extravaganza that drewthan it had been eight since trump's first tariffs,nd i wanted to hear what businessesat 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 ve actually a, a very special italian wine. the cream of the top ofal the n wines. >> sullivan: u.s. companies ieve been doing business here for decades and seemed unfazedy the trade war.

number-one market from any perspective, and... >> sullivan: for g.e. or for everybody? >> for, for everybody. >> sulliva 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 o joint-venture subsidiaries in the market. so very, very important to dupont. >> sullivan: it seemed like businessnes usual. what do you think the trade >> that's another thing you really just have to not worry about, because today i met myriads of chinese businesspeople... >> slivan: okay. >> ...men and women, that look you in the eye, and they want to do business with you. t >> sullivay do. >> and you're going to find a way. >> sullivan: it was hard to gaugif trump's tariffs were ving any impact here as i traveled arou the country... nihao. >>ihao. >> sullivan: helhi. somese 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 one of china's top tra officials agreed to talk to me. 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 in the world. and we do not have the secret strategy to reple the united states as the global superpower. ♪ li >> sn: but u.s. companies have long complained about an economic strategy that china does use.

they sayt gives chinese the government plays a heavyge. hand in the market here, thrgh massive subsidies ansupport. special economic zones, for example, have been created to spur industries the government believes are critical to china's success.on i found e six hours south ofin shanghai, the industrial port city of wenzhou.is conomic strategy is called "the china model." >> the china model is a blend ownership of resources and a economicivities dominad by privatentrepreneurs. 90% of the new jobs are in the private sector, t all the land is still owned by the state. control of energresoces controlled by the state. control of theinancial system, basically by the state. so you come up with this socialism with chinese characteristics, or socialis market economy, which is what

china calls itself. >> sullivan: here in wenzhou,ve the goment has prioritized high-tech development, proding suppt to companies like wm motor to build electric cars. l in 16 months, wm built a massive manufauring facility that will be able to produce 200,000 electric cars a year. (music playing in commercial) >> we focus on the intelligentge smart car. >> sullivan: and this is them? these are the cars? >> yes, this is tually the veryarly-stage car... >> sullivan: freeman shen is tht c.e.o. of wm m.♪ ♪ the china market for auto sale 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 om chinesemp ies, like wm. how does this reesent sort of a changing china?

>> oh, interting. you know, when a country upgrgring 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 e whole dustry. >> sullivan: you're saying, like, the, the cars are the, the y...wether of how a co >> exactly, exactly-- exactly. >> sullivan: why, why do cars..e >> becyou know, it's asasmbly of all kind of technology. it's equally software,ti mechanical, li. you've got, cybersecurity's in ther >> sullivan: so you're saying that cntries that can build a car... >> you've got all kind of industry very strong before you can build a strong car in at country.ul >>van: and if you can build a car, it means you are moving up the technology chain. >> exactly, exactly. >> sullivan: you're coming up. al the value chain, basically. >> sullivan: the chain. >> is going up. >> well, the communi party has long seen the automotive industry as a pillar iy. and so they've devoted huge amounts of resources and policies towards build that industry. it's all about bringing china up into the top tier of global

economies, in terms of its binufacturing capabilities and technological caties. you're not going to get rich, you're not going to become a perpower 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 chcomplaining about the waina hands economy, or is about china's legitimacy to become a osperous andpeowerful country? our polation is four times bigger than thu.s. we have 1.3 billion people. right? you have 300 million people. china's economy should

four times higher than the u.s. econy. now we are only... >> sullivan: that would be difficult for people in the united states to accept. >> yeah, of course, , this is, this is difficult to, to, accept, right? today we are only 60% the size of the u.s. i think we do have the to be at least as powerful ashe u.s. and eve one day, much powerful than the u.s. americans should be worried?at >> oh, yes, i thinso. >> sullivan:es, 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? >>ullivan: big b hther. >> ae 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 rlly depends on the, the intelligence of both countries' leader to make sure.

