U.S. trade enforcement holds back a flood of Chinese autos that is ravaging the global market.
China usurped Japan to become the world’s largest auto exporter in 2023, the China Passenger Car Association (CPCA) announced Tuesday. The CPCA estimates that China exported 5.26 million Chinese cars, overtaking Japanese exports by more than 1 million cars. China’s new record brings to fruition one of Beijing’s greatest manufacturing ambitions — and holds serious implications for the United States.
For more than a decade, the Chinese Communist Party (CCP) has deeply subsidized its domestic auto manufacturers and exploited technology from foreign brands, including American companies, seeking access to the Chinese market. It’s a strategy that has gained China dominance in several industries, including steel, solar and now autos.
Part of the CCP’s strategy to grow its domestic auto industry has been to inflate domestic demand with consumer-side subsidies. But domestic sales have plunged as these buyer incentives have waned, leading Chinese automakers to dump their goods in foreign markets.
China’s actions have caused trouble around the world, but the U.S. market has been sparred this onslaught by Section 301 tariffs that have exacted a 25% tariff on Chinese electric vehicles (EVs) since 2018. And that tariff rate could increase.
The Biden administration is reportedly considering upping tariffs on Chinese products in critical industries like autos. Meanwhile, the European Union is also considering how best to respond to China’s threat to European automakers, launching an anti-subsidy investigation into Chinese EVs in September.
Chinese-made autos are further blocked from U.S. import by the Uyghur Forced Labor Prevention Act, which bans the import of goods made by forced labor in China, with a particular focus on goods made in Xinjiang, where China has concentrated much of its forced labor camps and auto production.
Though trade action is staving off Chinese auto dumping in the U.S., China’s ascendancy in the global auto market poses not only an economic threat, but also a national security risk.
America’s manufacturing base, and its auto industry in particular, played a critical role as the “Arsenal of Democracy” in WWII. That ability to pivot the civilian motor vehicle industry and derive innovation relevant to military production remains essential as America contends with China’s aggression.
Additionally, the Transportation Department has expressed concerns that Chinese autonomous vehicle companies, which already test their vehicles in the U.S., could be used to surveil the American people and infrastructure for use by the CCP.
As the Horizon Advisory noted in a 2021 report: “Beijing’s positioning is no accident. The CCP prioritizes the auto industry as a source of jobs and of technology, including military-relevant technology; an ‘industry of industries’ at the intersection of the real economy and the high-tech revolution.”
China’s auto ambitions dually serve its economic and geopolitical ambitions.
At the very least, the Biden administration must sustain the tariffs that currently fence China’s autos from inundating the American market and foster the continued development of the nascent U.S. EV industry. European nations and others around the globe are fast coming to that realization, too.