The Biden administration has begun pumping more than $2 trillion into U.S. factories and infrastructure, investing huge sums to try to strengthen U.S. manufacturing and combat climate change.
But these efforts face a familiar threat: a wave of low-cost products from China. That’s catching the attention of President Biden and his aides, who are considering new protectionist measures to ensure U.S. industry can compete with Beijing.
As U.S. factories expand to produce electric vehicles, semiconductors and solar panels, China is flooding the market with similar products, often at discounted prices. prices significantly lower than those of American competitors. A similar influx is also hitting the European market.
U.S. leaders and officials say China’s actions violate global trade rules. The concerns are sparking new calls in America and Europe for higher tariffs on Chinese imports, which could worsen an already contentious economic relationship between China and the West.
Chinese imports reflect a surge that undermined the Obama administration’s efforts to launch domestic solar production after the 2008 financial crisis and pushed some U.S. startups into bankruptcy. The administration retaliated by imposing 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 U.S. factories at a time when the government is spending huge sums to revive domestic production. Administration officials appear likely to increase tariffs on electric vehicles and other strategic goods from China, part of a review of taxes imposed by former President Donald J. Trump on China four years ago, according to sources familiar with the matter. This review, underway since Mr. Biden took office, could finally conclude in the coming months.
Congress is also pushing for more protections. In a letter dated January 5 In the Biden administration, bipartisan members of a House committee have expressed concerns that China is flooding the United States with semiconductors. Lawmakers asked whether the government could establish a new “component” tariff that would tax an imported chip in another finished product.
This followed a November letter in which members of the same committee advised the Biden administration to consider a new trade deal regarding Chinese subsidies for electric vehicles, which could result in additional tariffs on cars.
Katherine Tai, the U.S. trade representative, told lawmakers she shared concerns about Chinese 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 must “work with American businesses and unions to identify and deploy additional responses to help overcome Chinese state-led industrial targeting in this sector.”
The United States has maintained tariffs on hundreds of billions of dollars of Chinese goods over the past five years, seeing it as a way to offset Beijing’s ability to compete with American manufacturers by selling cheaper goods to the UNITED STATES. Mr. Biden has tried to further help American businesses with billions in subsidies intended to boost American manufacturing of clean energy technologies like 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 the gradual bursting of the real estate bubble, the Chinese government has recently increased its efforts to promote exports and support its manufacturing sector.
Beijing is particularly focused on investments in high-tech products with strategic importance, such as electric vehicles and semiconductors, said Ilaria Mazzocco, a senior researcher in Chinese business and economics at the Center for Strategic and International Studies, a Washington think tank.
“It’s also the kind of industry that the rest of the world wants as well,” she said.
Part of China’s success comes from its larger market – which gives Chinese companies the scale and opportunity to perfect their products – as well as its vast pool of engineering talent. China sold approximately 6.7 million 100% electric vehicles last year, for example, compared to approximately 1.2 million units in the USA.
The Chinese government has said it competes fairly and has called U.S. trade measures 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 significant state aid, in the form of credits. tax, access to cheaper energy and equity injections.
“The list goes on,” she says. “When Chinese companies use these types of systems, it only leads to overcapacity. »
In the United States, when the supply of solar panels exceeds demand, factories idle, lay off workers and try to restore capacity, said Michael Carr, executive director of the Solar Energy Manufacturers for America Coalition, which represents United States. market based solar power manufacturers.
“That’s not how things work in China,” he said. “They just kept building and building and building.”
China invested more than $130 billion in the solar sector last year and is on track to bring enough wafer, cell and panel capacity online this year to meet annual global demand through 2032 , according to analysts at Wood Mackenzie, an energy research firm.
At the end of last month, two American companies launched a legal challenge to a temporary moratorium the Biden administration had imposed on tariffs on imported solar panels.
China’s massive investments in semiconductors, notably a new fund of 40 billion dollars to support the industry, also worries companies investing in new chip facilities in the United States.
China accounts for a relatively small share of global chip production – only about 7 percent in 2022. But experts say the country spends more on its semiconductor industry than the United States and Europe combined, and that it could become the world’s largest chipmaker over the next decade.
Dan Hutcheson, vice president at research firm TechInsights, said the fear is that China will do for semiconductors what it did for shipping, solar cells or steel: create excess capacity and then chase away its foreign competitors.
“It’s 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 their cost of production. Earlier this month, he imposed tariffs of more than 120 percent on Chinese steel.
But even when Chinese products are blocked from the United States, they can enter other countries. This drives prices down globally to levels that U.S. companies feel they cannot compete with, and drives U.S. companies out of foreign markets, reducing their revenues and competitiveness.
Some say the United States should simply Adopt China-made cheap solar panels and existing chipsinstead of 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 doesn’t make economic sense for the United States to try to outspend China, especially on goods that are not not related to the army.
“Is the right answer to make our own subsidies? Or is it to be a better economist and say, “Actually, we’re going to let foreign governments subsidize our consumption like crazy, we don’t really care?” » declared Mr. Lincicome.
But most officials in Washington now view Chinese dominance in key markets as a significant risk, given growing tensions between the two countries and China’s imposition of certain export bans. China produces about 80% of the world’s solar panels, almost 60% of electric vehicles and more than 80% 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 company. In the fourth quarter of last year, Chinese automaker BYD delivered more electric vehicles than Tesla, overtaking the American firm for the first time.
Chinese electric vehicles have gained popularity in Europe, prompting 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.
Under the climate law Mr. Biden signs in 2022, buyers of electric vehicles primarily sourced from the United States and assembled in the United States, rather than in China, will also receive lucrative tax credits. Still, some officials worry that Chinese vehicles are generally so much cheaper than U.S. alternatives that consumers might choose to buy them anyway.
Keith Bradsher contributed reporting from Shanghai.