U.S. to Use Tariffs Against China's Overproduction

By Andrea Shalal

WASHINGTON (Reuters) – The United States plans to use restrictive tools such as tariffs to counter China’s excessive production aimed at dominating global markets, according to White House official Daleep Singh.

Singh, the deputy national security adviser for international economics, explained that China's growing market power is leveraged for economic and geopolitical ends, which the U.S. finds unacceptable.

> “So that's the problem, and it's not abstract. You can see it in the numbers,” Singh remarked at an event by the Alliance for American Manufacturing. “They're a big outlier and we've got to do something about it.”

U.S.-China relations have been strained for years, with ongoing issues including trade tariffs, the origins of COVID-19, human rights, intellectual property, and Taiwan. Singh did not disclose specific new measures Washington is considering.

Data indicates that China has significant overcapacity for electric vehicles, batteries, and semiconductors, noted Singh, pointing out that Chinese manufacturers are facing “persistent losses.”

> “We're seeing an unrivaled level and rate of growth in China's subsidies, and … forget about the numbers, look at their public pronouncements to dominate key sectors and diffuse them with military pre-eminence,” Singh commented, just a week before international finance officials convene in Washington for IMF and World Bank meetings.

He highlighted that “a growing number of countries,” including Brazil and the European Union, are recognizing industrial overcapacity as a significant issue, similar to the U.S. perspective, asserting that China is using overproduction to assert dominance in several sectors.

> “China is flooding strategic sectors with supply that's well beyond what global demand can plausibly absorb, and therefore wiping out the competition,” he stated.

Singh noted that China has employed such tactics for two decades to dominate steel, solar, and medical devices, but the trend is now extending to electric vehicles, batteries, and semiconductors, areas where the U.S. is heavily investing.

Previously, the U.S. indicated it might need to take additional and innovative actions beyond tariffs to shield American industries and workers from China's increasing industrial overcapacity.

U.S. Treasury Secretary Janet Yellen, in a separate event in New York, emphasized that every province in China competes to invest in advanced manufacturing like clean energy and semiconductors.

> “So the level of subsidization is utterly enormous. There are many profit-losing firms that are kept in existence. And so there is a gigantic amount of overcapacity that is threatening our own attempts to build in these areas,” Yellen stated.