The U.S. government is investing trillions of dollars to boost its domestic manufacturing of clean energy and high-tech products, hoping to create jobs and fight climate change. But it faces a familiar challenge: China’s low-cost exports.
China is the world’s largest producer and exporter of solar panels, electric vehicles and semiconductors, which are key products for the U.S. green and tech industries. China has been ramping up its production and exports of these goods, often at prices that undercut U.S. competitors. For example:
- China accounted for 78% of global solar module shipments in 2020, up from 64% in 2019.
- China’s electric vehicle sales reached 1.3 million units in 2020, more than double the U.S. sales of 328,000 units.
- China’s semiconductor exports rose by 16% in 2020, reaching $109 billion, while U.S. exports fell by 5%, to $41 billion.
These trends have raised concerns in Washington that China’s exports could threaten the survival of U.S. factories, especially at a time when the Biden administration is spending more than $2 trillion to support domestic manufacturing of clean energy and high-tech products.
U.S. Trade Measures Against China
The U.S. government has been taking various trade measures to protect its domestic industries from China’s competition. These include:
- Imposing tariffs on Chinese imports, such as solar panels, electric vehicles and semiconductors, under the Trump administration’s Section 301 action. The Biden administration is reviewing these tariffs and may raise them for some products.
- Launching trade investigations into China’s subsidies and practices in the electric vehicle and semiconductor sectors, which could result in additional tariffs or other actions.
- Restricting the export of advanced technologies and components to China, such as chips and software, on national security grounds.
- Promoting the reshoring and diversification of supply chains for critical products, such as batteries and rare earths, to reduce dependence on China.
The U.S. trade measures have been met with resistance and retaliation from China, which denies violating global trade rules and accuses the U.S. of protectionism and bullying. China has also imposed its own tariffs and sanctions on U.S. products and entities, and has been expanding its trade and investment ties with other countries, such as the European Union and the Association of Southeast Asian Nations.
The Pros and Cons of U.S.-China Trade Tensions
The U.S.-China trade tensions have both positive and negative implications for the U.S. green and tech industries. On the one hand, the U.S. trade measures could help level the playing field and create a more favorable environment for U.S. manufacturers, by raising the costs and barriers for Chinese competitors. The U.S. trade measures could also incentivize more innovation and investment in the U.S. industries, by increasing the demand and profitability of domestic products.
On the other hand, the U.S.-China trade tensions could also have adverse effects on the U.S. industries, by increasing the costs and risks of doing business with China, which is a major market and supplier for many U.S. companies. The U.S. trade measures could also trigger a backlash from China, which could limit the access and opportunities for U.S. companies in the Chinese market, or even target them with cyberattacks or other forms of sabotage. Moreover, the U.S. trade measures could undermine the global cooperation and coordination on climate change and technology issues, which are vital for addressing the common challenges and opportunities facing the world.