Why is Biden ratcheting up the trade war with China? | Counting the Cost

[Music] [Music] hello I'm Adrian finegan and this is counting the cost on Al jazer your weekly look at the world of business and economics this week ratcheting up the trade war with China the US slaps massive tariffs on Chinese Goods Beijing launches its own anti-dumping inquiry following the measures once a world leader Cuba's sugar industry is collapsing the decline in production could impact other sectors of the Island's crisis hit economy and a looming shortage in critical minerals needed for the energy transition so why is global investment in the mining of those materials [Music] declining Chinese Imports help to push down the cost of products like this video games t-shirts and Home Appliances in the US but many American factories say that's driven them out of business and has cost more than a million jobs President Joe Biden says that he won't allow China to quote unfairly control the market in a pre-election effort to protect Industries and workers he sharply raised tariffs on Chinese Imports ranging from electric vehicles to solar cells Beijing has launched its own anti-dumping investigation following the measures so who has the upper hand we'll discuss it shortly with our guests but first a report from imin Kimber Chinese made solar cells lithium ion batteries and electric vehicles are set to double triple and quadruple in price respectively in the US thanks to new trade tariffs by President Biden China is not happy China always opposes unilateral tariff increases that violate WTO rules and will take necessary measures to safeguard its legitimate rights and interests Beijing says the move damages bilateral cooperation and is hit back with an anti-dumping inquiry into plastic widely imported from the US the EU Taiwan and Japan as the European Union has also launched investigations into Chinese Imports Biden says he has to protect us workers and Industry from heavily subsidized Chinese exports if you want to do business in China you got to have a 51% Chinese owner you got to provide access to all your intellectual property sometimes they just outright steal through cyber Espionage and other means and it's been a well documented and internationally recognized when you make tactics like these they you're not competing it's not competition it's cheating Biden is making sure the restrictions are in place ahead of the November presidential election it may help him in the polls with many voters who are unhappy with the US economy although although his tariffs said to be worth $18 billion are expanding on tariffs worth $300 billion imposed by former president Donald Trump trump says the US Auto industry will face a bloodbath if he loses in November and that he will impose 100% tariff on all cars made outside the US some argue since the us only Imports 2% of their electric vehicles from China the impact of this policy will be minimal and won't affect the overall economy Beijing says the US aims to stifle China's green industry the country is leaning towards clean energy to counter a slump in economic growth this is protectionism in the name of Fair competition the real aim is to contain China's new energy sectors hamper China's high quality development and get advantage in the elections by competing to be tough to be tougher on China an unfortunate casualty may be the US's green energy targets and the two superpowers relations which was already fractured over military activity in the South China Sea even worse could be an allout trade war between the two Global Giants of Industry imin Kimber Al jaaz for counting the cost well let's take a look at some of the figures China sold nearly $500 billion do worth of goods to the US last year but it only imported around $148 billion worth in return the US Imports just 2% of its electric vehicles from China but the figure goes up to nearly 70% for lithium ion batteries now the organization for economic cooperation and development the oecd says that Chinese manufacturers received nine times more State subsidies than their Western counterparts Chinese businesses receive Aid which is the equivalent to 3.7% of their revenues on average compared to only .4% for firms in higher income countries we have two experts to discuss all of this with us joining us from Soul in South Korea is Steven Oaken who's the CEO of APAC advisers a consultancy operating at the intersection of business government and sustainability and from Brisbane in Australia War Powell who's Adjunct professor at Queensland University of Technology and a senior fellow at the Tai Institute a non-government international think Bank tank based in Beijing gentlemen good to have you with us let's start with you then Steven why is the US so worried about Chinese Goods okay they're not worried about Chinese Goods per se they're worried about Chinese Goods that come into the us through unfair competition in in strategic Industries and so to understand the bid administration's actions here and really the Trump administration's actions before that you've got to go back a decade you go back to what China has been doing with its made in China 2025 policy that came out in 2015 where China said it was going to use State subsidies and and protection to Foster within China Key sectors for the 21st century including electric vehicles including renewable energy production that policy of China was very successful and now China has a huge Head Start into these sectors and as President Biden said we need these ourselves in the United States so to to compete on a Level Playing Field we have to put tariffs on those types of sector so it's not about banning Chinese Goods it's not about tariffing all of Chinese Goods as president Trump said he would do in in a second term it's really looking at those sectors that are strategic to the US and and have had unfair subsidies from China and that's what he did all right War what what's your take on this are Chinese subsidies responsible for the decline of us manufacturing and Industry us manufacturing industry has been declining now for over 40 years the first sounds of concerns around de-industrialization and the hollowing out of American manufacturing began in the 1970s and hasn't stopped since the