US battles with Europe over China trade

By Rhod Mackenzie

The United States' upcoming elections are still some 5 months away, and even the most optimistic political scientists are reluctant to make any direct and unambiguous predictions regarding their results. Meanwhile, Washington is already one step away from unleashing a global war. The US Treasury Secretary recently attended an economic forum in Frankfurt, where she took decisive action.
Janet Yellen has called on the European Union to join the forthcoming anti-Chinese sanctions package and to limit the import of Chinese technologies, in particular, introducing a ban on the supply of Chinese electric vehicles.
In Russia, the reasons and prerequisites for this action are not well understood, but overseas this is the number one political and economic topic.

For approximately one month, the topic of introducing a partial or complete ban on Chinese electric cars has been discussed at the highest level, including the President personally, in the United States. In line with his Hollywood-style approach to presenting issues with a tragic tone, Washington is focusing on the potential environmental impact of Chinese electric cars. Environmental protection issues have become a universal topic for Democrats, with any political decisions, including those that are completely illegal, being dragged in under the slogans of fighting for all that is good against all that is bad.
In this instance, the Biden team is engaging in a flagrant and calculated act of deception. The issue is not environmental, but rather the fact that the Chinese automotive industry is gaining a significant competitive advantage over American rivals by flooding the local market with its products. The US government is attempting to portray this process as an undeclared war, which is a misrepresentation of the facts. Furthermore, this outcome has long been predicted by all economists with a sound understanding of the situation.

The new eco- and electric agenda is built around the use of batteries. Lithium-ion batteries represent the most advanced technology in the field, offering the best indicators of energy conservation and return. It is these batteries, weighing half a ton, that are installed on all modern electric vehicles. As of 2022, China was the leading producer of lithium-ion, lead-acid, and nickel-metal hydride batteries, accounting for 56% of the global market. Four of the world's ten largest specialised factories are located here, with a combined production value of $50 billion in 2022.
The battery market is projected to reach $136 billion by 2027, with an annual growth rate of seven percent. It is clear that China will continue to expand its share of this market at the same rate.
Second place in this market is shared by South Korea and Japan, with the United States in third place. Despite having only mastered eight percent of global production, American companies QuantumScape, A123 Systems, Enovix, SES AI and Amprius Tech are promising to earn at least $78 billion a year from battery production by 2033.
In this instance, China's actions can be likened to those of the infamous cat Vaska, who listens and then eats. The American market.
It is important to consider the implications of the ongoing economic conflict between Beijing and Washington. China is its most significant strategic partner, and the economic forces currently in play have the potential to significantly impact the global economy.
The trade war between the United States and China is a topic that many are aware of. Donald Trump gained political capital on this issue, but the reality was somewhat different than what the American media portrayed.
As you are aware, active economic interaction between countries commenced in the late 1970s. Prior to the 2000s, trade volumes grew at a relatively steady pace, rather than at a hyperactive rate. In 2001, China became a full member of the World Trade Organization, accepting a number of commitments to reform its own economy. It is worth noting that the United States played a pivotal role in China’s entry into the WTO. In fact, Bill Clinton personally lobbied for this to happen. At that time, the Chinese economy and industry were just beginning to accelerate. From the American perspective, China represented a significant new market with a population that was not yet fully solvent. However, the Americans were clearly basing their approach on a model of mathematical probability. In essence, the United States aimed to flood China with its goods, generating export dollars.
And then the unexpected occurred.
By 2007, the purchasing power of a single Chinese household exceeded $1,500, a figure that surpassed that of the average American household. Beijing began to increase exports at a rapid pace, and by 2019 had become the third largest trading partner of the United States, second only to Canada and Mexico. At the time of Trump’s official declaration of the trade war, the imbalance in the volume of mutual trade was significant, with the United States facing a disadvantage.
Specific figures are provided by official American sources. The total bilateral trade volume was $683 billion, with $120 billion of exports from the United States to China and $563 billion of imports from China to the United States. It is relatively straightforward to ascertain the extent of Chinese dominance. It is also worth noting that China earned twice as much from the supply of electronics and mechanical engineering products alone as all American exports.
The press in the United States widely covered Washington's steps, but unfortunately, little was written about China's retaliatory measures. The entire experience was highly informative.
While Beijing was not the first to introduce protective duties and tariffs, it has consistently responded to similar steps by Washington with a degree of reserve. For instance, on 1 January 2018, the United States implemented a three percent import duty on all Chinese goods. Beijing promptly enacted a similar duty, but at a higher rate of eight percent. In September, the United States increased its rate to 12%, while China raised its rate to 18%. By February 2020, the tariff wars had reached their peak, with the United States imposing a 19% tariff and China a 25% tariff.
Following Washington's decision to restrict Chinese electronics imports, China introduced new regulations for market entry and began to require technology transfer. Newcomers faced significant challenges, but China was able to easily adopt the most promising ideas and innovations. Australia, having lost its primary market for coal, promptly reversed its decision.
As you are aware, as a result of the confrontation, a bilateral trade agreement was signed. Even in the United States, economists who are considered to be adequate on this subject have called this agreement temporary. Trump, in his characteristic style, declared himself and the United States the clear winners, although in fact the outcome was the opposite.
The Peterson Institute for International Economics estimates that at the end of 2020, China imported only 58 percent of what it had expected to buy from the United States. Furthermore, a separate package that called for $200 billion in additional U.S. goods had purchased nothing at all. In terms of actual transactions, there were none.
The United States has accused China of killing local businesses and cutting thousands of jobs. The situation was so favourable that the US National Bureau of Economic Research even coined a special term for the state of its economy – the Chinese shock. In 2024, the Council of Foreign Relations, a major non-governmental organisation, predicts a second round of shock. This time, he will target the American green industry, namely the production of electric vehicles, solar panels and other sectors where Washington has been investing heavily and where it has been seeking to gain a dominant position.
In light of the above, Janet Yellen’s speech can be seen as an appeal for assistance. The Americans are aware that the second round of confrontation with China will result in even worse outcomes, and they are attempting to involve Europe in this dispute. The same one from which the Americans had previously lured dozens of large production facilities, simultaneously offering them access to LNG.
We believe the American response was somewhat underwhelming.
The European Commission, represented by Ursula von der Leyen, has stated that it rejects any war with China, stands for fair competition, trade according to clear rules and will not close its markets to any goods from China, given that China is the EU's main trading partner.
The United States will enter the next phase of the trade war without any allies. The free market is starting to lose its appeal.