worry is fine.t but please, doght. ♪ (audience apauding)ul >>van: but back in the u.s., trump was eager to escalate the tariff fight.nk >> tou very much. >> sullivan: in fall of 2018, he upped the ante by threatenin ev more tariffs. >> as you u ow, we have $250 billion at 25% interest with china right now, and we could go $267 billion more. d china wantwato talk ve badly. and i said, "frankly, it's too early to talk." can't talk now, because they're not rey. because they've been ripping usr for so many >> sullivan: trump's position was that it was time to hit t back, and that prior soft on china.s had been too >> they have a surplus of $375 billion-- with a-- we s been states, and i that way for years ars years and years. i don't blame china, ilame our leadership. they should have never let that happen. and i told that to president

xi... >> sullivan: but while trump was blaming his edessors, we were hearing about other reasons why the problems with china had gone oso long. dozens of interviews we did in china anthe u.s. pointed to an unlikely obstacle-- american businesses themselves. >> they wereorried about the erations 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 comeo be known as forced tec transfer, where companies wanting to do buness in chinabu say they're prprsured to give up their technology. >> china started adopting what were called indidinous innovation policies to make t sut 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 danded that many foreign companies seeking to come into

their market had to do it through joint ventures with their own firms. and in many ses, requiring that their technology be transferred to empower chinesemp entities to become, you know, great rld companies. >> sullivan: china wasn't supposed to be doing this under rules set by the world trade organizati, which ad ayined in 2001.jo and though chinait has no official policies forcing compans to hand over technology, u.s. trade officials started getting complaints about the practice just ars after china joined the wto. but the mplaints came 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 this, but solve our problem." challenge.t was always a >> sullivan: why did that make it harder? >> it made it harder, because you couldn't really ove 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 wao you raising this issue 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. >> slivan: how did that... sort of having your hands tiedou behindback in a way, how did that affect, in the long run,he, the u.s. position against china? >> yeah, it probably emboldened china a bit, right? because as more and moream problemsup, individual companies were verspooked and didn't want to, you know,vi bly be associated with any strong action by the u.s. govegoment. ♪ >> sullivan: by 2008, u.s. companies were facing more and momo competition from chinese companies, and chi c was becoming an economic force. >> the chinese tonight reaching their hands out to the world in a rely unprecedented. >> sullivan: the china model was working, and ready for prime time.

that oning cerony, do you remember it? >> i was there. >> sullivan: what did you see?y >> oh,d. i sat up in a high seat, and i a was around these chinese people who'd come in from all over the country. >> (cheering) >>hey were beamingith pride. >> sullivan: what do you think the world saw?>> he world saw a pretty incredible place i think it blew the world away.l on, "hcow. and all of a sudden, they just do this incredible opening ceremony. (crowd cheers)w they know to put on a show.e it wasthe biggest coming-out party in history. >> (cheering) >> it was go-go years in beijing. everything was possible. you know, d there was still a t of respect for the u.s. and the s. economic system, the u.s. financial system. and, you know, theno was stillll banks, and the idea that the u.s.... they understood how to run a financial market. as and then... the happens.

(closing bell ringing)n >> a meltd wall street, the worst since 9/11. >> the worst financial crisis in modern times. >>hree 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 nks, but i just saw that with my friends was u guys knew what you werehought doing." >> a crisis which is unravelinge homeownership,iddle class, and the american dream itself. he i definitely look athe, financial crisis, 2007, 2008, as a aa really key turning point in how the leading chinese thinkers saw t u.s., where thehe 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 clothes. >> the aitude changed profoundly. ble to. who used to be go see the, the premier, and , presidenid they would cod

they would have to meet a low-level official, who would berate them. it was, it was stark. but you got to remember, for, for all these years, we had, you know, we had low-voltage congressmen or businesspeople comi in and, and shaking their finger in chinese, saying, "you should have allhe children you want, you should do this, you should do that." and thesvery capable chinese tongue and say, you know, kind"t ofnk you for your wisd ," because they, they needed, they needed america, they needed, they needed us, so they had toto rate us. then all of a sudden, global financial crisis, and it wasti paybac. it was, like, "you listen to us for a while." (crowd applauding) >> sullivan: publicly, china would promise to open its markets more tu.s. business. >> the new 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 learnbo more china. >> sullivan: and under xi jinping, it embraced an

ambitious national pla 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 glory if you're not the leading country in all sorts of areas, be it military, be it technology, be it, be it manufacturing. ♪ s livan: 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, o had just announced thathey had be hacked. >> google trtred the sabotage back to china. >> in the course othe investigation, they actually realized that there were many more companies that had been targeted. >> n 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 isomething bigger."

