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The Biden administration has begun investing more than $2 trillion in American factories and infrastructure, investing huge sums to strengthen American industry and fight climate change.
But the effort faces a familiar threat: the rise of low-priced products from China. This is drawing the attention of President Biden and his allies, who are considering new protectionist measures to ensure US industries can compete against Beijing.
As American factories move to produce electric vehicles, semiconductors and solar panels, China is flooding the market with similar goods, often at significantly lower prices than American rivals. Similar inflows are taking place in the European market also.
US officials and officials argue that China’s actions violate global trade rules. The concerns are fueling new calls for higher tariffs on Chinese imports in the US and Europe, potentially exacerbating already contentious economic relations between China and the West.
Chinese imports reflect a surge that undermined Obama administration efforts to boost domestic solar manufacturing after the 2008 financial crisis and drove some American start-ups out of business. 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 again threaten the survival of American factories at a time when the government is spending huge sums to jump-start domestic manufacturing. Administration officials are likely to raise tariffs on electric vehicles and other strategic goods from China, according to people familiar with the matter, which former President Donald J. The deal is part of a review of the tariffs Trump imposed on China four years ago. That review, which has been underway since Mr. Biden took office, could finally conclude in the next few months.
Congress is also agitating for more security. In a Jan. 5 letter to the Biden administration, bipartisan members of a House committee expressed concerns about China flooding the United States with semiconductors. Lawmakers asked whether the government could set up a new “component” tariff that would tax an imported chip inside another finished product.
It 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 fees on cars.
U.S. Trade Representative Katherine Tai told lawmakers she shared 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 US companies and unions to identify and deploy additional responses to help counter China’s state-directed industrial targeting in the region. “
The United States has maintained tariffs on hundreds of billions of dollars of Chinese products over the past five years, seeing them as a way to balance Beijing’s ability to undercut American manufacturers by selling cheaper products in the United States. Mr Biden has tried to help American companies with billions in subsidies aimed at boosting American manufacturing of semiconductors as well as clean energy technology such as solar panels and electric vehicles.
Yet Chinese industrial policy spending still far exceeds that of the United States. Faced with an economic slowdown and the gradual bursting of an asset bubble, the Chinese government has recently redoubled efforts to boost exports and support its factory sector.
Ilaria Mazzocco, senior fellow for China business and economics at the Center for Strategic and International Studies, a Washington think tank, said Beijing is particularly focused on investing in high-tech products of strategic importance, such as electric vehicles and semiconductors.
“These are the types of industries that the rest of the world wants,” he said.
Some of China’s successes come from its large market – which gives Chinese companies the scale and opportunity to improve their products – as well as its vast pool of talented engineers. For example, China sold about 6.7 million all-electric vehicles last year, while the United States sold about 1.2 million units.
The Chinese government has said it seeks fair competition and has described US trade measures as protectionist.
But Wendy Cutler, vice president of the Asia Society Policy Institute and former trade negotiator, said China’s clean energy and semiconductor industries have received plenty of state aid in the form of tax credits, access to cheap energy and equity infusions.
“This list continues to grow,” she said. “As Chinese companies take advantage of these types of systems, it increases efficiencies.”
In the United States, when the supply of solar panels exceeds demand, factories idle their lines, lay off workers, said Michael Carr, executive director of the Solar Energy Manufacturers for America coalition, which represents the United States. And try to align the capacity back. -based solar manufacturers.
“It doesn’t work that way in China,” he said. “They have continued to build, build and build.”
China invested more than $130 billion in the solar sector last year, and plans to bring enough wafer, cell and panel capacity online this year to meet annual global demand through 2032, according to analysts at energy research firm Wood Mackenzie. Is in position.
Late last month, two US companies filed a legal challenge to a temporary pause on tariffs on imported solar panels imposed by the Biden administration.
China’s massive 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 holds a small share of global chip production – only about 7 percent in 2022. But experts say the country is spending more on its semiconductor industry than the United States and Europe, and it could become the world’s biggest maker of chips. In the next decade.
Dan Hutchison, vice president of research firm TechInsights, said the fear is that China will do for semiconductors what it did for shipping, solar cells or steel — build up excess capacity and then drive foreign competitors out of business.
“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 at prices below the cost of making them. This month, it imposed tariffs of more than 120 percent on Chinese steel.
But when Chinese goods are blocked from the United States, they can still flow to other countries. This pushes prices down globally to levels with which American companies say they cannot compete, and drives American companies out of foreign markets, cutting into their revenues and competitiveness.
Some say the United States should adopt cheaper Chinese-made solar panels and legacy chips, rather than imposing tariffs that raise 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 for items that are not military-related.
“Do we respond appropriately to our own subsidies? Or to be a better economist and say, ‘Actually, we’ll let foreign governments subsidize our consumption like crazy, we don’t really care about it’? Mr. Lincicome said.
But most officials in Washington now view China’s dominance of key markets as a significant risk, given rising tensions between the countries and some export restrictions imposed by China. China produces about 80 percent of the world’s solar panels, about 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 with about $47,500 in the United States, according to electric vehicle market research firm Dunn Insights. In the fourth quarter of last year, Chinese automaker BYD delivered more electric vehicles than Tesla for the first time.
The popularity of Chinese electric vehicles has surged in Europe, prompting the EU to launch an investigation into illegal subsidies. So far, Chinese electric vehicles have yet to gain a foothold in the United States, which imposes heavy tariffs on those imports.
As part of climate legislation signed by Mr Biden in 2022, buyers of electric vehicles that are primarily sourced and assembled in the United States rather than China will also receive attractive tax credits. Still, some officials worry that Chinese vehicles are generally so cheap compared to American alternatives that consumers may choose to buy them anyway.
keith bradsher Contributed reporting from Shanghai.
