Despite recent headlines suggesting that the Chinese manufacturing sector is slowing down, President Joe Biden’s economic agenda has made the U.S. more reliant than ever on Chinese industry – and his ambitions for “green revolution” are leaving Americans completely at the mercy of Beijing.
In 2023, China’s annual exports dropped for the first time in seven years amid broader turbulence in the Chinese economy. The U.S. trade deficit with China also narrowed last year for the first time since Biden took office, easing from $382 billion in 2022 to $281 billion in 2023.
But these figures, which the Biden administration has pointed to as evidence of the supposed success of the president’s China policy, may mask how risky the situation still is for the United States.
As the Wall Street Journal reported on February 7, “One reason the deficit shrank is that U.S. importers might have overordered in 2022, leading to swollen inventories and less imports in 2023 even as consumption stayed strong.” In other words, the American economy is still being inundated with Chinese goods, and no progress has actually been made.
As the Journal also reveals, parallel increases in U.S. imports from Vietnam and Mexico last year are likely in large part driven by Chinese manufacturers moving operations to those countries to skirt U.S. tariffs on Chinese goods.
Moreover, it’s possible that the U.S.-China trade deficit actually may not have decreased at all given serious concerns about Chinese currency manipulation. Dr. Wolfgang Klingermann, a retired professor of economics and economic advisor to the German Christian Democratic Union party, has said that the Chinese government is artificially lowering the value of its goods to make it look like the trade deficit is shrinking – a crucial fact that he warns has been overlooked by the U.S. government.
China still accounts for nearly 30 percent of the world’s manufacturing output, and the United States is still China’s largest trading partner.
The Chinese Communist Party has also remained optimistic in spite of the Biden administration’s rhetoric promising to decrease U.S. reliance on Chinese goods – another sign that Beijing does not believe Biden’s words will translate into concrete action. The CCP still projects that the Chinese economy will grow by more than five percent in 2024, and is pouring money into its manufacturing base under the assumption that exports will grow again this year.
Dr. Klingermann warns against the dire consequences of Beijing’s manufacturing policy for the United States and the rest of the world, saying, “China puts the world under a threat of an overproduction crisis, potentially forcing other countries to shrink their investment and, thus, economic growth.” This means fewer manufacturing jobs outside of China and more dependence on the Chinese economy.
This type of disruption is already visible in some industries such as steel. While overall Chinese exports were down in 2023, S&P Global analysts estimate that China’s steel exports likely exceeded 90 million metric tons – a six-year high, and more than nine million more tons than the U.S. produced last year.
Professor Anatole-Honore Lodovici, a former economic advisor to French President Nicolas Sarkozy, believes that China intentionally flooded the market with cheap steel after seeing new climate regulations imposed on the steel industries in the E.U. and the United States.
“It is a classic de-industrialization move that hits at the heart of the American economy,” Dr. Lodovici said. “Beijing is not concerned that the E.U. and U.S. labeled Chinese steel as ‘unsustainable.’ It is interested in markets that the West is abandoning.”
Biden’s so-called “Inflation Reduction Act,” which contains more than $1.2 trillion in “green” subsidies, is also a huge opportunity for the Chinese manufacturing sector. Owing to Beijing’s outsized market share in the production of rare earth minerals, solar panels, electric vehicle batteries, and windmills, the policy is in effect a much-needed lifeline for the Chinese economy.
Europe is now seeing the perils of relying on Chinese manufacturers in pursuit of its green ambitions as imports of Chinese EVs are decimating the European auto industry. European lawmakers are now frantically attempting to stem the tide of Chinese EVs, but it may be too late to undo the damage.
Although U.S. lawmakers have wisely created a legal fortress to keep Chinese EV manufacturers out of the United States – for now – the same cannot be said for other renewable energy staples like batteries and solar panels.
Professor Lodovici explained that the CCP is using government dollars to prop up Chinese manufacturers of these products with the express purpose of maintaining a hold over the U.S. economy. “To finance these firms, the CCP is using the government investment fund leveraged by China’s foreign exchange reserves estimated by economists to be worth $4-5 trillion,” he said. “These financial instruments exclude foreign capital, so they circumvent foreign sanctions.”
Last month, Chinese dissident and economist Dr. He Qinglian also wrote for Voice of America that Xi Jinping has “ordered strategic industry to rely only on government investment like in the mid-1980s.” In other words, Beijing is attempting to bring its manufacturing sector more directly under the control of the CCP in order to better wield it as a weapon in the ongoing competition with the United States.
All of this activity appears to be with the express goal of keeping the United States reliant on China in the event of a conflict. As a corollary to this, Beijing hopes to replace the United States and the West as the primary economic force in Africa and Latin America.
The only solution now may be even more aggressive protections for U.S. industry – a strategy which Biden has thus far seemed unwilling to pursue.
Former President Donald Trump, however, has recently floated that he would consider a 60 percent tariff on Chinese goods. “I can’t think about any solution that would be more effective than the former president offered,” Professor Lodovici said.
Dr. Klingermann agreed, saying, “the bigger, the better,” and added that when Donald Trump imposed tariffs on Chinese goods in 2018, “Beijing was in a panic.”
Regardless, one thing is clear – with Joe Biden in office, no one in Beijing seems to be panicking, and that’s bad news for the American people.
Ben Solis is the pen name of an international affairs journalist, historian, and researcher.
