US Treasury Secretary won’t rule out tariffs on China’s green exports, EU launches probe

US Treasury Secretary won’t rule out tariffs on China’s green exports, EU launches probe
US Treasury Secretary will not rule out more tariffs on imports of green goods from China / Treasury Department
By by Roberta Harrington in Los Angeles April 10, 2024

US Treasury Secretary Janet Yellen, while visiting China, said she will not rule out more tariffs on China’s green exports such as solar products and electric vehicles (EVs).

A report published in March said that China was manufacturing and exporting clean energy technology more than ever before, and over-capacity threatened.

The surplus manufacturing capacity may be good for keep prices low, but it does mean a concentration in China and less domestic manufacturing elsewhere, said the report by BloombergNEF.

Yellen, wrapping up four days of meetings, told reports she would not allow the "China shock" of the early 2000s to occur again. That was when Chinese imports flooded the US market so much that 2mn American manufacturing jobs were lost.

"We've seen this story before," she said. "Over a decade ago, massive PRC (People's Republic of China) government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States."

She continued: "I've made it clear that President Biden and I will not accept that reality again."

She added: "the viability of American and other foreign firms [could be] put into question" is overly subsidised Chinese goods flood the market.

Her comments were reported by Reuters.

China recently filed a dispute at the World Trade Organisation (WTO) to safeguard its EV industry.

China said it was questioning what it described as "discriminatory subsidies" under the US Inflation Reduction Act (IRA) of 2022, which favours domestically produced components such as wind turbines and EVs.

It gives tax credits for the purchase of EVs, with a bonus added for domestically produced vehicles.

"Under the disguise of responding to climate change, reducing carbon emission and protecting environment, (these IRA subsidies) are in fact contingent upon the purchase and use of goods from the United States, or imported from certain particular regions," said the Chinese mission.

China says that its success with green goods is largely because of Chinese innovation rather than state support. US-China trade tensions have been high for years.

The US is not the only region to be alarmed by China’s dominance and state subsidies.

Earlier in April, the EU launched probes into subsidiaries of China’s LONGi Green Energy Technology Co. and Shanghai Electric Group Co., a state-owned company, to ascertain if there was unfair competition in the bidding for a contract to construct and operate a solar project in Romania that is being partly funded by EU money.

On April 9, the EU also launched a broad probe in whether China overly subsidised its wind turbine makers. The EU is probing wind farm development in Spain, Greece, France, Romania and Bulgaria, Margrethe Vestager, the European Commissioner for Competition, announced in a speech.

Verstager said that Chinese turbine makers acquire technology, allot “massive subsidies for domestic suppliers, while simultaneously and progressively closing the domestic market to foreign businesses”, then they are “exporting excess capacity to the rest of the world at low prices”.

WindEurope, the trade group, said Chinese manufacturers were already encroaching on the EU market by offering turbines at half the price as those of domestic manufacturers.

“We fully understand the [EU] Commission’s rationale,” said director Giles Dickson.

“Chinese wind turbine manufacturers are offering much lower prices than European manufacturers and incredibly generous financing terms with up to three years deferred payment," he said. "You can’t do that without unfair public subsidy."

This comes six months after EU trade officials launched an anti-subsidy probe into the import of EVs from China.