WASHINGTON — China's burgeoning production of electric cars and other green technologies has become a flashpoint in a new U.S.-China trade fight, highlighted by Treasury Secretary Janet Yellen during her five-day visit to China and seized on by former President Donald Trump in incendiary remarks on the campaign trail.
Trump, at a rally late last month in Ohio, charged that China would seek to export cars into the United States through Mexico. The U.S. currently has a 25-per-cent tariff on cars from China that has largely blocked vehicles from that country, but Mexico has a free trade agreement with the U.S. and Canada.
Yet by some estimates, Chinese companies are producing as many as 10 million more electric vehicles annually than they can sell domestically, according to the AAM. That is driving them to sell more cars overseas. Similar dynamics exist in other industries, such as solar panels, batteries, and more traditional areas such as steel.
The company “was once forced to close down, like other companies across a number of industries, because it could not compete against large quantities of goods that China was exporting at artificially depressed prices,” Yellen said. “It’s important that this doesn’t happen again.” “What's new is that the concerns around overcapacity in some cutting edge sectors have become acute,” said Brad Setser, a senior fellow at the Council on Foreign Relations and former Treasury Department official in the Obama adminstration. “China’s clearly built an insane amount of capacity to produce solar cells, and similarly large amounts of battery production. And now it’s starting to export autos.
But the government in Beijing has also acknowledged that manufacturing overcapacity and weak consumer spending are challenges it needs to confront to achieve sustainable growth for its own economy.