The U.S. National Security Adviser reiterated the “small yard high wall” strategy to counter the second wave of impact from China. On Wednesday, National Security Adviser Jake Sullivan spoke at an event at the Brookings Institution in Washington, emphasizing that the Biden administration’s technology export restrictions and investment in clean energy are necessary to prevent the “second round of China impact.”
The first round of impact from China, according to him, occurred in the early 21st century as companies shifted production to China leading to job losses in the U.S. manufacturing sector. The second wave of impact from China refers to the expansion of the market share in industries such as automobiles, machinery, and chemicals, as well as the “impact” caused by exporting due to weak domestic demand.
In an interview with Reuters on Wednesday, several officials from the Biden and former Trump administrations, industry experts, and campaign operatives expect the new U.S. government to take new actions to curb non-leading Chinese semiconductor chips, smart vehicles, and other imported goods entering the U.S. They also anticipate more restrictions on semiconductor manufacturing tools and high-value artificial intelligence (AI) chips exported to China.
With less than two weeks until the U.S. presidential election, Bloomberg reported that Democratic candidate and Vice President Harris is trying to characterize former President Trump’s tariffs on China as “sales tax,” but she must tread carefully as many swing-state union voters support the tariffs. Both candidates have pledged to protect domestic employment and increase pressure on China’s trade policy.
Sullivan stated on Wednesday, “We choose to target tariffs on (Beijing’s) unfair practices in strategic sectors.”
The Biden administration has expressed concerns about China’s overcapacity, believing that China’s overcapacity leads to a flood of exported products threatening domestic enterprises and employment in the U.S. Washington is also seeking allies’ help to restrict Beijing’s access to high-end semiconductors and manufacturing equipment.
Executives from Dutch semiconductor equipment manufacturer ASML Holding NV stated at a London Bloomberg Technology Summit on Tuesday that they anticipate increasing policy pressure from Washington.
Sullivan reiterated support for this policy on Wednesday, stating that the Biden administration’s actions follow certain principles, such as identifying the most sensitive technology for U.S. national security and the most advantageous technology for the U.S. He acknowledged that while there is a broad consensus among other countries on this policy, there is still room for “mutual compromise.”
“This is an ongoing dialogue we have with more and more allies and partners,” Sullivan said.
Compared to export restriction policies, allies around the world have more reservations about Biden’s “Lower Inflation Act” as some countries are concerned that the U.S. industrial subsidy plan aims to weaken them.
“This is not the case,” Sullivan said. “We encourage our partners to invest in their own industrial strength.”
In April 2023, Sullivan first outlined Biden’s export restriction policy at the Brookings Institution, proposing to protect critical technology through a “small yard high wall.”
Sullivan revisited this theme on Wednesday, saying, “The high wall is a matter of course. In a broader commercial context, the yard is also small, and we don’t want to unnecessarily expand it.”
Sullivan’s remarks coincided with the annual meetings of the International Monetary Fund and World Bank in Washington. Financial officials from these two major global financial institutions are tense about who will succeed in the White House.
The U.S. is the largest donor to these two institutions, and their fundraising for next year’s operations has hit obstacles.
Whether it’s Harris or Trump, their political views cater to the increasingly inward-turning U.S. “rust belt” voter base. With ongoing wars in the Middle East and Ukraine, and most parts of the world grappling with low economic growth and dangerous debt levels, while the U.S. economy appears prosperous on the surface, voters recognize that they are not better off than four years ago.