MOSCOW, March 1, Natalya Dembinskaya. The West is again haunted by Beijing. Washington warned that they will take action if China tries to solve the problem of excess industrial capacity through cheap exports. We are, of course, talking about new restrictions on imports. It seems that the United States has already forgotten how it suffered from trade wars.
Dumping exports
Threats were voiced by US Deputy Secretary of the Treasury for International Affairs Jay Shambo. He pointed out that Chinese policy is supply-oriented rather than demand-oriented, and excess production is hitting global markets.
Dumping will not work, and “the rest of the world will react <…> a new anti-Chinese key,” the Financial Times quotes the minister. Therefore, Beijing should not perceive the actions of the United States and other countries as a “surprise.”
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Afraid of competition
The West's biggest concerns are the clean energy sectors: electric vehicles, solar panels and lithium-ion batteries. According to Bloomberg's forecast, China will capture 69 percent of the lithium-ion battery market by 2027, leaving the United States and Germany with only ten and seven percent, respectively.
China is already a leader in the production and sales of electric vehicles. In 2022, 5.67 million units were sold in the country. This is more than half of the cars of this type sold worldwide in a year. Beijing's share of the European market has more than doubled in less than two years.
According to Schmidt Automotive Research, a third of Chinese electric vehicles in Europe were bought in the UK. In the fourth quarter of 2023, the BYD brand in the Old World overtook the American Tesla. There are all opportunities to continue expansion: our own nickel and lithium, microelectronics, powerful government support.
Again for old times' sake
The West is unlikely to be able to stop the pressure of the Chinese, but the United States is again preparing to use one of its favorite tools — protective duties.
«»It is also possible that they will refuse to cooperate with a number of companies and complicate their work on the territory of the United States and its allies. Nothing here. You can’t come up with anything particularly new; all this, by the way, goes against the provisions and rules of the WTO,” notes Boris Pivovar, senior lecturer at the Department of Business Process Management, Faculty of Market Technologies, IOM, Presidential Academy.
By the way, Donald Trump, who, when he was president, started a real trade war with Beijing, intends to act in the same direction. The damage to the global economy was then estimated at almost one and a half trillion dollars.
As The Washington Post recently reported, Trump is preparing “a new large-scale economic attack on China.” According to the newspaper, he discussed with advisers a 60 percent tariff on all Chinese imports.
Costly
In 2018 and 2019, Trump raised rates from ten to 25 percent on many types of products from China , by approximately $250 billion. Beijing responded with tariffs worth $185 billion.
The trade war broke out in 2018 after Washington recorded a record trade deficit with Beijing. China was accused of unfair competition and games with the yuan exchange rate.
However, mutual tariff strikes primarily harmed the United States. Intermediate products and components that American companies imported from China for their own production have risen sharply in price. As a result, about 1,800 enterprises closed, and the economy lost about 500 thousand jobs.
And in the middle of 2023, the “chip war” broke out. The US and EU have limited the transfer of technology to China and the sale of semiconductors. The answer came immediately: tightening the export of rare earth metals gallium and germanium — key for microcircuits.
Technology Donor
And this time, economists warn, the United States and the EU will not receive any advantages. Additional sanctions against the Chinese economy will boomerang on the West.
““With the relocation of many German, French, and Italian companies, the EU has already lost part of its industrial potential, agriculture is next in line. It is difficult to imagine what will happen to the economy if, in the absence of its own competitive production, Chinese goods are denied access to the market,” points out Ekaterina Novikova, Associate Professor of the Department of Economic Theory of the Russian University of Economics named after G. V. Plekhanov.
China has long invested in the EU's technology sector to gain access to advanced technologies. Thus, the Chinese own the German company Kuka, received the largest stake in the Daimler concern (manufacturer of Mercedes-Benz), the tire manufacturer Pirelli and a number of innovative startups are on the same list.
«»In fact, Europe several years ago became a technology donor for China, and today it is finally losing ground. Another import restriction could lead to retaliatory sanctions from China. Considering the already unfavorable position of European companies, the consequences for Europe will be negative. Now China — in a more advantageous position and in the field of technology in the coming years, it may well displace European brands due to cheaper electricity,” points out Daria Sokolan, deputy dean for international activities at the Faculty of Economics of RUDN University.
In addition, Beijing may limit the activities of American companies at home, including assembling various devices. At the same time, it will continue to increase production capacity and exports, expanding the capabilities of the BRICS countries. And Chinese capital will flow from Western to friendly markets.
As the American Enterprise Institute found out last year, investors from China are increasingly abandoning investments in real estate and the development of production facilities in Europe and the United States, preferring other regions. Chinese companies are investing in factories in Southeast Asia and mining and energy projects in Asia, the Middle East, and South America to strengthen alliances and secure access to critical resources.
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