With investment, new US factories face a familiar challenge

With investment, new US factories face a familiar challenge

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 Prices are significantly lower than US competitors, 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 once again threaten the survival of American factories at a time when the government is spending huge sums to jump-start domestic manufacturing. According to people familiar with the matter, administration officials have criticized former President Donald J. China may increase tariffs on electric vehicles and other strategic goods as part of a review of tariffs imposed by Trump. 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 letter of 5th january Before 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.

After this a november letter In which members of the same committee advised the Biden administration to consider a new trade case on China’s electric vehicle subsidies, which could result in additional tariffs 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 US companies with billions of dollars in subsidies aimed at boosting US manufacturing of clean energy technology such as solar panels, electric vehicles as well as semiconductors.

Yet Chinese industrial policy expenditure still much further 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. sold about china 6.7 million full-electric vehicles For example, compared to last year 1.2 million units In the United States.

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 creates greater 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.

At the end of last month, two american companies A legal challenge to a temporary pause on tariffs on imported solar panels imposed by the Biden administration has been filed.

China’s huge investment in semiconductors A new $40 billion fund Companies investing in new U.S. chip facilities to support the industry are also worried.

China’s share in global chip production is relatively small – only approx. 7 percent In 2022. But experts say the country is spending more on its semiconductor industry than the United States and Europe, and it Can be made The world’s largest chip maker 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. Earlier this month it had increased tariffs 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 just do Adopt cheap Chinese-made solar panels and old chipsInstead of 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.

“What is the appropriate response, we subsidize our own? Or be a better economist and say, ‘Really, we’re just going to let foreign governments subsidize our consumption like crazy, we don’t really care?'” Mr. Lincicome said.

But most officials in Washington now see China’s dominance of key markets as a significant risk given rising tensions between the countries and sanctions imposed by China. Fixed export ban, 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 Even ahead of Tesla, ahead of an American company for the first time.

Chinese electric vehicles have surged in popularity in Europe, prompting the EU 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 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.

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