fact of the matter is is that over the last 40 years the American politically economy has favored other kinds of Industries particularly in financial services Stock Exchange and those sorts of areas instead of industrialization and now the chickens have come home to roost it's not like there's been a hidden agenda here as your other guest has mentioned uh China announced in 2015 a political and policy priority around um domestic um value adding and moving up the value chain and of course it's been focused on things like electric cars um well before then um if people bothered reading the policy documents and the planning instruments coming out of the uh Chinese political system they would have known this well in advance all right Stephen it's perhaps no coincidence that this is an election year in the US I mean a Biden's moves politically motivated you think there this an attempt to to to grab voters there's no question any move by any Administration in in a presidential election year is going to be looked at through through that election so that is a given I think that Biden AR Biden Administration would argue in this case that this is good policy and good politics um there's no question that uh that H being tough on China is a positive in the US right now it ensures a Level Playing Field it ensures that the United States can have an electric vehicle industry going forward and that if it doesn't have these types of tariffs when there is unfair competition there isn't going to be an electric vehicle industry in the United States and that is of national strategic importance what what is this going to do though to to ultimately to the US economy is it going to help or hinder it well in terms of what will it do to the US economy in the short term it's really going to have no impact on the US economy because as we've said there are literally zero electric vehicles being imported into the United States from China right now um these these tariffs are mostly on Goods the new tariffs are mostly on Goods um that aren't coming in yet to ensure that the US industry can have a chance to get off the ground because you know as the other guest has noted uh the US hasn't been investing in infrastructure um in in the in the United States as much as it should have been and it it's trying to do that now and so it's going to give it a chance the tariffs that have been extended were put into place by Donald Trump and have been in place for that $300 billion has been in place for a few years now so it's not going to have any new inflationary impact because that has already taken place so it's not going to really have any short-term impact on on the economy unless you you're talking about extraordinarily specific sectors maybe on on certain medical devices but but that's about it Warick what does this mean for the rest of us what happens to to companies that are supplyed to America uh using uh partly using Chinese produced Goods look Global Supply chains are now incredibly complex and many sophisticated products require inputs from production processes in a number of countries to untangle all of that is extremely costly with significant cost implications for Downstream consumers and Enterprises who rely upon stable priced Supply chains to bring their intermediate Goods to them so the the last few years I've seen a lot of rhetoric around um you know drisking and and decoupling but the the the basic economic and Engineering reality is that it's easier said than done now the competitive environment means that the world is best served including consumers and Enterprises when they can access the least cost inputs for their activities that they need so that they can actually proceed to do what they're good at and um and and I think uh in in in due course uh those who pursue a rational Economic Policy framework as opposed to jumping on the shortterm political cycle bandwagon will deliver real dividends for their economies and for the communities and workers that they say that they care about Bor where does the WTO fit into to all of this well the WTO has been frustrated over the past six plus years by the United States which has frankly gone Rogue in terms of the uh the global trade regulatory framework since uh 2018 the United States has styed the appointment of judges to the appelate dispute resolution processes of the WTO and continues to do so this is very unhelpful for the WTO the second point to remember about the WTO is that the United States actually has the most complaints against it out of all countries and products um with with the last time I checked the WTO website there was some 171 complaints lodged against um us products uh the EU had I think from memory about 105 106 and China was well back in the pack with 49 so when it comes to uh to to participating in terms of fair um because we're talking about questions of fairness and uh and and participation in open trade the US itself has clearly been a rogue player for quite some time stepen final word to you then how do you respond to that the that the US has been a rogue player for some time it's gone Rogue well look in in in the 21st century you have to take into account National Security when it comes to trade and economics and and that had not been the case previously and now when you're a country and you're looking at what is going to happen if there's a pandemic and we have all of our sourcing from one country and we can't get in the medical uh and pharmaceuticals that we need and we can't get in uh in terms of climate change and and addressing that um the critical minerals that we need well then you that becomes a national security issue and there has always been a national security exemption uh when it comes to the WTO um it is a different world now and there's there's no question that that countries are looking at trade differently they're looking at the WTO differently and that is what is going to make this competition and confront between between the US and China you know so fraught and you know one of the worries going forward is the United States believes it can confront China where it needs to be confronted such as it's doing on these tariffs but that it can also cooperate with China on of course the most important issue the world is facing which