- ‘China may also impose certain export restrictions on the US,’ Wang, senior fellow at Taihe Institute, tells Anadolu
- Washington is signaling ‘unhappiness’ with what it views as Beijing’s ‘predatory’ trade policy, says University of Houston’s Ed Hirs
ISTANBUL
The recent US decision to hike tariffs on Chinese imports has raised fresh concerns about trade tensions and the specter of more tit-for-tat measures by the two economic giants.
The Biden administration last month increased tariffs on $18 billion worth of imports from China, including critical industries such as steel, aluminum, semiconductors, solar cells, electric vehicles, and batteries, saying the step was taken due to “unfair trade practices.”
The May 14 announcement drew a sharp rebuke from Beijing labeling it “typical bullying behavior” aimed at “suppressing China’s normal economic, trade and technological activities.”
Experts from the US and China believe the situation represents the line of thinking in both countries and indicates what either side could do in the coming days.
From Washington, this is a signal of “unhappiness” with what it views as Beijing’s “predatory” trade policy, according to Ed Hirs, an energy economist at the University of Houston.
Some of the main issues for the US are “China’s … theft of intellectual property, industrial espionage, continued support of fentanyl production that targets the US, and belligerence in the South China Sea,” he told Anadolu.
These points were raised in the White House statement announcing the tariff decision, which also accused China of “flooding global markets with artificially low-priced exports.”
It also alleged that China’s “forced technology transfers and intellectual property theft” have contributed to its control of up to 90% of global production for critical inputs necessary for American technologies, infrastructure, energy, and health care.
Such practices have created “unacceptable risks” to US supply chains and economic security, the statement added.
‘New development of US protectionism’
For China, the latest tariffs imposed by the Biden administration represent “new development of US protectionism,” according to Wang Zaibang, a senior fellow at Taihe Institute, a think tank based in Beijing.
“It indicates that the US has completely abandoned its adherence to the concept of free trade for over a century,” he told Anadolu.
“This reflects a decline in US economic confidence and an increase in the sense of crisis unprecedented in history.”
Hirs, meanwhile, pointed out that the tariff “likely to be the most damaging” in the short-run is the one targeting China’s photovoltaic (PV) panels, used to produce electricity directly from sunlight.
However, he emphasized that these are “not likely to put a damper on US solar farm development or in the growth of rooftop solar (usage).”
China’s stake in all manufacturing stages of solar panels is over 80%, according to the International Energy Agency (IEA), more than double of Beijing’s share in global PV demand.
It is also home to the world’s 10 top suppliers of solar PV manufacturing equipment, according to a 2022 IEA report, while global solar PV manufacturing has increasingly moved from Europe, Japan and the US to China over the last decade.
Electric vehicles and batteries
Competition between Chinese electric vehicle (EV) manufacturers and others around the world is also heating up.
Chinese BYD, known as Build Your Dream, is the world’s biggest electric carmaker, beating out the US Tesla in global sales for the second consecutive year last year.
BYD produced over 3 million vehicles in 2023, including both hybrid and battery-only, against Tesla’s 1.84 million fully electric vehicles.
An IEA report released in April said global EV demand growth this year has been building on a record-breaking 2023, when global sales soared by 35% to almost 14 million.
“Growing electric car exports from Chinese automakers, which accounted for more than half of all electric car sales in 2023, could add to downward pressure on purchase prices,” the report said.
“Chinese companies, which are also setting up production facilities abroad, have already seen strong sales of more affordable models launched in 2022 and 2023 in overseas markets.”
Wang explained that there are several reasons why China is able to make cheaper EVs than the US.
“Firstly, China has lower labor prices than the US. Secondly, China has a more complete industrial chain than the US. And lastly, China has lower transportation costs than the US, which originates from a complete industrial chain within a single huge market,” he said.
“American automakers might be exempt from competition with Chinese enterprises in terms of tariff put into force by the Biden administration in the US market. But I don’t think they could do the same thing in the world market outside of America.”
Semiconductors, steel and aluminum
As innovations in artificial intelligence make massive leaps, global demand for semiconductors has also been rapidly rising around the world.
While the US accounts for 25% of total semiconductor demand in the world, its chip manufacturing capacity stands at just 12%, down from 37% in the 1990s, according to a January report by Citigroup.
In August 2022, President Joe Biden signed into law the CHIPS and Science Act, setting aside $52.7 billion to increase the production of semiconductors, address supply chain vulnerabilities, and bolster domestic research.
As for steel and aluminum, Biden’s predecessor Donald Trump imposed tariffs in 2018 on imports of steel – 25% – and aluminum – 10% – from most countries, which was seen as a protectionist step by many economists and led to a trade war with China.
A report released this May by S&P Global showed that China’s share of exports of finished steel to the US is below 1% of its total exports, while aluminum product exports account for around 4%.
US presses on Europe
Washington has also been looking across the Atlantic for support against China, with Treasury Secretary Janet Yellen saying last month that the US and Europe must put up a united front.
“If we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk," she said in Germany, warning that China’s industrial overcapacity poses a threat to both American and European companies
She said the issue “will be a focus at the G7 meetings in Italy,” referring to the upcoming summit of some of the world’s most influential powers set for mid-June in the Italian city of Fasano.
How will China respond?
On Beijing’s expected response to the US’ latest step, Wang said it is unlikely to remain “totally indifferent to such unilateral economic discrimination.”
“We might increase flexibility in the import source of certain products such as agricultural products. Secondly, because of the different economic structure and economic goals between the two countries, China wouldn’t retaliate equally. It would continue to develop new quality productive forces,” he said.
“Lastly, with the continuous upgrading and strengthening of China’s industrial chain, I guess China may also impose certain export restrictions on the US.”