>> for the first time ever, we were facing a nation-state, an telligence service, that was breaking into companies, notgo rnments, not militaries, but private-sector organization. >> in all more than 72 orgazations were hacked by spies, dating back to 2006. >> sulvan: the google hack led to revelations about dozens of other chese cyberattacks. >> ...dubbed operation shady is it coming from e particular place? >> sullivan: and alperovitch was called to the white house situation room to brief obama'ie top national surity officials. >> i briefed them on what we tre seeing with both aurora, night dragon, shady rat. >> sullivan: what did they say?i >> my impr was none of this was a surprise. and when i pressed them on whyt they were king stronger action against china, their w respon, "it's complicated." >> sullivan: "it's complicated." did they explain that? >> well, they were tellingute straight"those same customers that are getting victimized by china, they e the same companies that aree coming in to tell us, 'don't do

relationship with china. we want to continue doing business there. we want to continue making money there. we need that market.'" >> you know, the, e u.s. government listens to companies so ithe companies are sang, "chill," they'll chill. >> sullivan: how can businesses walk into united states agencies and complain about being treate unfair they're the ones, if that are preventing any actionfr being taken? how do they get to have it both ways? >> sometimes two things n 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 y than donald trump or barack obama. and it's, it's not that these are bad people who don't careut about america,heir incentives are to shareholders, not to t government of the united states. (band playing "hail to the thief") >> sullivan: nei google nor contacteabout cyberattacks

would agree to talk to us. and chinese officials deny they've been iolved 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 economicin cyber-ha >> 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 put pressure on china to fix the growing economic problems between thes r two cos. but all of that would mera led with a new president in the white house. (march playing) trump quickly withdrew from the. tpp agem and by the fall of 2018, negotiations stymi

the conflict was widening. the administration tooooa tough turn, confroing china aggresvely. >> ...releasing a new reportil tonight deg just how big the threat china poses. >> sullivan: it accusea of breaking the cyber agreement... >>hinese intel officers charged wi hacking u.s. businesses... >> sullivan: ...and engaging in widespread technologogtheft. >> this latest indictment adds tohe 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 intelligce. speech, attacking china on the domestic politics front,he trade front, and the military front. >> chinese security agencies have masterminded the wholesalef of american technology. >> they don't nt to wait 20 more years to catch up.ch they're just rg into the cookie jar and taking whatever they want... >> and using that stolen technology, thchinese communist party is turning

>> 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 eveybody all the way up to top. >> did the vice president issue any 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? >> it was a very unnuaed, undiplomatic speech. it was kind of a bill of indictment. >> bh china and the united states need to make an effort to make sure that the bilateral relations do not get out of contro >> our message to china's rulers back down.his president will not (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,he focusde

ofhe tar had been on tariffs and reviving 20th-century iustries. but it'dow become about far more. about who will dominate the cutting-edge industries of the 21st century. where the battle weing valley, waged.r >> the feaside this ite house is that china is using its vast financial resources to leap ahead, technologically, of the united states. >> sullivan: the trump administration was trying toct restrihina's access to .aluable technology developed by americam compani >> first up, though, this morning, the trump white househo announcing a pivot. >> using existing law reted to national emergencies to restrich ese investment in sensitive technogies. >> sullivan: on sa hill road, i met one of the most exinrienced high-tech banker the valley, who watroubled by what he was seeing. he told me about a flood of calls he started reiving 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?l, and i i id, "what kind of technology?" answering the question.ty and if i pushed him hard, ldclearly in the end, it we artificial intelligence, semiconductors. maybe things having to do with automotive. government's top'sriorities. >> the chinese government's top priorities, right.op much do you have to invest?" how and he claimedhat he had access to a billion dollars. >> sullivan: a billion dollars? >> yeah. and then i met a private equity some entity in the chinesefrom gornment. >> sullivan: how much money? >> $15 billion. >> sullivan: with a b. their only, their only mandate was s nvest in semiconductors. >> sullivan: what did you think of that? >> i thoug, "this s ... i don't know if this is good." >> sullivan: i mean,ou've been

at t heart of silicon valley financing... >> yeah. >> sullivan: for 35 years.h. >> y >> 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. thank you. at stanford university, i found investors and entrepreneurs grappling with china's hi-tech ambitions. >> 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 lot of the innovations thatha are powering the u.s., in terms of all sorts of differen 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." 's

and i think thhat we probably are really worried about. o >> a lchinese tetenology companies invest heavily in 5gs... >> now there are areas where they're actually, you know, quite competitive, and some areas where they even se to be maybe having an, an edge. >> and you know what? chinese companies al 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 silin valley? >> i think so, but there's a fference between, "yes, there's a problem," and the response being m msured, appropriate, and grounded. i think they, they may end up operating to our detriment broadly economicallybut also, without the ability to collaborate, it's going to be very difficult for the u.s. to keep up. >> businesused to be the ballast in the relationship, nscause american companies made moy, american ers got

