Are America and China close to separating economically? | Economy

China accused US President Joe Biden of reneging on his pledge “not to seek separation from China,” after he sharply raised tariffs on imports of Chinese electric cars and other clean energy products.

Critics accused Biden of pandering to blue-collar workers in states such as Pennsylvania and Michigan, crucial electoral battlegrounds in the presidential election in November, according to the Financial Times.

Others wondered whether the Democratic president was using tariffs as a weapon in an attempt to appear tougher on China than Donald Trump, his Republican rival in this year’s White House race, who launched a trade war with China in 2018 and recently pledged to impose tariffs on all imports from China by 10 percent. 60%.

It is noteworthy that US Treasury Secretary Janet Yellen and National Security Advisor Jake Sullivan said – about a year ago on two separate occasions – that Washington is not trying to separate from China (commercially), but rather seeks to “remove risks.”

Separation or trade war?

While experts in Washington debated the merits of using tariffs to protect American industry, few considered the measures announced this week to be either “disengagement” or a sign of a new trade war.

The British newspaper quoted Emily Kilcrease, a trade expert at the Center for New American Security Research, as saying that the high fees announced last Monday on electric vehicles and other clean technology products, including batteries, were an “intensification of the de-risking agenda.”

She added that de-risking is a term that covers everything from reducing security threats from Beijing to distributing US dependence on Chinese supply chains.

The expert noted that Biden targeted the sectors that are at the heart of the competition between the United States and China, but he added a new factor represented by customs duties, as normal policy tools, such as export controls, are completely ineffective in the areas of technology in which China has great capacity, as well as production. Excess in some cases.

Clete Williams, a former White House trade official in the Trump administration, has a different term for the specific focus of the new measures on specific sectors, according to the Financial Times.

“The juxtaposition between complete decoupling and mere de-risking is a very wide gap,” he said. “It is a strategic decoupling.”

Until last Monday (the day the new tariffs were imposed), Biden was largely focused on security-related measures to prevent China from obtaining advanced American technology, such as semiconductors.

Sullivan described this narrow strategy that focuses on key sectors, such as artificial intelligence, as a “small spaces with high fences” approach in reference to denying China access to specific technology.

Attract voters

The question raised by some, last Tuesday, was whether Biden was changing his course in attracting blue-collar voters whom he and Trump are courting across the American industrial “rust belt,” the newspaper says.

The Rust Belt refers to the geographic region extending from New York through the American Midwest that was previously dominated by manufacturing industries, and it is synonymous with areas facing industrial decline, leading to the abandonment of factories that rust due to exposure to weather factors.

After a legal review of the tariffs that Trump imposed on Chinese goods worth $300 billion during his trade war, Biden kept the tariffs as they were, which he criticized when they were imposed, but he added other tariffs on clean energy products recently.

“What you’re seeing is a lot of symbolism that is clearly politically motivated,” Williams said.

The newspaper quoted trade expert at the Center for Strategic and International Studies, Emily Benson, as saying that it is important to look at each product that was targeted in Biden’s new tariff system.

She added, for example, that deterring electric vehicle imports was not an example of decoupling, because the Chinese auto sector and the American economy “were not very intertwined to begin with.”

Likewise, doubling tariffs on Chinese semiconductors to 50% would have a limited impact, because the United States imports few chips.

By contrast, any targeting of finished products that include chips would represent a new step toward decoupling.

Trade expert at the Council on Foreign Relations, Brad Setser, said the best explanation for the tariffs was simply that Washington was trying to prevent China from gaining a foothold in parts of the emerging clean energy sector in the United States.

Setser said the new tariffs are designed to avoid linkage in sectors that have not historically been integrated, such as automobiles, in which China has not been a major source of supplies to the United States.

Setser ruled out that these tariffs would lead to further separation, given that they do not cover the rest of the aspects of trade between the two countries.