is the climate crisis now the question is will China accept that framework will China accept the tariffs coming in but also cooperate with the United States at the at the same time so we really are on on a precipice of where trade and National Security are intersecting within the climate crisis that that should be a concern to everybody gentlemen there I'm afraid we're going to have to leave it many thanks indeed Steven Oaken and Warick Powell now the old Cuban saying goes without sugar there is no country Cuba was the world's top sugar exporter for hundreds of years and the industry was the main driver of the economy but the island has been under us sanctions for decades and that in part has affected the sugarcane har Harvest which has hit its lowest level since 1900 once Unthinkable the island now Imports sugar to meet its demand last season Cuba's production fell to an all-time low of 350,000 tons of raw sugar that's well below the 1.3 million tons recorded in 2019 the slump in Sugar output impacts other sectors of the Cuban economy including its export earnings from rum less than 3% of State investment goes to to the sugar industry well the collapse of the sugar industry is just one aspect of Cuba's faltering economy the island is suffering its worst economic crisis since the collapse of the Soviet Union in 1991 the tourism industry has dried up since the covid-19 pandemic depriving the island of as much as $3 billion annually foreign currency is in short supply and the peso has lost nearly half its value against the dollar in 2024 alone the government's budget Gap is projected to increase to 18 a half% of economic output this year inflation is running at more than 30% that's more than twice the Latin America Regional average and the average salary for Cuban state workers is now less than $16 a month well in response to the crisis the Cuban government has announced tough economic measures that include raising the price of fuel by more than 500% and cutting subsidies for Staples like eggs and rice except for those deemed vulnerable fuel power medicine milk and other food items are in short supply in March the government asked the un's food program for help for the first time children are supposed to get 3 Kg of milk a month but now they are only giving 1.5 kg a month milk I can't remember the last time I drank mil it's very expensive although we have difficulties we're still alive like we Cubans say before they used to give 2.3 kilos of rice per person per month now they give nearly half a kilo of rice per person per month and that's when it's available joining us now from London Emily Morris an economist and research fellow at the University College of London's Institute of the Americas good to have you with us Emily so why has Cuba's sugar industry collapsed are us sanctions to blame or is it mismanagement essentially what's happened is that previously sugar under the Soviet system was heavily subsidized in in effect there was a kind of bter system where they got cheap fuel in return for their sugar um so now they're having to compete at World Market prices spot prices because they don't have any um contracts with anybody um is actually not economic I mean the sugar industry is not economic it's not it's now only accounts for less than 2% of total export earnings so you know in 1990 it was over 70% so that's the extent of the collapse of the sugar industry um so in a sense the reduction in production for the macroeconomy isn't that important but I think psychologically it's important Cubans like everybody else think that um the Cuban economy is dependent on sugar people have a kind of historical memory and every year the government publishes its Target for the sugar production and once CE again and it happens practically every year since I've been covering Cuba for the last 30 years um the target was missed and so that has a psychological effect and anything that reduces export earnings is significant because of the tightness of Cuba's foreign exchange constraint Emily then how can Cuba's wider economic problems be addressed can they be fixed well is a very very difficult problem because um the constraints on Cuban foreign exchange earnings are extreme not only um because of the collapse of Tourism and um but also because of the US sanctions and they don't just prevent trade with with obviously Cuba's natural trading partner but they also prevent trade with other partners and not only do they reduce the availability of Foreign Exchange but they also result in the cancel ation of contracts of um uh ships arriving at short notice so there's extreme disruption as well as extreme type foreign exchange constraint um so what happened during the covid um pandemic was essentially Cuba threw everything at it in 2020 they did incredibly well in terms of the number of people got killed and so on in 2020 but they exhausted their foreign exchange reserves and so by 2020 1 they had nothing left and so they're now scrublet the obligations that they've taken on I mean like one of your um interviewees there said um there's an expectation Cubans expect the government to give them um extremely cheap uh russed supplies and so the government has a commitment to do so but given that it's got very little foreign exchange it said struggle to do that all the time um and so what's the solution the solution is to build up the foreign exchange earnings they need to diversify the economy that's been a necessity for a long time in a sense their recovery from the collapse of the Soviet system um was built on just a few items it was very um concentrated in nickel tourism um Professional Services and really they need diversification and that seems to be what they're pushing for but trying to diversify to restructure the economy in the context of very very little foreign exchange is extremely difficult what's life like for ordinary Cubans right now well as you saw there you know life it's not just Foods you know they they have very very basic supplies of food which is not as much as they used to they have to cue an awful lot they have uncertainty the inflation is very worrying for people on fixed incomes you know where's it going to go next the prices in the markets are very very high but it's not even just that it's not