US to Use Tariffs to Counter China’s Excess Industrial Capacity
Growing Market Power and Unacceptable Costs
The United States will employ restrictive tools like tariffs to push back against China’s practice of producing far more goods than it needs to dominate global markets, according to White House official Daleep Singh. As the deputy national security adviser for international economics, Singh believes that China’s growing market power is being used for economic and geopolitical leverage, and Washington views the costs as unacceptable.
Industrial Overcapacity: A Growing Concern
China’s industrial overcapacity is a significant issue, with the country producing more goods than projected demand warrants. This has led to persistent losses for Chinese producers, with data showing that China has a significant overcapacity relative to projected demand for electric vehicles, batteries, and semiconductors. "We’re seeing an unrivaled level and rate of growth in China’s subsidies, and… forget about the numbers, look at their public pronouncements to dominate key sectors and diffuse them with military pre-eminence," Singh said.
Global Consequences
The trend of overcapacity is not limited to steel and solar panels, but is now spreading to other sectors, including electric vehicles, batteries, and semiconductors. This has led to a growing number of countries, including Brazil, India, South Africa, and the European Union, recognizing industrial overcapacity as a major problem like the US. "China is flooding strategic sectors with supply that’s well beyond what global demand can plausibly absorb, and therefore wiping out the competition," Singh stated.
Washington’s Response
Washington has been investing heavily in these sectors, but may need to take further and "more creative" actions beyond tariffs to protect US industries and workers against China’s growing excess industrial capacity. US Treasury Secretary Janet Yellen said that every province in China is competing to invest more in advanced manufacturing sectors, leading to a "gigantic amount of overcapacity that is threatening our own attempts to build in these areas."
Conclusion
The US government is determined to counter China’s strategy of producing excess goods to dominate global markets. The use of tariffs and other restrictive tools is a crucial step in protecting US industries and workers from the negative consequences of China’s industrial overcapacity. The US is not alone in this fight, as several countries are beginning to recognize the issue of overcapacity and its impact on the global economy.
Frequently Asked Questions
Q: Why is the US concerned about China’s industrial overcapacity?
A: The US is concerned about China’s growing market power, which is being used for economic and geopolitical leverage, and views the costs as unacceptable.
Q: What are the sectors affected by China’s overcapacity?
A: China’s overcapacity is affecting sectors such as electric vehicles, batteries, semiconductors, steel, solar panels, and medical devices.
Q: How is the US planning to address the issue of overcapacity?
A: The US is planning to use restrictive tools like tariffs to counter China’s strategy and protect US industries and workers.
Q: Are other countries also concerned about overcapacity?
A: Yes, a growing number of countries, including Brazil, India, South Africa, and the European Union, are recognizing industrial overcapacity as a major problem like the US.