President Biden's multitrillion-dollar effort to reinvigorate American manufacturing and accelerate the transition to cleaner energy sources is collide with the rise of cheap exports from China, threatening to be wiped out investment and employment that is central to Mr. Biden's economic agenda.
Mr. Biden is considering new measures to protect nascent industries such as electric vehicle manufacturing and solar panel manufacturing from Chinese competition. On Wednesday in Pittsburgh, the president called for increased tariffs on Chinese steel and aluminum products and announced a new trade investigation into China's heavily subsidized shipbuilding industry.
Mr. Biden said: “I don't want to go to war with China. “I'm looking for competition – and fair competition.”
Unions, manufacturing groups and some economists say the administration may need to do more to limit Chinese imports if it hopes to ensure that China's broader industrial initiatives Mr. Biden is not overwhelmed by lower-cost Chinese versions of the same emerging technology.
“It's a very clear and present danger, because the Biden administration's industrial policy is not primarily focused on traditional low-skill manufacturing,” said Eswar Prasad, of Cornell University. low wages but new high-tech production. economist specializing in trade policy.
“Those are exactly the areas where China has increased its investment,” he said.
Both the US and China are using massive government subsidies to spur economic growth and try to dominate what they believe will be the most important global market of this century: industrial companies. technology to accelerate the global transition away from fossil fuels to prevent catastrophic climate change.
But their approaches to financing these industries have important differences. Chinese officials have poured money into factories, including offering lucrative loans from state banks to companies that might not have been able to survive without them. help offset the real estate crisis and domestic consumption slows down. Those factories often use cheap labor.
China's factories are now exporting goods at prices that are often much lower than their competitors, helping to boost the country's economy. In some cases, other countries allege, Chinese companies are losing money selling products abroad.
Mr. Biden is also pouring federal money into targeted industries, hoping to seed innovation and open new pathways for the middle class through high-paying jobs. He signed infrastructure legislation, advanced manufacturing legislation focused on semiconductors and a series of manufacturing incentives included in his climate legislation, the Disinflation Reduction Act. Spending and tax cuts from those laws have spurred hundreds of billions of dollars announced in new factory investment plans in the United States.
Some of that support comes with strings attached. The administration has conditioned federal funding on companies that pay relatively high wages or provide child care services for workers. Other credits are conditions at factories based on ingredients mined or produced in the USA. Mr. Biden has targeted his re-election campaign on creating more good-paying jobs, especially union jobs, but some economists have raised concerns that efforts to replace Changing that company's behavior will undermine his core industrial policy goals.
Mr. Biden and his economic team increasingly see Chinese imports as a direct threat to the president's agenda. They are considering new and higher tariffs on some strategic imports from China and have initiated several investigations into Chinese technology, such as software and other components of electric vehicles and other internet-connected cars.
Administration officials are mindful of how China's surge in cheap steel and aluminum exports previously hollowed out American manufacturing hubs in previous decades. Although heavily subsidized exports of solar panels, batteries and electric vehicles are helpful in curbing inflation and combating climate change, administration officials believe the risk of job losses and shutdowns businesses are too high, politically and economically.
These competing goals present a challenge as the Biden administration tries to make the case that China should scale back its production of clean energy technology.
“On the one hand, the Biden administration is doing everything it can to increase consumption of renewable energy products,” said Scott Lincicome, a trade expert at the Cato Institute, a libertarian think tank. . “On the other hand, it warns China against selling cheap renewable energy products, which will boost American consumption of the very products we are trying to encourage.”
Janet L. Yellen, Treasury Secretary, warned her Chinese counterparts about unfair trade practices during a visit to China last week. Administration officials expressed concerns about China's overproduction on Tuesday, ahead of Mr. Biden's announcement in Pittsburgh.
“The glut caused by China's policies poses serious risks to the future of the steel and aluminum industries,” Lael Brainard, head of the White House National Economic Council, said on a call with reporters. America”. “China cannot export to recover. China is simply too big to play by its own rules.”
Chinese officials have made similar complaints against the Biden administration. In response to the new investigation into Beijing's shipbuilding subsidies, officials from China's Ministry of Commerce issued a statement saying that “the development of Chinese industries is the result of innovation.” technology and active participation in market competition by Chinese enterprises” rather than unfair state support.
“We call on the United States to respect the truth and multilateral rules, immediately end its wrongdoing, and return to the rules-based multilateral trading system,” the officials said.
But Americans are not alone in complaining about the new wave of Chinese exports. European leaders have raised similar concerns, including Prime Minister Olaf Scholz of Germany, who complained about Chinese goods being sold at a loss in Europe. during an official visit to Beijing this week.
The European Union is conducting its own investigations into China import electric vehicles, which could eventually lead to tariffs on those products. Block gave one carbon border tax that is expected to hit China, which has looser environmental regulations. The new program will calculate taxes based on carbon emissions associated with the production of imported goods. And so do Mexico and Brazil Pursue anti-dumping investigations entering China could lead to new trade restrictions.
Bruno Le Maire, the French finance minister, noted Wednesday that the deficit between European goods exported to China and the country's imports has tripled in the past 15 years and that more needs to be done. further to create a level playing field.
“Europe must be clear about trade and commercial relationships,” Mr. Le Maire said, explaining that although a trade war will cause damage, Europe should adopt the types of policies industry that China and the United States have applied.
“I just want to emphasize the need for Europe to better protect its economic and industrial interests,” he said.
In the past, the United States and its allies have struggled to assemble a coordinated response to threats to their domestic industries from Chinese competition. That could change at this point, said Mark Haefele, chief investment officer at UBS Global Wealth Management. China's manufacturing export success could be “a catalyst for a more coordinated response” from the United States and Europe on trade, he said.
The arguments for tougher protectionism were made at the spring meetings of the International Monetary Fund and World Bank this week. While the fund warns that tariffs pose a threat to the global outlook, top economic policymakers explain why they view measures to protect domestic industries as necessary .
“Investment in manufacturing is skyrocketing and capacity utilization in these areas is very low,” Ms. Yellen said of China's spending on green energy technology. “With these subsidies, capacity will exceed global demand and will likely even exceed that level over the next decade.”
“And so it's not a level playing field,” she added.
The administration has faced pressure to do more to protect American industry. Sen. Sherrod Brown, an Ohio Democrat who is struggling in his difficult re-election bid, last week called on Mr. Biden ban Chinese electric cars, which already faces high taxes. He called Chinese electric vehicles “an existential threat to the US auto industry.”
Mr. Biden upset Mr. Brown and other manufacturing advocates in 2022 when he announced a two-year pause on current tariffs on imported Chinese solar panels, effectively allowing many of these panels to enter the US market. He vetoed a bipartisan bill in 2023, that would reinstate those tariffs by June 2024, when the two-year moratorium will expire.
He also faces pressure to increase tariffs on Chinese components for electric vehicles or other clean energy technology. Brad Setser, a senior fellow at the Council on Foreign Relations in Washington and a former adviser to the US trade representative under Mr. Biden, said the tariff is currently 7.5% on electric vehicle battery packs but is 25% for the components of those battery packs. He said the lower rate should be raised.
Mr. Setser also noted that China has long subsidized companies that manufacture and supply products in China – and sometimes requires those companies to be Chinese-owned.
“To build industries where China has a first-mover advantage and now a cost advantage, you need to have an insulation market — and use some of the tools that China has used,” he said. use”.