only queuing but it's also um the transport issue there's there's not enough fuel the buses are all broken down um and so everyday life is extremely difficult they also have power Cuts regularly um but and having said that you know sometimes it's portrayed as if everything's about to collapse and actually as you see from those pictures people are not they haven't lost weight like they did in the 1990s there are supplies there is manageable but it's very very difficult and now of course they've got a huge um heat wve which makes life even more impossible when um you haven't got air conditioning and so on so they're really suffering um and really frustrated because there's so many ideas they've opened up the private sector so it's really possible for people to do things but they have no Finance Emily really good to talk to you on counting the cost many thanks indeed for being with us thank you very much finally then needed to make wind turbines electric vehicles and other green technologies minerals like copper lithium and Cobalt are in high demand as many nations try to make the transition to clean energy but the International Energy agency says the world faces a shortage of those minerals with only 70% of global demand for copper and 50% for lithium expected to be met by 2035 the prices of some of the elements fell sharply last year following two years of increases the IA says the drop in prices is discouraging investment in the mining of minerals the paris-based agency forecasts that investors need to put something like $800 billion do into mining projects by 2040 to try to limit the rise in global temperatures to one and a half degrees C but a handful of Nations and companies control their extraction China for example mins most of the rare earth materials joining us now from London Andy Leland who's the managing director of supply chain insights good to have you with us Andy what's going on then within this industry why at the moment are miners failing to meet demand I mean the huge issue that this industry has is trying to match Supply with demand and when you consider that it takes years to plan and then fill the mine and get that into production that's the supply side of the equation well the demand side can change in a matter of weeks so it's incredibly difficult to get those two matched and the way that the market then matches them is by having price spikes or declines which again makes it difficult to balance the investment cycle that's very much what we're seeing at the moment we had a huge spike in lithium prices Supply responded now prices have crashed the same thing's happening in Copper where we're seeing a price spike in Copper but it will take a little while for the investment to come through and match supply and demand are these minerals particularly rare or difficult to extract no I mean there's no geological shortage of any of the the critical minerals that we need for the energy transition the big barrier is in in capital it's in permitting of these operations and in some cases in political will as well so these are challenges that can be met they're not insurmountable but they do need planning and they they probably need government intervention as well um you know I don't think relying purely on the the market and mining companies will will see us able to increase the tonnages um that we need for the energy transition and as we said at the moment China at the moment is mining most of these Rare Earth minerals what are the dangers in that you know since the pandemic and the the sort of trend of De globalization in the world what we've seen is that single points of failure in the supply chain are are not welcome um you know particularly in the west and while the resources themselves are very geographically diverse China has built up a huge amount of processing capacity um in things like fight lithium copper Etc um and that single point of failure just isn't seen as as politically acceptable so what we're seeing is um the West trying to effectively build secondary Supply chains for these materials that obviously takes money um and where you've got established markets which are in over Supply with low margins the commercial incentive for Private Industry to develop those secondary Supply chains isn't necessarily there so again it comes back to the governments needing to get involved to provide U you know particularly sources to cheap debt Capital to uh to make those Investments Andy what does all of this mean for consumers like you and I so in in some respects consumers are sheltered from from the the price increases you know if the price of lithium doubles it doesn't necessarily reflect in the price of your electric vehicle overnight but the companies effectively do take on that volatility and volatility is is no one's friend when it comes to making uh these long-term Investments so I think for us it creates a little bit of uncertainty we're also facing the impact that if they don't um make these Investments and balance supply and demand that it may derail some parts of the energy transition and you know when you look at um climate change the easiest way to reduce emissions is in electrification electrification of transport electrification of fossil fuel burning Industries and that all needs critical minals you know it needs trans lines it needs copper it needs batteries to store that energy and you know if we can't do that then um it's going to be a challenge to meet our our climate goals Andy it's been great to talk to you on counting the cost many thanks indeed for being with us thank you and that's our show for this week if you'd like to comment on anything that you've seen I'm at a finegan on X please try to remember to use the # a jctc or you could drop us a line counting the cost at al.net is our email address as always there's plenty more for you online at alo.com CC that takes you straight to our page and there you'll find individual reports links and entire episodes for you to catch up on but that's it for this edition of counting the cost I'm Adrien fenan from the whole team here thanks for being with us the news on alra Zer is next

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Id: wMBVEpQ9qyo

Length: 28min 0sec (1680 seconds)

Published: Thu May 23 2024