Economic Coercion Inhibits Sustainable Global Growth

The Biden administration’s tariff hikes on Chinese products came, unsurprisingly, a month or so before the first 2024 presidential debate between incumbent U.S. President Joe Biden and former President Donald Trump. They are thus to play the China card once more. Biden has announced tariff increases across key sectors, purportedly to “protect American workers and businesses from China’s unfair trade practices,” according to the White House. The White House Fact Sheet also emphasizes the Biden administration’s creation of jobs in key sectors, as a countermeasure to the Trump administration’s failed China strategy to increase American exports and boost American manufacturing. The White House’s political agenda is thus laid bare.

“U.S. politicians are using trade bullying policies as presidential campaign bids with an attempt to secure support from some labor unions,” said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation, in an interview with Xinhua.

Calling the move “a clear example of political manipulation,” a spokesperson for the Ministry of Commerce noted that the United States has politicized and used trade issues as a tool.

The tariff hikes on Chinese products, which amount to blatant protectionism and economic coercion, belie the U.S. image as a champion of open economy and free trade, instead highlighting its hegemonic mindset.

Having investigated the negative impact of unilateral sanctions imposed on China through relentless U.S. pressure on Chinese tech companies since 2017, the UN Special Rapporteur on unilateral coercive measures and human rights Alena Douhan called on the U.S. to lift sanctions on China on May 17 during her visit to Beijing. Moreover, Douhan urged states to take strong action to curb sanction over-compliance by businesses and other actors under their jurisdiction. The UN Special Rapporteur deplored the decline in business activities that sanctions had caused, and how the consequent loss of global markets had affected those most vulnerable, “including women, older persons, and all those in informal employment.”

The recent U.S. move will, under Section 301 of the country’s Trade Act of 1974, increase tariffs on Chinese EV imports to 100 percent, those on solar cells to 50 percent, those on steel and aluminum products to 25 percent, and those on semiconductors to 50 percent, by 2025.

The potential disruption of global supply chains and normal production these measures threaten will also harm the U.S. economy. “The additional tariffs will drive up commodity prices in the United States, which will end up dampening consumer spending and exacerbating inflations,” said Zhang Jun, chief economist with China Galaxy Securities, in an interview with Xinhua.

Additional tariffs slapped on China’s key sectors, notably new-energy vehicles (NEV), also signify, certain experts observe, the U.S.’s hidden agenda to curb the development of China’s emerging industries in a bid to maintain its dominant position in the global industrial chain.

China is rising as a global leader in the new energy sector by merit of the country’s strategic foresight and unremitting efforts to advance green development. Having been a bellwether in the NEV industry for nine consecutive years, in 2023 China saw both its production and sales exceed nine million units. Meanwhile, as a key driver of global green transformation in the automotive industry, China’s NEV exports soared 77.6 percent in 2023, reaching 1.203 million units. The 278 new-energy models that made their debut at the 2024 Beijing International Automotive Exhibition underlined the magnetism of the Chinese market and the robust growth of the country’s new energy sector. A workable and effective national strategy, along with technological innovation, have helped to fuel the green trend.

The global popularity of China’s NEVs is attributable to their comparative advantages in market competition of being driven by innovation, rather than spurred by subsidies. The rhetoric of overcapacity, moreover, does not hold water in view of China’s NEV exports constituting only a small portion of its total production – 12 percent last year.

That a country’s production capacity outstrips its domestic demand is not uncommon in a market economy, and also a result of comparative advantages and labor division. “For instance, 80 percent of U.S.-manufactured chips are exported, 50 percent of Japanese cars are sold overseas, and nearly 80 percent of Germany’s auto output is shipped to foreign markets,” Ding Weishun, a Ministry of Commerce official, said recently.

As the threat of climate change continues to looms large, dealing with it becomes ever more urgent. Amid the global effort for sustainable growth, the demand for new energy products is surging. China’s thriving new energy sector helps to advance the global drive. The U.S. unilateral tariff measure, however, is inhibiting the global effort.

In fact, the world’s two largest economies share considerable cooperation opportunities in sustainable and inclusive development. This is potentially beneficial for both countries, and may also contribute to the well-being of the entire planet, Noah Fraser, senior vice president of China operations with the U.S.-China Business Council, observed at a recent forum. Their joint efforts will undoubtedly advance the global drive towards sustainable green development. But the tariff scheme is putting a brake on the process.