President Biden’s multi-trillion dollar effort to revitalize U.S. manufacturing and accelerate transition to clean energy Conflicts with surge in cheap exports from China, threatening to eliminate investment and employment This is central to Biden’s economic agenda.
Biden is considering new measures to protect emerging industries such as electric vehicle production and solar panel manufacturing from Chinese competition. In Pittsburgh on Wednesday, the president called for higher tariffs on Chinese steel and aluminum products and announced new trade investigations into China’s heavily subsidized shipbuilding industry.
“I don’t want to get into a fight with China,” Biden said. “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 wants to ensure Biden’s vast industrial plans aren’t overwhelmed by low-cost Chinese versions of the same emerging technologies.
“This is a very clear and present danger because the Biden administration’s industrial policy is not primarily focused on traditional low-skill, low-wage manufacturing,” said Cornell University’s Eswar Prasad. But a new type of high-tech manufacturing.” Economist who specializes in trade policy.
“These are exactly the areas where China is investing more,” he said.
The United States and China are both using huge government subsidies to spur economic growth and seek to dominate what they believe will be the most important global market of this century: technologies aimed at accelerating the global transition away from fossil fuels to avoid catastrophic climate change.
But the way they finance these industries differs significantly.Chinese officials are pumping money into factories, including offering attractive loans from state-owned banks to businesses that might not otherwise survive. Help offset the housing crisis and sluggish domestic consumption. These factories typically operate on low-cost labor.
Chinese factories are now exporting goods at far lower prices than rivals, helping to drive its economy. Other countries claim that, in some cases, Chinese companies sell products abroad at a loss.
Biden is also injecting federal funds into targeted industries, hoping to seed innovation with good-paying jobs and create new pathways for the middle class. He signed into law an infrastructure law, an advanced manufacturing law focused on semiconductors, and a slew of production incentives included in the climate law, the Inflation Reduction Act. The spending and tax cuts brought by these laws have spurred companies to announce plans to invest hundreds of billions of dollars in new factories in the United States.
Some of this aid comes with strings attached.The government limits federal funds to paying relatively high wages or Provide childcare services to workers.Other credits are Conditional on factory Contains components mined or produced in the United States.Biden has focused his re-election campaign on creating more good-paying jobs, especially union jobs, but some economists worry these efforts to change corporate behavior will Undermining his core industrial policy goals.
Biden and his economic team increasingly view Chinese imports as a direct threat to the president’s agenda.They are considering new higher tariffs on some strategic imports from China and launching a number of investigations into Chinese technology, e.g. Software and other components for electric vehicles and other connected cars.
Government officials have noted how a surge in cheap Chinese steel and aluminum exports has hollowed out U.S. manufacturing centers over the past few decades. While heavy subsidies for exports of solar panels, batteries and electric cars could help curb inflation and combat climate change, government officials believe the potential for job losses and business failures is too great from a political and economic perspective.
Competing goals pose a challenge as the Biden administration tries to make the case that China should scale back its production of clean energy technologies.
“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 research center. “On the other hand, it warns China not to sell cheap renewable energy products, which will increase U.S. consumption of the very products we are trying to encourage.”
During a visit to China last week, U.S. Treasury Secretary Janet L. Yellen warned of unfair trade practices by her Chinese counterparts. Ahead of Biden’s announcement in Pittsburgh on Tuesday, administration officials expressed concerns about overproduction in China.
“China’s policy-driven overcapacity poses a serious risk to the future of the U.S. steel and aluminum industries,” White House National Economic Council Chairman Lael Brainard said in an interview with reporters. “China cannot recover through exports. China is too big. I can’t follow my own rules.”
Chinese officials have made similar complaints about the Biden administration. In response to Beijing’s new investigation into shipbuilding subsidies, Chinese Ministry of Commerce officials issued a statement saying that “the development of China’s industry is the result of Chinese enterprises’ technological innovation and active participation in market competition,” rather than unfair state support.
“We urge the U.S. to respect facts and multilateral rules, immediately stop its wrong practices and return to the rules-based multilateral trading system,” the officials said.
But Americans are not the only ones complaining about China’s new wave of exports.European leaders have raised similar concerns, including German Chancellor Olaf Scholz, who complained that Chinese goods were being sold in Europe at a loss During an official visit to Beijing this week.
EU is conducting its own investigation into China Electric vehicle import, which could ultimately lead to tariffs being imposed on these products.The group has developed carbon border tax This is expected to affect China, which has looser environmental regulations. The new plan would impose tariffs based on the carbon emissions associated with the production of imported goods.Mexico and Brazil also Launch anti-dumping investigation Access to China could result in new trade restrictions.
French Finance Minister Bruno Le Maire noted on Wednesday that the deficit between Europe’s exports and imports to China has tripled in the past 15 years and that more measures need to be taken to create a level playing field.
“Europe must show its attitude on trade and trade relations,” Le Maire said, explaining that while a trade war would cause damage, Europe should accept the industrial policies adopted by China and the United States.
“I just want to emphasize that Europe needs to better protect its economic and industrial interests,” he said.
The United States and its allies have struggled in the past to coordinate efforts to counter threats to their domestic industries from Chinese competition. That could change this time, said Mark Highfill, chief investment officer at UBS Global Wealth Management. He said the success of China’s manufacturing exports could be a “catalyst for a more coordinated response” from the United States and Europe on trade issues.
The argument for greater protectionism was on display at the spring meetings of the International Monetary Fund and World Bank this week. While the IMF warned that tariffs pose a threat to the global outlook, top economic policymakers explained why they believe measures to protect domestic industries are necessary.
“Manufacturing investment is surging, but capacity utilization in those industries is very low,” Yellen said of China’s spending on green energy technology. “With these subsidies, production capacity exceeds global demand and may even exceed demand over the next decade.”
She added: “So it’s not a level playing field.”
The government is under pressure to do more to protect U.S. industry.Democratic Sen. Sherrod Brown of Ohio, who faces a tough reelection bid, called for support for Biden last week Ban Chinese electric cars, already facing high tariffs. He called Chinese electric vehicles “an existential threat to the U.S. auto industry.”
Mr. Biden unnerved Mr. Brown and other manufacturing supporters in 2022 when he Announcing a two-year suspension of existing tariffs Imports of Chinese solar panels effectively allow more products to enter the U.S. market. He vetoed a bipartisan bill This would reinstate these tariffs in 2023 until June 2024, when the two-year moratorium expires.
He also faces pressure to increase tariffs on Chinese components for electric vehicles or other clean energy technologies. Brad Setser, a senior fellow at the Council on Foreign Relations in Washington and a former adviser to the U.S. Trade Representative under Biden, said the current tariff on electric vehicle battery packs is 7.5%, but the tariff on components of these battery packs is 25%. . Lower interest rates should be raised, he said.
Setzer also noted that China has long provided subsidies to companies that make and source products in China, sometimes requiring those companies to be Chinese-owned.
“In order to build an industrial sector where China has first-mover advantages and cost advantages,” he said, “you need to have an isolated market and use some of the tools that China has already used.”
