Beyond tariffs, US economic strength is key to containing China

On Tuesday, President Biden announced that the U.S. will increase tariffs on Chinese electric vehicles (EVs) from 25 percent to 100 percent, along with higher tariffs on semiconductors, solar panels and batteries. This move targets China’s “Three New Things” strategy, which relies on EVs, lithium batteries and solar panels to replace its struggling real estate sector and boost its economy. 

The timing and strategic significance of these tariffs are critical. To address U.S.-China relations effectively, the U.S. needs to shift from a reactive to a proactive approach, leveraging its strengths creatively. 

China’s comprehensive strategy spans issues from Taiwan to global competition with the U.S. While Beijing is proactive, the U.S. has often been reactive, focusing mainly on preventing escalation. Recent examples include responses to conflicts in Ukraine, Israel and the Taiwan Strait. 

During a recent Beijing visit, Secretary of State Antony Blinken warned China about supplying critical components to Russia for weapons production, saying that if China doesn’t stop, the U.S. will act. This message underscores the U.S. challenges in addressing China’s provocations, as the Chinese Communist Party (CCP) often avoids significant retaliation by calibrating its actions. 

For instance, China refrains from directly supplying arms to Russia to avoid strong diplomatic and military responses. Despite Xi Jinping’s promises to curb civil-military exports to Russia, it is doubtful this will be enforced sincerely. China excels at finding loopholes. Beijing views its support for Russia in the Russia-Ukraine conflict as a means to exhaust U.S. resources, diverting attention from the Taiwan Strait. 

In the Taiwan Strait, China’s gradual expansion of maritime patrols and military airspace violations steadily assert control. The U.S. has been largely reactive, reluctant to escalate tensions to a direct confrontation, which does not effectively deter Beijing. 

While Beijing aims to annex Taiwan without open conflict, it has contingency plans. Over the past two years, China has fortified its economy against potential Western sanctions by strengthening partnerships with Global South allies, securing oil and gas reserves from Russia and amassing gold. China’s foreign currency reserves have reached $3.22 trillion, the highest of any country. 

In a recent congressional testimony, Director of National Intelligence Avril Haines noted the first-time joint military exercises between China and Russia in relation to Taiwan. This collaboration likely aims to deter the U.S., as engaging with two nuclear powers simultaneously would be challenging. 

Beijing is aware of the U.S. dilemma. On one hand, de-escalation could be seen as weak, potentially inviting further aggression. On the other hand, the U.S. cannot act as the global police force, engaging in multiple conflicts at once

Former Assistant Defense Minister Bridge Colby said the U.S. might struggle to fight one war, let alone multiple. The U.S. must choose between Taiwan, Israel and Ukraine if it has to, but cannot afford to let Ukraine fall, as this could embolden Xi Jinping regarding Taiwan. 

Traditional diplomatic and military means offer no good options for the U.S. Instead, it should leverage its strengths to target its opponents’ weaknesses, breaking the balance of power and forcing a change in strategy. 

The U.S.’s biggest advantage over China is its economy. While the U.S. economy is strong, China’s domestic demand is weak, with minimal consumption and investment. The only bright spot in China’s economy is the “Three New Things,” with EV exports leading. These exports have contributed more to GDP growth than real estate, and China needs to maintain this momentum. 

China also needs foreign investment for capital, as domestic confidence is low, and much state-issued money remains idle in banks. Foreign investment not only provides financial capital but also boosts confidence in China’s economy. 

China needs foreign technology, with Tesla’s success in China serving as a model for the CCP. Advanced Western technology is essential for China’s industrial upgrading. 

Moreover, China needs foreign markets due to weak domestic demand. Without strong exports, China’s economy is at risk of collapse. Xi Jinping denied China has an overcapacity problem and will continue to flood global markets because exports are crucial to China’s economy. 

If the U.S. targets China’s economic advantages, such as government subsidies, it could significantly impact China’s economy, forcing Beijing to reconsider its strategies. Therefore, Biden’s decision to raise tariffs on the “Three New Things” is strategically sound. 

Additionally, U.S. and European carbon neutrality goals underpin China’s growth in photovoltaic products. Most of the world’s solar panels are produced in Xinjiang due to the polluting production process, which is too dirty for the U.S. and Europe. A change in carbon-neutral goals would devastate the “Three New Things” supporting China’s economy. 

Finally, the U.S. must rebuild its manufacturing base to outcompete China. Over recent decades, America’s manufacturing sector has declined while China developed a complete industrial chain. For example, China’s shipbuilding capacity is vastly superior to the U.S., representing almost 50 percent of global shipbuilding capacity. This must change for the U.S. to remain competitive. 

President Reagan famously stated during the Cold War that the U.S. goal was: “We win, they lose.” Today’s American leaders hesitate to make such bold statements. However, the United States cannot prevail without this resolve. 

U.S. leaders must boldly declare that the goal is to win. By leveraging its economic strength and showing unwavering determination, the U.S. can reestablish its prestige, deterring and inhibiting the CCP from challenging Taiwan or the global order. 

Simone Gao is a journalist and her website is zoomingin.tv.