April
2024
Following the World Bank and International Monetary Fund’s spring meetings, U.S. Treasury Secretary Janet Yellen warned that China’s overproduction and industrial overcapacity has the potential to put American workers and businesses at risk.
As China faces economic slowdown in part due to the aftereffects of the COVID-19 pandemic, the country has responded by churning out more machinery, consumer electronics, and clean energy goods than its domestic economy can absorb. Looking to revive the Chinese economy, the country has directed its surplus and cheap goods overseas to countries including Germany, Brazil, India, the UK, Mexico, France, and Chile, causing a global panic over a potential second China shock, marked by reduced domestic manufacturing employment, a lower labor force participation rate, and reduced wages in local labor markets.
In response, the Biden administration has called for the imposition of new tariffs on Chinese-produced steel and aluminum products. This policy mirrors the hardline approach of his Republican rival, Donald Trump, who has long been hawkish on Chinese trade policy and has stated an interest in phasing out Chinese imports and prohibiting Chinese companies from owning U.S. infrastructure in the energy sector if elected.
Summary
The increased attention paid to Chinese exports has lasting implications for an already strained U.S.–China relationship aggravated by tensions regarding security issues, economic competition, and human rights. As the 2024 U.S. presidential election draws near, both Biden and Trump are proposing retaliatory measures in response to China’s trade policies, threatening to escalate the existing trade war between the world’s two largest economies. Special attention should be paid to how political ideologies, economic and industrial policy, the viability of domestic businesses, and existing relationships with foreign countries intersect. Trade experts at organizations such as the Council on Foreign Relations have expressed concern over a risk of heightened trade tensions resulting in “uncoordinated efforts that produce recriminations and retaliation among countries that otherwise share common objectives.”
Analysis
