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The Biden administration has begun pumping more than $2 trillion into U.S. factories and infrastructure, investing billions to strengthen U.S. industry and combat climate change.
But this effort faces a more immediate threat: the proliferation of low-cost products from China. This has drawn the attention of President Biden and his allies, who are considering new protectionist measures to help U.S. industry compete with Beijing.
As U.S. factories ramp up to produce electric cars, semiconductors and solar panels, China is flooding the market with similar products, often at prices significantly lower than their U.S. competitors. many. A similar influx has reached the European market.
U.S. executives and officials say China’s actions violate global trade rules. These concerns have led to renewed calls for higher tariffs on Chinese imports in the United States and Europe, potentially escalating China’s already contentious economic relationship with the West. .
The surge in imports from China comes as it undermined the Obama administration’s efforts to seed domestic solar manufacturing after the 2008 financial crisis and forced some U.S. startups out of business. There is. The administration retaliated with tariffs on solar equipment from China, sparking a dispute at the World Trade Organization.
Some Biden officials worry that Chinese products could once again threaten the viability of U.S. factories as the government spends billions to boost domestic manufacturing. Officials say administration officials are likely to raise tariffs on electric vehicles and other strategic goods from China as part of a review of tariffs that former President Donald J. Trump imposed on China four years ago. is. The review, which has been underway since Biden took office, could be finalized in the coming months.
Congress is also pushing for stronger protections. In a Jan. 5 letter to the Biden administration, bipartisan members of a House committee expressed concern about China’s large supply of semiconductors to the United States. Lawmakers asked whether the government could enact a new “component” tariff that would tax chips that are imported as part of another finished product.
This follows a November letter from committee members recommending that the Biden administration consider new trade litigation over China’s electric vehicle subsidies, which could result in additional tariffs on vehicles. There is a possibility that
According to a Jan. 4 letter shared with the New York Times, U.S. Trade Representative Katherine Tai told lawmakers she shares concerns about China’s practices in the electric vehicle industry. Tai told the committee that the government must “work with U.S. businesses and unions to identify and deploy additional responses to overcome China’s state-directed industrial targeting in this area.” He said that there is.
The United States has maintained tariffs on hundreds of billions of dollars worth of Chinese goods for the past five years, seeing it as a way to offset Beijing’s ability to hurt American manufacturers’ profits by selling cheaper products in the United States. There is. Biden is seeking to further support U.S. companies with billions of dollars in subsidies aimed at boosting U.S. manufacturing of semiconductors and clean energy technologies such as solar panels and electric vehicles.
However, China’s industrial policy spending still far exceeds that of the United States. Faced with an economic slowdown and the gradual bursting of the real estate bubble, the Chinese government has recently stepped up efforts to promote exports and support the factory sector.
Ilaria Mazzocco, a senior fellow on China business and economics at the Center for Strategic and International Studies think tank in Washington, said the Chinese government is placing particular emphasis on investing in strategically important high-tech products such as electric vehicles and semiconductors.
“These are the kinds of industries that other parts of the world want as well,” she said.
Part of China’s success comes from its large market and vast pool of talented engineers, which give Chinese companies scale and opportunity to hone their products. For example, China sold about 6.7 million fully electric cars last year, compared to about 1.2 million in the United States.
Beijing insists it competes fairly and calls U.S. trade measures protectionist.
But Wendy Cutler, deputy director of the Asian Social Policy Institute and a former trade negotiator, says China’s clean energy and semiconductor industries will benefit from significant state funding in the form of tax credits, access to cheaper energy, and equity injections. He said he has received assistance.
“The list goes on,” she said. “When Chinese companies use this kind of system, it just creates overcapacity.”
Michael Kerr, executive director of the National Federation of Solar Energy Manufacturers, which represents the United States, said that in the United States, when the supply of solar panels exceeds demand, factories are forced to idle lines, lay off workers, and reduce production capacity. He said he would try to restore it. A solar power generation manufacturer based in
“That doesn’t work in China,” he says. “They just kept building, building, building.”
China invested more than $130 billion in solar power last year, and this year will produce enough wafers and cells to meet annual global demand until 2032, according to analysts at energy research firm Wood Mackenzie. , is poised to bring its panel production capabilities online.
Late last month, two U.S. companies filed a legal challenge to the Biden administration’s moratorium on tariffs on imported solar panels.
China’s huge investments in semiconductors, including a new $40 billion fund to support the industry, are also worrying companies investing in new U.S. chip facilities.
China accounts for a small portion of global chip production, accounting for only about 7% as of 2022. But experts say the country spends more on the semiconductor industry than the United States and Europe combined and could become the world’s largest chipmaker. into the next decade.
Dan Hutchison, vice chairman of research firm TechInsights, said China might do with semiconductors what it did with shipping, solar cells and steel: build up excess capacity and then drive foreign competitors out of business. He said he was concerned that the situation would be pushed further.
“That’s a legitimate concern, because the weakness of Western companies is that they have to make a profit,” he said.
The United States can and does impose tariffs on Chinese exports that are unfairly subsidized or sold in the U.S. market for less than they cost to produce. This month, it imposed tariffs of more than 120% on Chinese steel.
But even if Chinese products are blocked from the United States, they can still find their way to other countries. This would cut prices globally to levels that U.S. companies say they cannot compete with, locking them out of foreign markets and hurting their profits and competitiveness.
Some argue that the United States should embrace cheaper Chinese-made solar panels and legacy chips rather than impose tariffs that would raise costs for American consumers and factories that use imported materials.
Scott Linthicum, a trade expert at the libertarian Cato Institute, said it doesn’t make economic sense for the U.S. to try to outspend China, especially on non-military goods.
“Is the appropriate response to be for us to subsidize our own? Or to be better economists and say, “Actually, we don’t want foreign governments to subsidize our consumption like crazy.” Do they say, “You can let them out, we don’t care at all”? ” Linthicome said.
However, given rising tensions between the two countries and China’s imposition of certain export bans, most Washington officials now view China’s control of key markets as a significant risk. China produces about 80% of the world’s solar panels, 60% of electric vehicles, and more than 80% of electric vehicle batteries.
The average price of an electric car in China is about $28,000, compared with about $47,500 in the United States, according to electric vehicle market research firm Dan Insights. In the fourth quarter of last year, Chinese automaker BYD delivered more electric cars than Tesla for the first time.
Chinese electric cars are rapidly gaining popularity in Europe, and the European Union has launched an investigation into illegal subsidies. So far, Chinese-made electric cars have not yet caught on in the United States. The US imposes high tariffs on these imported goods.
As part of the climate change law Biden signed into law in 2022, buyers of electric vehicles that are primarily sourced and assembled in the United States rather than China will also receive favorable tax credits. Still, some officials worry that Chinese-made vehicles are generally much cheaper than their American-made alternatives, so consumers may choose to buy them anyway.
keith bradshire I contributed a report from Shanghai.
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