Article Summary –
President Biden is considering new measures to protect the US manufacturing sector and clean energy transition from the challenge of cheap Chinese exports, including higher tariffs on Chinese steel and aluminum and an investigation into China’s subsidized shipbuilding industry. While both the US and China are using large government subsidies to stimulate economic growth and dominate future global markets, China’s approach relies on pouring money into factories and offering attractive loans, often creating goods that are exported at prices far below competitors’. The Biden administration is directing federal money towards targeted industries in an attempt to foster innovation and create new, well-paying jobs, however, there are concerns that cheap Chinese imports threaten this agenda.
President Biden’s Economic Agenda Challenged by Cheap Chinese Exports
Biden’s trillion-dollar plan to boost American manufacturing and advance clean energy transition is facing a threat from a wave of low-priced exports from China, jeopardizing the investment and jobs at the heart of his economic plans.
New Measures Considered to Protect Emerging Industries
President Biden is considering new protective measures for budding industries like electric-vehicle and solar-panel manufacturing against Chinese competition. In Pittsburgh, he proposed higher tariffs on Chinese steel and aluminum products while announcing an investigation into China’s heavily subsidized shipbuilding industry. “I’m not seeking a fight with China, but a fair competition,” Biden said.
Administration May Need to Restrict Chinese Imports
Unions, manufacturing groups, and some economists suggest more restrictions on Chinese imports may be needed to ensure Biden’s large-scale industrial initiatives aren’t overwhelmed by cheaper Chinese alternatives of similar technologies.
China Boosting Investments in Key Areas
China is increasing its investments in the same high-tech manufacturing areas that the Biden administration’s industrial policy is focusing on, posing a clear threat, according to Eswar Prasad, a Cornell University economist specializing in trade policies.
US and China: Different Approaches to Financing Industries
Both nations use substantial government subsidies to stimulate economic growth and try to dominate key global markets of the century, such as the technologies accelerating global transition from fossil fuels. However, their financing methods for these industries differ significantly. While China has heavily invested in factories, the US has funneled federal money into targeted industries, aiming to spur innovation and create middle-class jobs through high-paying roles.
The Impact of Chinese Imports on Biden’s Agenda
Administration officials view Chinese imports as a direct threat to Biden’s agenda. They’re considering new and higher tariffs on some strategic imports from China and have started several investigations into Chinese technologies, like software and other components of electric vehicles and other internet-connected automobiles.
US and Allies May Launch Coordinated Response
While the US and its allies have struggled in the past to deliver a coordinated response to threats from Chinese competition, this could change this time around, suggests Mark Haefele, chief investment officer of UBS Global Wealth Management. The success of China’s manufacturing exports could trigger a more unified response from the US and Europe on trade.
Pressure to Protect American Industry
The administration faces pressure to do more to safeguard American industry. Senator Sherrod Brown, Democrat of Ohio, called last week for Biden to ban Chinese electric vehicles, which already face high tariffs, deeming them an “existential threat to the American auto industry.”
Pressure to Raise Tariffs on Chinese Components
Biden is also facing pressure to increase tariffs on Chinese components for electric vehicles or other clean energy technology. Tariffs currently stand at 7.5 percent on electric vehicle battery packs but 25 percent on the components of those packs, says Brad Setser, a former adviser to the US trade representative under Biden.
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