by The Biden administration has begun pumping more than $2 trillion into American factories and infrastructure, investing huge sums to try to strengthen American industry and fight climate change.
But the effort faces a familiar threat: a rise in low-priced products from China. This is drawing the attention of President Biden and his advisers, who are considering new protectionist measures to ensure that American industry can compete with Beijing.
As American factories prepare to produce electric vehicles, semiconductors and solar panels, China is flooding the market with similar products, often at prices Significantly lower prices than US competitors.. A similar influx is also affecting the European market.
American executives and officials argue that China’s actions violate global trade rules. The concerns are prompting new calls in the United States and Europe to impose higher tariffs on Chinese imports, which could intensify what is already a contentious economic relationship between China and the West.
Chinese imports reflect a surge that undermined the Obama administration’s efforts to boost domestic solar manufacturing after the 2008 financial crisis and bankrupted some U.S. startups. 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 survival of American factories at a time when the government is spending huge sums of money to revive domestic manufacturing. Administration officials appear likely to raise tariffs on electric vehicles and other strategic goods from China, as part of a review of levies that former President Donald J. Trump imposed on China four years ago, according to people familiar with the matter. . That review, which has been underway since Biden took office, could finally conclude in the coming months.
Congress is also pushing for more protections. In a letter dated January 5 To the Biden administration, bipartisan members of a House committee expressed concern about China flooding the United States with semiconductors. Lawmakers asked whether the government could establish a new “components” tariff that would tax an imported chip inside another finished product.
That followed a November letter in which members of the same committee advised the Biden administration to consider a new trade case over China’s electric vehicle subsidies, which could result in additional tariffs on cars.
Katherine Tai, the U.S. trade representative, told lawmakers she shared their concerns about China’s practices in the electric vehicle industry, according to a Jan. 4 letter shared with The New York Times. Ms. Tai told the committee that the administration needs to “work with American businesses and unions to identify and deploy additional responses to help overcome China’s state-led industrial attacks on this sector.”
The United States has maintained tariffs on hundreds of billions of dollars of Chinese goods over the past five years, viewing them as a way to offset Beijing’s ability to undercut American manufacturers by selling cheaper goods in the United States. Biden has sought to further help American businesses with billions in subsidies aimed at boosting American manufacturing of clean energy technology such as solar panels, electric vehicles and semiconductors.
However, Chinese industrial policy spending remains far exceeds that of the United States. Faced with an economic slowdown and a gradual bursting of the real estate bubble, the Chinese government has recently redoubled its efforts to promote exports and support its manufacturing sector.
Beijing is particularly focused on investing in high-tech products with strategic importance, such as electric vehicles and semiconductors, said Ilaria Mazzocco, a senior fellow in Chinese business and economics at the Center for Strategic and International Studies, a Washington think tank.
“Those are also the types of industries the rest of the world wants,” he said.
Part of China’s success is due to its larger market, which gives Chinese companies the scale and opportunity to perfect their products, along with its vast pool of talented engineers. China sold approximately 6.7 million fully electric vehicles last year, for example, compared to about 1.2 million units in the U.S.
The Chinese government has said it competes fairly and described U.S. trade measures as protectionist.
But Wendy Cutler, vice president of the Asia Society Policy Institute and a former trade negotiator, said China’s clean energy and semiconductor industries had received plenty of state assistance, in the form of tax credits, access to cheaper energy and capital injections.
“The list goes on and on,” he said. “The fact that Chinese companies take advantage of these types of systems only leads to excess capacity.”
In the United States, when the supply of solar panels exceeds demand, factories stop their lines, lay off workers and try to align capacity, said Michael Carr, executive director of the Solar Manufacturers Coalition for the United States, which represents the United States. Joined. -Solar energy manufacturers.
“That’s not the way it works in China,” he said. “They’ve just kept building and building and building.”
China invested more than $130 billion in the solar sector last year and is positioned to bring enough wafer, cell and panel capacity online this year to meet annual global demand through 2032, according to analysts at Wood Mackenzie, a firm energy research.
At the end of last month, two American companies He mounted a legal challenge to a temporary moratorium the Biden administration had imposed on tariffs on imported solar panels.
China’s heavy investments in semiconductors, including a new fund of 40 billion dollars to support the industry, they also worry companies investing in new chip facilities in the United States.
China accounts for a relatively small proportion of global chip production: only around 7 percent in 2022. But experts say the country is spending more on its semiconductor industry than the United States and Europe combined, and that could become the world’s largest chipmaker in the next decade.
Dan Hutcheson, vice president at research firm TechInsights, said the fear was that China would do to semiconductors what it did to shipping, solar cells or steel: build up excess capacity and then drive competitors out of business. foreign.
“It is a legitimate fear, because the weakness of Western companies is that they have to be profitable,” 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 it costs to make them. Earlier this month, it imposed tariffs on more than 120 percent on Chinese steel.
But even when Chinese goods are blocked in the United States, they can flow to other countries. That drives down prices globally to levels that U.S. companies say they can’t compete with and drives U.S. companies out of foreign markets, reducing their revenues and competitiveness.
Some say the United States should simply adopt cheap Chinese-made solar panels and legacy chipsrather than imposing tariffs that increase costs for American consumers and factories that use imported inputs.
Scott Lincicome, a trade expert at the libertarian Cato Institute, said it didn’t make economic sense for the United States to try to outspend China, especially on goods not related to the military.
“Is the appropriate response for us to make our own subsidies? Or is it being a better economist and saying, ‘Actually, we’re going to let foreign governments subsidize our consumption like crazy, we don’t really care,’” Lincicome said.
But most officials in Washington now view China’s dominance in key markets as a significant risk, given rising tensions between the countries and China’s imposition of TRUE export bans. China produces about 80 percent of the world’s solar panels, nearly 60 percent of electric vehicles and more than 80 percent of electric vehicle batteries.
The average price of an electric vehicle in China is about $28,000, compared to about $47,500 in the United States, according to Dunne Insights, an electric vehicle market research firm. In the fourth quarter of last year, Chinese automaker BYD delivered more electric vehicles than Tesla, surpassing the American firm for the first time.
Chinese electric vehicles have gained popularity in Europe, leading the European Union to start an investigation in illegal subsidies. So far, Chinese electric vehicles have yet to gain a foothold in the United States, which imposes heavy tariffs on such imports.
As part of the climate law Biden signed in 2022, buyers of electric vehicles that are primarily sourced and assembled in the United States, rather than China, will also receive lucrative tax credits. Still, some officials worry that Chinese vehicles are generally much cheaper than American alternatives and that consumers may choose to buy them anyway.
Keith Bradsher contributed reporting from Shanghai.
