Chinese factory exports are growing faster than expected, putting jobs around the world at risk and triggering a growing backlash.
From steel and automobiles to consumer electronics and solar panels, Chinese factories are increasingly finding foreign buyers for their goods. The world’s appetite for its products is welcomed by China, which is suffering a serious slowdown in what was the economy’s main growth driver: apartment construction and development. But other countries are increasingly concerned that China’s rise is partly at their expense and are beginning to take action.
The European Union announced last week that it was preparing to impose customs duties, which are import taxes, on all electric cars from China. The European Union said it found “substantial evidence” that Chinese government agencies were illegally subsidizing these exports, which China denies.
The amount of tariffs will not be set until the summer but will apply to any electric car imported by the bloc from March 7.
During a visit to Beijing in December, European leaders warned that China was compensating for its housing crisis by building far more factories than it needs.
China already produces a third of the world’s manufactured goods, more than the United States, Germany, Japan and South Korea combined, according to the United Nations Industrial Development Organization.
The European Union is also considering restrictions on the import of wind turbines and solar panels from China. India announced last September that it would impose broad tariffs on steel from China. Turkey complains that China exports unbalanced while purchasing little.
The Biden administration, which has maintained former President Donald J. Trump’s tariffs, has imposed an ever-lengthening list of restrictions on U.S. high-tech exports.
“I have ensured that America’s most advanced technologies cannot be used in China, preventing their commerce there,” President Biden said in his State of the Union address on Thursday.
Chinese exports, measured in dollars, rose 7% in January and February compared to last year. But falling prices for many Chinese products – due to excess production in China – mean that the physical quantity of exports and their global market share are growing much faster.
China has found ways to circumvent certain tariffs. Chinese components are being shipped in increasing volumes to countries including Vietnam, Malaysia and Mexico. These countries process the goods so that they are considered their own products and not made in China. These countries then ship the goods to the United States and the European Union, which charge them low or no tariffs.
The United States and the European Union are starting to worry.
Katherine Tai, the United States trade representative, warned last week in comments at a Brookings Institution event that the United States-Mexico-Canada Agreement, which replaced the North American Free Trade Agreement, was due for review in the summer of 2026. She suggested that the United States could insist on strengthening rules on the origin of components, particularly for automobiles — a position also married last fall by Robert E. Lighthizer, former trade representative to President Trump and now top trade adviser to Mr. Trump’s election campaign.
China “is already a very significant element of tension and concern” in North American trade relations, Ms. Tai said.
In addition to looming tariffs on imported clean energy products, Europe will soon gradually impose a tax on imports from around the world, based on the amount of climate change-causing carbon dioxide emitted during their production .
The new tax is known as a carbon border adjustment mechanism, or CBAM. But it has been nicknamed the “C bomb” in Europe because it will fall heavily on imports coming directly or indirectly from China. Two-thirds of China’s electricity is produced by burning highly polluting coal, meaning much of its exports to Europe could be hit by the new tax.
Europe and the United States also face threats from China to their long-standing economic relationships with developing countries, which are increasingly choosing cheaper Chinese products. Countries across much of Latin America and Africa now buy more from China than neighboring industrial democracies, and there is little the United States and Europe can do about it.
“There are no rules to prevent dumped and subsidized products from harming your exports to the rest of the world,” said Susan C. Schwab, who was the U.S. trade representative under President George W. .Bush.
For their part, Chinese officials expressed concern during the annual session of the country’s legislature, which ended Monday, over what they perceive as a wave of unfair protectionism. China’s Commerce Minister Wang Wentao cited a recent study by the International Monetary Fund that found the number of trade restrictions around the world had almost tripled in the past four years, with most of them targeting China.
Foreign trade officials and economists generally cite three aspects of China’s industrial policy that favor exports. State banks provide loans to factories at low interest rates. Cities transfer public land for factory construction at little or no cost. And the public electricity grid keeps prices low.
According to China’s central bank, new lending to industry jumped to $670 billion last year, up from $83 billion in 2019. In contrast, net lending for real estate was $800 billion. dollars in 2019, but fell by $75 billion last year.
Zheng Shanjie, China’s top economic planner, reaffirmed China’s industrial policy last week, saying “land and energy will be channeled into good projects.”
China’s booming exports are visible in its manufactured trade surplus, which is the largest the world has seen since World War II.
These surpluses match deficits in other countries, which can hamper their growth.
The growing surplus is not only due to rising exports. China has reduced or stopped purchases of many manufactured goods from the West as part of a series of national security and economic development measures over the past two decades.
China’s manufactured goods surpluses are now about twice as large, relative to the global economy, as the largest surpluses run by Japan in the 1980s or by Germany just before the global financial crisis, according to calculations by Brad Setser and Michael Weilandt, economists at the Council on Foreign Relations in New York.
Deficits with Japan and Germany have long been tolerated because they are American allies.
But China is an increasingly close ally of Russia, North Korea and Iran. Foreign Minister Wang Yi warmly mentioned these three countries, especially Russia, at a press conference last week.
“Maintaining and developing China-Russia relations is a strategic choice made by both sides and based on the fundamental interests of the two peoples,” he said. Russia has become one of China’s fastest-growing export markets, particularly for automobiles, as exporters from industrial democracies stopped selling to Russia after its invasion of Ukraine.
Western economists, and even some Chinese economists, have called on China to do more to help consumers instead of increasing industrial production. Premier Li Qiang, China’s second-highest official after Xi Jinping, told parliament in his annual speech last week that he would move in that direction, but his steps were modest.
He said China would, for example, increase minimum government pensions for the elderly, but only by $3 a month. This would cost less than a tenth of a percent of the country’s economic output.
