This is a potentially dangerous time for our economy and the security of the West. The focus is on trade policy with China. China is no longer just a trading partner with whom we have differences. It has become a global adversary that uses trade to dominate both militarily and economically.
China's strategy is to flood the world with its cheap products. We're not talking about T-shirts here. We're talking about electric vehicles, where China dominates almost 60% of the global market.
How can Americans and others compete with manufacturers whose first goal is not to make money but to drive everyone else out of business?
“The weakness of Western companies is that they have to be profitable,” an executive at research firm TechInsights told the New York Times.
When solar panel supply exceeds demand, U.S. factories lay off workers and reduce capacity, a spokesman for the Solar Energy Manufacturers for America Coalition said. “That’s not how it works in China. They just kept building and building and building.”
China now produces around 80% of the world's solar modules.
China's state-run manufacturers do this with huge government subsidies. These include direct investment and tax credits. Access to cheaper energy brings another advantage.
The Biden administration has poured more than $2 trillion into U.S. manufacturing to build domestic capacity and protect jobs. They also want American factories to lead the fight against climate change, which is why they're worried about the flood of Chinese solar panels.
Not only is China squeezing out competition, it is also using trade to gain access to sensitive American technology that can be incorporated into weapons systems. Computer chips are in the crosshairs.
Former President Donald Trump initiated some resistance to China, but Joe Biden's policies are more forceful. He is rewriting the rules of trade in a way that his predecessor would never have dared to do.
Beyond tariffs and sanctions, a Biden executive order would go a long way toward shutting off the taps that help fund China's development of advanced weapons. China is pushing ahead with the production of computer chips that are used in high-tech products of strategic importance. These are semiconductors that the rest of the world also wants to produce.
Froma Harrop commentary
Grandstand graphics
The order would ban Americans in private equity, venture capital, joint ventures and other forms of financing from investing money in Chinese companies involved in semiconductors, quantum computing or artificial intelligence.
According to Bloomberg News, the Biden administration's goal is to “stifle entire industries that are critical to China's capabilities on the battlefield and in cyberspace.”
In the background, there is growing fear that China is cozying up to America's adversaries. For a while, China appeared to play the useful role of peacemaker between Ukraine and Russia. But as time goes on, it becomes clear that Russia is clearly capable.
In April, the Chinese ambassador to France said in an interview that “countries of the former Soviet Union” were not sovereign states under international law. This would also include Ukraine.
This didn't sit well with the French, who feared that further advances by Vladimir Putin's Russia could drag NATO into war. And it suited Latvia, Lithuania and Estonia even less, as the Baltic states felt constantly threatened by Russian invasion.
A bipartisan group of House Democrats wants the Biden administration to impose a new “component” tariff that would tax an imported Chinese chip that is in another finished product. Sounds like a solid idea.
China is obviously not just playing by different rules, but by a completely different game. One way to protect jobs and national security would be to withdraw from the game. Diplomat Biden denies that America is trying to “decouple” from China. Could be misleading us and not entirely dissatisfying for many.
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