cheap goods,s,ept inflation down. ina got know-how, capil, et cetera. the busine relationship is now the major confct, 'cause we're both going for all the technologies of the future. we're both racing for global leadship influence. so now business is, is an irritant, and it's'she conflict. ♪ >> sullivan: ai drove around the valley, i could see the challenge of ts high-tech confli. present, tightly ced tovisib the economy. and few people i met here thought the trump administration's hard line on ina would be good for anyone in the long ru >> the endgame here is theng decoupli of the americ and chinese economies. >> which, by the way, is already underway, and it's going to continue. >> i think there are people who think thatealing ourselves off is, is ultimately the best solution. >> sullivan: to break china d the united states' economies apart. >> yeah. but that seems so sad, because

we could do so much for each other.to if your goal itop china from advancing, you're not goino to accomplish that anyway, innovate around you.ll just why would you want to stop anybody from making progress? i, i don't see that. is to...hink our goal should be >> sullivan: some people would say because they couou become more powerful in the world marketplace than, than the united states. >> the better goal is for us to spend time on beming more powerful ourselves, i think. ♪ t >> sullivan: ts 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 tariffs. >> t future is on the line f more workers at general motors. >> sullivan: people were making the same point in the face ofse ingly unstoppable economic rces. >> a large american factory stopped production today... >> sullivan: in march 2019, the gm plant in lordstownop std producing cars. (horn honkin crowd shouting) 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 pursuingen next-gation technology, thene talk in lordstown that day wasw is plant could be transformed to keep the u.s. competitive. my personal hope e that general motors, which is investing billions odollars in all-electric, emission-free, green cars, will decide to build (car horn honking) to compete with china.r system we've got to internalize some of this blame and not spend all 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 agreements they've made, but they'red focused ving ahead. >> cna has a plan. th got a ten-year, a 20-year,an a 50-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.ti

>> we didn't do what china's doing. we didn't look at,t,where are the industries of the future? where do... what kind of training do we need? what kind of peopldo we need? what kind of incentives do business need to do this?" this is where, actually, the chinese syem that 've always looked d dn on actually has an advantage now. ♪ >> sullivan: in wash, through the spring of 2019, president trump was hopeful about getting an agreement on ou at least some of the difficultta and longing issues. we'll see what happens.turn. we have a ways to go, but not very far. >hat's still left to ftree to, sir? >> we have things, we have ings. we're talking intellectual-property protection and theft, we're talking about certain tariffs... >> sullivan: deste challenges, he said a deal is possible.. >> this is the granddaddy of them a, and we'll see if it happens. it's gotot. >> sullivan: but whether deal is made, trump's trade war has

heightened the economic >> i think i'll qu chinesenk friends... >> sullivan: and the specter of rgprolonged rivalry looms 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 actually a change of the top leaders in the chinese communist party. >> sullivan: 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... s livan: y're talking about regime change. >> well, first off, nobody in the white house is talkingitbout that, okay? and the president would neidr even consider that they're talking about a trade deal and some fundamental economic change. i'm saying, one of thesewo are going to... this, either, this, this mercantilist, totalitariany em that has a network effect, or the kind of, you know, liberal, docratiwest.c 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 t executive at cnese telecom... >> this is really the united states ramping things up agains. huawei >> tensions in the south china a escalate. >> taiwan has become a hot-button issue. >> our next major war could best fought aga china. >> this is my optimistic scenario, that we will have ama naged tension. but we do have the, uh, pessimistic scenario. we do have a chance to s.. a so-calle 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 type of cold war that nobody have everer experienced. but i think it's a comprehensive nfrontation. 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. ♪ o >> most peopleutside of flint look at the lead iue, but the killer has beelegionnaire's. >> narrator: a frontline exclusive investigation. >> i plotted out each one of those deaths, just to see if anything stood out. and in fact it did. >> narrator: what diofchigan cials know? >> a lot of people didn't want us to expose whawas happening and why it was happe. >> narrator: and was there a coverup? >> test the water. they should have tested the water. >> go to pbs.org/frontline for the last on the trade war... >> ...trump personally raised the pressure on china... >> ...and more reporting from our partners at npr. >> some that are very pro-tariff right now make an argument that the united states has lost its manufacturing base.

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