Abundantly financed, American factories confront a challenge posed by China.

In a recent IB Talk podcast, Chris McMurray, managing director of cyber at Travelers Europe, shared insights into the evolving cybersecurity landscape and the increasing importance of adequate cyber coverage. As US factories and infrastructure receive a substantial injection of over $2 trillion from the Biden administration, aimed at bolstering American industry and addressing climate change, a familiar challenge emerges in the form of a surge in low-priced products from China. President Joe Biden and his team are contemplating new protectionist measures to ensure the competitiveness of American industry against Chinese counterparts.

While US factories gear up production of electric vehicles, semiconductors, and solar panels, China is flooding the market with similar goods, often at significantly lower prices. This trend is not exclusive to the US; it is also affecting the European market. US executives and officials argue that China’s actions violate global trade rules, prompting calls for higher tariffs on Chinese imports in both the US and Europe. Concerns about the potential threat to the survival of US factories, especially at a time when significant government investment is being made to revitalize domestic manufacturing, are prompting considerations of tariff increases on strategic goods from China.

Some Biden officials are particularly concerned about the impact of Chinese products on sectors like electric vehicles. A review of levies imposed by former President Donald Trump on China four years ago is underway, and there are indications that tariffs on electric vehicles and other strategic goods from China may be raised. Congress is also pushing for more protective measures, with bipartisan members expressing concerns about China flooding the US with semiconductors and proposing the possibility of a new “component” tariff.

The US Trade Representative, Katherine Tai, has shared concerns about China’s practices in the electric vehicle industry. Despite maintaining tariffs on Chinese products over the past five years, the US faces challenges as China’s industrial policy spending continues to surpass that of the US. China’s recent efforts to boost exports and support its factory sector, especially in high-tech products like electric vehicles and semiconductors, pose a threat to American manufacturers.

China’s significant investments in semiconductors, including a new $40 billion fund, are raising concerns among companies investing in US chip facilities. While China currently accounts for a relatively small share of global chip production, experts warn that its substantial investments could position it as the world’s largest chipmaker in the next decade. The fear is that China may build excess capacity, similar to its approach in shipping, solar cells, or steel, potentially driving foreign competitors out of business.

The US can impose tariffs on unfairly subsidized Chinese exports, as demonstrated by recent tariffs on Chinese steel. However, the global flow of Chinese goods into other countries, even when blocked from the US, poses challenges for American firms competing globally. Some argue for embracing cheap Chinese-made products, while others emphasize the need for protective measures to ensure the competitiveness of American industries.

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