Are the US and Chinese economies really on the verge of decoupling?

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Just over a year ago, US Treasury Secretary Janet Yellen argued in a speech that Washington was not trying to decouple from China, saying a “complete separation” of the economies would be “disastrous” for both countries.

A week later, US National Security Advisor Jake Sullivan borrowed a line from European Commission President Ursula von der Leyen, saying the US was pursuing a policy of “de-risking” and not decoupling.

The rhetoric was aimed at countering Chinese criticism that the US was taking measures, such as technology-related export controls, to limit China’s rise.

Biden administration officials wanted China to understand that the US would continue to take measures to protect national and economic security even as the countries tried to stabilize relations that had reached a low point after a suspected Chinese spy balloon flew over the US.

The troubled relationship came into focus again this week when President Joe Biden sharply increased tariffs on imports of Chinese electric vehicles and other clean energy products.

Beijing accused the US president of reneging on his pledge “not to seek decoupling from China,” while critics accused Biden of pandering to workers in states such as Pennsylvania and Michigan – crucial electoral battlegrounds in November’s presidential election.

Others wondered whether the Democratic president was using tariffs as a weapon in an effort to get tougher on China than Donald Trump, his Republican rival in this year’s race for the White House — who launched a trade war against China in 2018 and recently pledged to will meet. the country’s imports into the US with a 60 percent tariff.

As Washington experts debated the merits of using tariffs to protect U.S. industry, few viewed the measures announced this week as a “decoupling” or a sign of the outbreak of a new trade war.

Emily Kilcrease, a trade expert at the think tank Center for a New American Security, said the higher duties announced Tuesday on electric vehicles and other clean technology products, including batteries, are an “intensification of the risk reduction agenda.”

De-risking is a term that encompasses everything from reducing security threats from Beijing to diversifying America’s dependence on Chinese supply chains.

Biden had focused on sectors at the center of US-China competition, she said, but had added a new factor with tariffs. “The standard policy tools, such as export controls, are completely ineffective in technology areas where China already has significant capacity and . . . in some cases overcapacity.”

Clete Willems, a former White House trade official in the Trump administration, had another term that reflected the new measures’ tailored focus on certain sectors.

“The dichotomy between complete decoupling and merely reducing risk is too wide a divide,” he said. “This is a strategic disconnect.”

Workers on a solar panel production line in China.
One trade expert said the best interpretation of the tariffs was simply that Washington was trying to prevent China from gaining a foothold in parts of the emerging U.S. clean energy sector. © Chen Bin/VCG/Reuters

Until Tuesday, Biden had largely focused on security-related measures to prevent China from acquiring advanced American technology such as semiconductors. Sullivan described this limited strategy, focused on key sectors such as artificial intelligence, as a “small garden, high fence” approach.

The question for some was whether Biden changed course in an appeal to the working-class voters he and Trump are courting in America’s industrial rust belt.

After a legislative overhaul of the tariffs Trump imposed on $300 billion of Chinese goods during his trade war, Biden — who had criticized the tariffs when they were introduced — left the duties in place but added the other duties on clean energy products.

Willems said: “What you see is a lot of symbolism that is clearly politically driven.”

Employees work on the electric vehicle assembly line at a Jiangling Motors factory
US President Joe Biden this week raised tariffs on imports of Chinese electric vehicles and other clean energy products © Zhu Haipeng/VCG/Reuters

Emily Benson, a trade expert at the Center for Strategic and International Studies think tank, said it was important to look at every product subject to Biden’s new tariff regime. For example, deterring electric car imports was hardly an example of decoupling, as the Chinese auto sector and the US economy “were not significantly intertwined to begin with.”

Doubling the tariff on Chinese semiconductors to 50 percent would also have a limited impact because the US imported few chips. In contrast, any targeting of end products containing chips would represent another step toward decoupling.

Brad Setser, a trade expert at the Council on Foreign Relations, said the best interpretation of the tariffs was simply that Washington was trying to prevent China from gaining a foothold in parts of the emerging U.S. clean energy sector.

“It was designed to prevent ‘coupling’ in sectors that have not historically been integrated, such as automotive, where China has not been a major source of supply for the US,” Setser said. “As it doesn’t cover the rest of the trade, I don’t think it’s likely to lead to further decoupling.”

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