The Chinese Communist Party has been taking advantage of globalization to impact American manufacturing and steal US technology. Faced with the growing security threat posed by China, the United States has initiated an economic transformation, with national security concerns permeating into economic policies. The US’s economic shift in response to countering China will gradually alter the global economic relationship landscape.
A recent report from the US Congress reveals that Chinese cranes widely used in American seaports contain technology that allows secret access by Beijing, making them susceptible to Chinese espionage activities and sabotage.
In response, the Biden administration has imposed a 25% tariff on Chinese cranes and is preparing to introduce equipment from allies Japan and Finland to replace them.
This move not only reflects the US government’s strong intention to de-risk the Chinese supply chain but also demonstrates a significant shift in the US government’s economic mindset, with officials increasingly willing to spend more time considering economic security issues.
During the Cold War era, markets followed national security interests, with the US government directly intervening in large parts of the economy. However, after the collapse of the Soviet Union, the US abandoned economic intervention, heavily promoting economic globalization, believing that a complex and interdependent global economy would bring about peace.
Yet, in recent years, the US’s attitude towards globalization has undergone a significant change. With the intertwining of the US market with China’s state-led capitalism-dominated market, it has become challenging to easily separate trade from security concerns. China’s consumer electronics products can easily be weaponized, and strengthened graphic chips can serve as engines for military artificial intelligence.
In April 2023, US National Security Adviser Jake Sullivan mentioned in a speech that decades of free-market zeal have weakened national security. Past US government policies of economic liberalization did not bring about peace but rather hollowed out American manufacturing. With China’s entry into free trade, the global supply chain is rife with severe security vulnerabilities.
Over the past few years, the US government has frequently invoked Cold War-era laws to strengthen its economic security, such as the 1949 Export Control Act, the 1950 Defense Production Act, and the 1977 International Emergency Economic Powers Act, to prevent Beijing from acquiring the semiconductors needed for its military artificial intelligence and to restrict US investments in China.
Yao Yuan Ye, a professor of international studies at the University of St. Thomas in the US, told The Epoch Times that ten years ago, US economic policies were more diversified, allowing economic freedom to develop passively. The significant transformation of US economic policy today is mainly due to the increasingly intense competition with China, as most policies are targeted at countering China. The US needs to continue to detach itself from China and proactively adjust its economic policies.
Sun Guoxiang, an associate professor at the Department of International Affairs and Business at Nanhua University in Taiwan, stated that over a decade ago, US economic decision-making mainly adopted a free-market orientation and did not intervene in the economy in the name of national security. The current shift reflects a new understanding in the US of the global competitive environment and domestic economic security, particularly in the face of challenges posed by China.
In the past three years, Biden has been firming up the connection between the economy and national security, continuing Trump’s tariffs on China and export controls and emphasizing the use of subsidies and other forms of government intervention to promote investments in critical industries to address the threats posed by China.
One of the most notable measures was the comprehensive export control on semiconductors introduced in October 2022, which expanded a year later. The same year saw the enactment of the “Chip and Science Act” aimed at revitalizing America’s semiconductor manufacturing industry to counter communist China.
In 2022, the “Inflation Reduction Act” was also enacted to reduce carbon emissions, stimulate the domestic clean energy industry, and decrease dependence on China.
In May of this year, Biden imposed a 100% tariff on electric vehicles imported from China to promote domestic green economic development and address security concerns over Chinese acquisition of onboard computer data.
According to Bloomberg, Biden’s top aides have been drafting a proposal to create a sovereign wealth fund to allow US investment in national security interests, including technology, energy, and critical elements in the supply chain, with the main motivation being to prevent China from controlling key materials and emerging technologies.
Many of these measures aim to slow down China’s military modernization, reduce reliance on Chinese supply chains, and address what the US sees as Beijing’s unfair industrial policies, especially subsidies to domestic industries.
Sun Guoxiang stated that the US government’s economic policies have achieved certain results: promoting the “Chip and Science Act” to provide significant subsidies to the domestic semiconductor industry, attracting businesses back, rebuilding supply chains, and reducing external dependence; investing heavily in infrastructure to improve public facilities such as roads, bridges, and broadband networks; and aggressively promoting green energy transformation to support renewable energy and reduce carbon emissions, which has played a role in driving growth in the US’s new energy industry.
Despite both the US and China mentioning economic security, their approaches and directions are completely different.
Strictly speaking, Ye Yao Yuan stated that China’s approach involves directly using state-owned enterprises or state capital to dominate all markets. In China, if you are a friend of the Communist Party, your enterprise can continue to operate, with a perspective of state capital behind it. On the other hand, American policies allow private enterprises to redirect themselves or adhere to the concept of a free market.
Ye Yao Yuan continued to mention that most of the US’s policies are essentially to confront China head-on. The success of these policies would pose a significant threat to China, making it increasingly difficult for China to acquire technology and any advantages from the US. Under conditions of great power competition, it will be easier for the US to leave China behind.
The pandemic, warfare, and the escalating tensions between the US and China have undoubtedly reshaped the global economic relationship landscape.
In recent years, with increasing geopolitical risks, including measures such as tariffs or export restrictions, globalization has seemingly evolved into “de-globalization.” Since mid-2022, global GDP has been growing annually by 3%, while the volume of goods exports has declined by 2% each year.
During multinational company conference calls, there is an increasing focus on topics like reshoring, nearshoring, offshoring, and de-globalization.
Global foreign direct investment (FDI) is diversifying along geopolitical lines, with China no longer the top destination for US outward investment, trailing behind emerging markets like India, Mexico, and the UAE.
China is no longer the largest trading partner of the US, with its share of US imports decreasing by nearly 10 percentage points over five years, from 22% in 2018 to 13% in the first half of 2023.
As the presidential election approaches, regardless of who wins, US allies are preparing to further strengthen similar policies. The US seems determined to implement a strategy that combines security considerations related to China and economic ties, which will further shake its relationships with European and Indo-Pacific partners.
Sun Guoxiang remarked that the US’s economic policies pursued in the name of national security have had broad implications on the global economy, with other countries expected to emulate this approach in the future. It could accelerate the trend of de-globalization, leading countries to pay more attention to the security of supply chains and reduce dependence on potential adversary nations; restrictions may be imposed on strategic industries and resources, creating more trade barriers.
“Some European countries, especially Germany and France, may adopt more protectionist policies, particularly concerning national security issues in high-tech and energy fields; major US allies in the Asia-Pacific region like Japan and South Korea may also enhance control over technology exports and supply chain security; India has already begun implementing policies similar to those of the US, trying to reduce dependence on China by strengthening domestic manufacturing and attracting foreign investment.”
Ye Yao Yuan added that adjustments to US economic policies could result in shifts across the entire production chain, with other countries likely adjusting their policies based on the direction of US or China policies, forming blocs with countries that align closely with US policy and another bloc with countries that do not. Starting from the 1990s when global markets began to globalize, there has been a gradual shift towards regional markets or even single-country markets, becoming more closed off.