The United States has signaled its intent to push back against China’s growing market dominance, which is fueled by excessive production in key sectors like electric vehicles (EVs), semiconductors, and batteries. Daleep Singh, Deputy National Security Adviser for International Economics, highlighted this in a speech on Thursday, emphasizing the need for new economic tools, including tariffs, to curb China’s overproduction strategy. The message, delivered during an event hosted by the Alliance for American Manufacturing, underscores Washington’s growing concern over China’s use of industrial overcapacity to gain global market power and geopolitical leverage.
Singh’s remarks align with broader U.S. concerns regarding China’s economic practices, which have long strained bilateral relations. His comments foreshadow potential upcoming measures that could redefine U.S.-China trade relations as tensions continue to mount across multiple fronts, from trade disputes to technological competition.
China has adopted an industrial policy that relies on producing far more goods than global markets can absorb. This approach, Singh argued, is intended to undercut foreign competition and achieve dominance in strategic industries. He noted that Chinese producers, particularly in sectors like EVs and semiconductors, are reporting “persistent losses” despite their massive output. This points to a system propped up by heavy government subsidies rather than genuine market success.
The practice of overproduction is not a new phenomenon. China has been applying similar strategies for more than two decades, initially targeting industries like steel, solar energy, and medical devices. However, Singh warned that the scope of this practice is broadening, with China now aggressively focusing on advanced sectors where the U.S. is investing heavily, such as green technology and semiconductors.
The growing market power China has amassed through its overproduction strategy is not merely an economic issue but also a geopolitical one. Singh pointed out that China’s increasing dominance allows it to use economic leverage to influence global politics, often at the expense of other nations. This, he said, is one of the key reasons the U.S. views China’s practices as “unacceptable.”
“We’re seeing an unrivaled level and rate of growth in China’s subsidies,” Singh explained, citing China’s publicly stated ambitions to dominate key global industries. He went on to emphasize that China’s strategy is not limited to economics but is intertwined with the country’s broader geopolitical aims, including military pre-eminence.
Singh’s speech also touched on the growing international recognition of the problems posed by China’s industrial overcapacity. He noted that a “growing number of countries,” including major players like India, Brazil, South Africa, and the European Union, are beginning to see industrial overcapacity as a critical issue. This aligns with the U.S. perspective and suggests that a broader coalition may emerge to challenge China’s global production dominance.
“China is flooding strategic sectors with supply that’s well beyond what global demand can plausibly absorb,” Singh said, warning that this practice is effectively eliminating competition in critical industries. He suggested that this overproduction not only harms competitors in the short term but also stifles long-term innovation and development in key global industries.
The U.S. government has long employed tariffs as a primary tool in its trade disputes with China, but Singh hinted that Washington may need to explore “more creative” approaches to protect U.S. industries from the negative effects of China’s overproduction. These could include regulatory measures, export controls, or even enhanced domestic investment in strategic sectors like clean energy and semiconductors.
Singh did not provide specific details on what new measures might be under consideration. However, his comments indicate that the Biden administration is preparing to take stronger actions to address the issue. Washington has already committed significant resources to bolstering domestic production in sectors like EVs, batteries, and microchips, partly in response to China’s aggressive industrial policy.
U.S. Treasury Secretary Janet Yellen echoed Singh’s concerns in a separate speech at the Council on Foreign Relations event in New York. She pointed out that China’s government is heavily subsidizing industries such as clean energy and semiconductors, which has led to a situation where many Chinese firms are kept afloat despite running at a loss.
“Every province in China is competing to try to invest more in advanced manufacturing sectors,” Yellen said. She noted that the “level of subsidization is utterly enormous,” which poses a direct challenge to U.S. efforts to build its own capacity in these critical industries. Yellen’s remarks reinforce the idea that China’s overproduction strategy is not just about flooding the market with cheap goods, but also about preventing other countries, including the U.S., from developing competitive industries in these same sectors.
China’s dominance in industries like EVs, semiconductors, and batteries has far-reaching implications for global supply chains. Many countries, including the U.S., rely on Chinese-made goods and components for their own manufacturing processes. If the U.S. moves to impose new tariffs or other trade restrictions on Chinese imports, it could disrupt global supply chains, affecting everything from automobile production to consumer electronics.
However, the U.S. is also working to reduce its reliance on Chinese-made goods, especially in strategic sectors. The Biden administration has prioritized building domestic capacity in areas like semiconductor manufacturing, a move that has received bipartisan support. Still, such efforts will take time to bear fruit, and in the interim, U.S. manufacturers may face higher costs or supply shortages if relations with China continue to deteriorate.
Singh’s comments come at a time when U.S.-China relations are already strained on multiple fronts. The two countries have clashed over a wide range of issues, including trade tariffs, intellectual property rights, and the origins of the COVID-19 pandemic. China’s increasing assertiveness in the South China Sea and its claims over Taiwan have further complicated the relationship, drawing sharp rebukes from Washington.
While both sides have expressed a desire to avoid full-scale economic decoupling, the trajectory of their relationship suggests that more conflicts are likely. Washington’s concern over China’s industrial overcapacity is just one facet of a broader competition for global influence and technological superiority. As China continues to invest heavily in sectors that will shape the future of the global economy, such as renewable energy and artificial intelligence, the U.S. is grappling with how to maintain its own competitive edge.
China’s overproduction and subsidization strategies are contributing to a shifting global economic landscape, where traditional market forces are being overshadowed by state-backed industries. This poses a challenge not just to the U.S., but to other major economies as well. As Singh noted, countries like India, Brazil, and the EU are beginning to recognize the dangers of industrial overcapacity and may seek to join the U.S. in crafting a coordinated response.
The International Monetary Fund (IMF) and the World Bank in Washington could provide an opportunity for countries to discuss collective strategies for addressing China’s economic practices. If a broader consensus can be reached, it may signal the beginning of a more unified global effort to push back against China’s overproduction.
