President Biden's multitrillion-dollar effort to revitalize U.S. manufacturing and accelerate the transition to cleaner energy sources is colliding with a surge in cheap exports from China, leaving Biden's economy There is a risk that investment and employment, which are central to the policy, will be wiped out.
Biden is considering new measures to protect emerging industries such as electric vehicle production and solar panel manufacturing from Chinese competition. On Wednesday, in Pittsburgh, the president called for higher tariffs on Chinese steel and aluminum products and announced a new trade investigation into China's heavily subsidized shipbuilding industry.
“I don't want a fight with China,” Biden said. “I want competition, and fair competition.”
Labor unions, manufacturing groups and some economists say the administration needs to restrict imports from China to ensure Biden's far-reaching industrial vision is not drowned out by cheaper Chinese versions of the same emerging technologies. It said further measures may need to be taken.
Eswar Prasad of Cornell University said, “This is very clear and significant because the Biden administration's industrial policy is primarily focused on new high-tech manufacturing, rather than traditional low-skill, low-wage manufacturing. “It's a present danger.” An economist who specializes in trade policy.
“These are exactly the areas where China is increasing its own investments,” he said.
Both the U.S. and China are leveraging massive government subsidies to spur economic growth in what they believe will be the most important global market of this century: the world away from fossil fuels to avoid catastrophic climate change. is seeking to monopolize the technology that will accelerate the transition. .
However, their approaches to financing these industries differ in important ways. Chinese authorities are pouring money into factories to offset the real estate crisis and weak domestic consumption, including offering attractive loans from state banks to companies that might not otherwise have survived. These factories often operate with low labor costs.
Chinese factories are now exporting goods, often at far lower prices than their competitors, helping to boost China's economy. In some cases, other countries claim that Chinese companies are selling products overseas at a loss.
Mr. Biden is also funneling federal money to targeted industries in hopes of seeding innovation and opening new avenues for the middle class through well-paying jobs. He signed a series of production incentives into law, including the Infrastructure Act, the Semiconductor-focused Advanced Manufacturing Act, and the Climate Change Act to Suppress Inflation. Spending and tax cuts from these laws have injected hundreds of billions of dollars into announced corporate plans for new factory investment in the United States.
Some of that support may come with conditions. The administration has made federal funding conditional on companies paying relatively high wages to workers and providing child care. Other credits are contingent on factories using parts mined or produced in the United States. Biden is betting his re-election on creating higher-paying jobs, especially union jobs, but some economists say such efforts to change corporate behavior could undermine his core industrial policy goals. They have expressed concern about this.
Biden and his economic team increasingly see imports from China as a direct threat to the president's policies. They are considering new tariffs and higher tariffs on some strategic imports from China, including Chinese technology, such as software and other components for electric vehicles and other internet-connected vehicles. We have started some research into this.
Administration officials note that a surge in cheap steel and aluminum exports from China over the past few decades has hollowed out the U.S. manufacturing base. Exports of heavily subsidized solar panels, batteries and electric vehicles can help reduce inflation and combat climate change, but administration officials say the political and economic potential for job losses and business closures is too high. are thinking.
The conflicting goals pose a challenge as the Biden administration seeks to make the case that China should scale back its production of clean energy technologies.
“Meanwhile, the Biden administration is doing everything it can to increase consumption of renewable energy products,” said Scott Linthicum, a trade expert at the Cato Institute, a libertarian research center. “Meanwhile, we are warning China against selling cheap renewable energy products, which would increase U.S. consumption of the very products we are trying to encourage.”
Treasury Secretary Janet L. Yellen visited China last week and admonished China's Treasury chief for unfair trade practices. Administration officials on Tuesday expressed concerns about China's overcapacity ahead of Biden's announcement in Pittsburgh.
“China's policy-driven excess capacity poses serious risks to the future of the U.S. steel and aluminum industry,” White House National Economic Council Chairman Lael Brainard said in a call with reporters. Ta. “China cannot export its path to recovery. China is too big to play by its own rules.”
Chinese officials have also made similar accusations against the Biden administration. In response to a new investigation into the Chinese government's shipbuilding subsidies, Chinese Ministry of Commerce officials issued a statement saying that “the development of China's industry is the result of technological innovation and the active participation of Chinese enterprises in market competition.” , stated that it was not unfair state aid.
“We call on the United States to respect the facts and multilateral rules, immediately end this wrong practice, and return to a rules-based multilateral trading system,” the officials said.
But Americans aren't the only ones dissatisfied with China's new export flows. European leaders have expressed similar concerns, including German Chancellor Olaf Scholz, who complained during an official visit to Beijing this week that Chinese products were being sold at a loss in Europe.
The European Union is carrying out its own investigation into China's imports of electric cars, which could ultimately lead to tariffs on electric cars. The European Union has already introduced a carbon border tax, which is expected to have an impact on China, where environmental regulations are lax. The new program would impose tariffs on imported goods based on the carbon emissions associated with their production. Mexico and Brazil are also pursuing anti-dumping investigations against China, which could lead to new trade restrictions.
French Finance Minister Bruno Le Maire said on Wednesday that the deficit between what Europe exports to China and what it imports has tripled in the past 15 years and that further steps should be taken to level the playing field. He said it was necessary to take steps.
“Europe has to get serious about trade and trade relations,” Le Maire said, explaining that while trade wars are damaging, Europe needs to embrace industrial policies like those adopted by China and the United States. did.
“I just want to emphasize the need for Europe to better protect its economic and industrial interests,” he said.
The United States and its allies have traditionally struggled to coordinate a response to the threat to domestic industries from competition from China. Mark Hefele, chief investment officer at UBS Global Wealth Management, said things could be different this time. He said the success of China's manufacturing exports could be a “catalyst for a more coordinated response” between the United States and Europe on trade.
At the International Monetary Fund and World Bank's spring meetings this week, calls for tougher protectionism were voiced. The fund warned that tariffs were a threat to the global outlook, while economic policymakers explained why they believed measures were needed to protect domestic industries.
“We're seeing a surge in investment in manufacturing, but capacity utilization in these areas is very low,” Yellen said of China's spending on green energy technology. “With these subsidies, the amount of production capacity exceeds global demand, and that demand is likely to increase even further over the next decade.”
She added: “So this is not a level playing field.”
The administration faces pressure to do more to protect U.S. industry. Ohio Democratic Sen. Sherrod Brown, who is facing a difficult re-election bid, last week called on Biden to ban Chinese-made electric vehicles, which already face high tariffs. He said Chinese EVs are an “existential threat to the U.S. auto industry.”
In 2022, Biden vowed to suspend existing tariffs on solar panels imported from China for two years, effectively allowing more solar panels to enter the U.S. market and threatening Brown and others. This angered manufacturing supporters. He vetoed a bipartisan bill in 2023 that would have reinstated these tariffs ahead of their two-year moratorium expiring in June 2024.
He also faces pressure to raise tariffs on Chinese-made parts for electric vehicles and other clean energy technologies. Brad Setzer, a senior fellow at the Council on Foreign Relations in Washington and a former adviser to the U.S. Trade Representative under Mr. is 25%. He said the floor interest rate should be raised.
Setzer also noted that China has long directed subsidies to companies manufacturing and sourcing products in China, and sometimes required those companies to be Chinese-owned. .
“For China to have a first-mover advantage and create a cost-advantaged industrial sector, it will need isolated markets and will need to leverage some of the tools China already uses,” he said. There is a need to do so.”