Will China flood the world with EVs and green technology? What's behind the recent US-China trade war?

WASHINGTON (AP) – China's surge in production of electric vehicles and other green technologies has become a flashpoint in a new U.S.-China trade war, highlighted by Treasury Secretary Janet Yellen during a five-day visit to China. , former President Donald Trump also took control of it. For his inflammatory statements during election campaign.

China is ramping up production of cheap electric cars, solar panels and batteries, just as the Biden administration passed legislation to support many similar industries in the United States. Concerns are growing not only in the United States but also in Europe and Mexico that China will try to shore up its sluggish economy with a wave of exports that could overwhelm factories overseas.

The American Manufacturing Alliance, a U.S. trade group, said in a February report that Chinese automaker BYD recently launched an electric SUV at an “astonishingly low price” of $14,000. China's auto industry poses an “existential threat” to U.S. automakers, the report claimed.

At a rally in Ohio late last month, President Trump accused China of trying to export cars to the United States through Mexico. The United States currently imposes a 25% tariff on cars from China, and imports of cars from that country are largely prohibited, although Mexico has a free trade agreement with the United States.

President Trump has promised to block these imports with new tariffs, but suggested that if Biden is re-elected it would be a “disaster” for the auto industry.

So what is behind the new trade war between the US and China? Here are some questions and answers on this issue.

What is the threat from China?

China has spent more than a decade subsidizing automakers, building a sizable auto industry that accounts for 60% of global electric vehicle sales, according to the Paris-based International Energy Agency.

But according to some estimates, Chinese companies are producing as many as 10 million more electric vehicles a year to sell domestically, according to AAM. That's what makes them try to sell more cars overseas. Similar dynamics exist in other industries, such as solar panels, batteries, and more traditional sectors such as steel.

“The concern is that the Chinese have built a lot of production capacity across many industries, including these new technology areas, and if domestic demand does not recover, China will look for markets overseas. It means being deaf,” Eswar said. Prasad is an economist at Cornell University.

How is this different from the previous trade war with China?

It's quite similar. American officials say they have seen the film before.

In remarks in Guangzhou, China, on Saturday, Yellen highlighted the Biden administration's concerns, recalling her visit a week earlier to Suniva Inc., a solar cell maker in Norcross, Georgia.

Yellen said the company “was once forced to shut down, like other companies in many industries, because it couldn't compete with the huge volume of goods that China was exporting at artificially low prices.” . “It is important that something like this never happens again.”

China is currently the world's largest producer of solar cells. Suniva closed in 2017 but has restarted production with the help of subsidies from the Biden administration's anti-inflation law.

Steel and aluminum imports to the United States surged about a decade ago after the Chinese government helped boost production after the 2008-2009 global financial crisis. These imports were subject to tariffs in 2017 under the Trump administration. Biden kept the tariffs in place.

“What's new is that there are growing concerns about overcapacity in some of the most advanced sectors,” said Brad Setzer, a senior fellow at the Council on Foreign Relations and a former Treasury official in the Obama administration. “China has obviously built an insane amount of production capacity to produce large quantities of batteries as well as solar cells. And now they're starting to export cars as well.”

Isn't the US also subsidizing these industries?

Yes, the Biden administration has passed several bills that provide financial support to clean energy and semiconductor producers. China has also filed a complaint with the World Trade Organization alleging that some of Biden's subsidies for electric vehicles violate trade rules.

However, according to a 2022 report from the Center for Strategic and International Studies, China's industrial subsidies in 2019 were twice the size of U.S. aid in dollar terms.

Both Prasad and Setzer added that while China subsidizes the production of goods, it does little to stimulate consumption among its own people. For example, during the COVID-19 pandemic, the United States supported a significant increase in consumption with several rounds of economic stimulus.

So far, the two countries have largely agreed to hold talks on the issue. China claims cheap solar panels and other environmentally friendly products are helping the world fight costly climate change, and refuses to take any steps to address U.S. concerns. I haven't made any promises.

But Beijing also acknowledges that manufacturing overcapacity and weak consumer spending are challenges it must confront to achieve sustainable growth for its economy.

The rapid expansion of EV production is expected to cause intense price competition, forcing some manufacturers to go out of business. Industrial policy expert Huang Hanquan said China needs better policy coordination to encourage provinces to promote the same industries and encourage the development of new technologies without encouraging companies to overinvest.

“China is concerned about how China's industrial strategy could affect the United States, potentially flooding the Chinese market with exports and making it difficult for American companies to compete,” Yellen told reporters on Saturday. I think I understand what's going on.”

“This problem is not going to be solved in a day or a month, but I think it's sending a message that this is an important issue to us,” she said.

Associated Press reporter Ken Moritsugu in Beijing contributed.