The U.S. continues to expand the scope of restrictions against Chinese companies outside of the semiconductor industry as American lawmakers become increasingly focused on addressing issues related to unfair competition and national security in the run up to the U.S. presidential elections in November.
On the national security front, the U.S. Department of State recently announced the sanctioning of three Chinese companies and one Belarussian entity for reportedly aiding Pakistan’s ballistic missile program. All four were accused of supplying industrial machinery including filament winding machines, stir welding equipment, and testing equipment to the Pakistani military. The sanctions were imposed as an apparent response to Beijing’s decision to place restrictions on two American defence companies over alleged arms sales to Taiwan.
Chinese chip and industrial machinery makers that have been tied to weapons sales to Russia will also continue to face sanctions from the U.S. A report by the American Enterprise Institute indicated that Chinese chipmakers have become the primary suppliers of semiconductors to sanctioned Russian companies, with China currently accounting for around 90% of chips imported by Russia during the first half of 2023. Toolmaking manufacturers are also set to receive additional scrutiny from the U.S. as China reportedly accounted for around 70% of Russian machine tool imports in Q4 of 2023, with the U.S. suspecting that some of these tool imports were eventually used to make ballistic missiles.
The U.S. could also impose additional restrictions on imports of Chinese steel and aluminum as President Joe Biden seeks to boost his anti-China credentials in the run up to the U.S. presidential election. The restrictions could increase tariffs on certain Chinese steel and aluminum imports from 0-7.5% to as much as 25%. The Biden administration is also considering increasing tariffs on Chinese EVs in order to protect U.S. automakers from cheaper Chinese vehicles that could be manufactured in Mexico.
Manufacturers in Mexico with supply chain links to China could also see their production costs rise after the Mexican government-imposed tariffs of between 5% to 50% on aluminium, textiles, and plastics from countries that it does not currently have trade agreements with, including China. The tariffs are aimed at ending the dumping of below-cost Chinese products in Mexico and also at stopping Chinese-manufactured or semi-finished goods from entering the United States via the country.
U.S. lawmakers target technology companies for their links to China
Regulatory pressure on Chinese medical and biotechnology companies is also rising as U.S. lawmakers continue efforts to push through the BioSecure Act, which aims to ban U.S. companies that receive federal loans, grants, and contracts from working with Chinese biotechnology equipment or service providers. Lawmakers sponsoring the Act are currently aiming to have the bill passed in the U.S. House of Representatives before July 4 and signed into law by the end of 2024.
In the meantime, U.S. representatives urged the Department of Defence to expand the Pentagon’s list of Chinese biotechnology companies linked to the Chinese military.
The U.S. is also seeking to increase oversight of apparel shipments from Chinese-linked e-commerce companies Temu and Shein over competition and forced labor concerns. Lawmakers claim that the platforms have received an unfair market advantage in the U.S. due to a rule on de minimis shipments which has generally exempted imports valued under $800 from customs screenings and taxes.
This has prompted the U.S. Congress have to introduce bills aimed at eliminating the de minimis exemption over claims that Temu and Shein have been allowed to unfairly undercut U.S. retailers. The two firms have also been accused of selling apparel tied to forced labor in Xinjiang, and political pressure has also been mounting on the Department of Homeland Security to investigate imports from both companies under the Uyghur Forced Labor Prevention Act.
Scrutiny against Chinese-linked online platforms could also increase following the U.S.’s decision to formally ban Singapore-based social media app TikTok due to the company’s ties with its Beijing-based parent company, ByteDance Ltd. The popular video hosting app will be banned from domestic app stores within a year unless ByteDance completely divests from the company.
EU launches investigations into Chinese renewables and medical device companies
Worries over unfair competition from China have also begun to gain traction within the EU, which recently directed its anti-trust commissioner to launch an investigation into whether Chinese government subsidies allowed wind turbine companies from the country to gain an unfair advantage when bidding for renewable energy projects in Spain, Greece, France, Romania, and Bulgaria.
The EU has also opened investigations into two Chinese solar makers over concerns that the two firms had unfairly received state subsidies that enabled them to win a public tender for a solar power park in Romania. The anti-competition investigations into Chinese renewables companies appear to be similar in scope to an ongoing EU investigation into EV imports from the country and could result in the bloc introducing retroactive tariffs on renewables devices from Chinese manufacturers.
The EU also launched an anti-competition enquiry into Chinese-based medical device companies on April 24 over concerns that European firms have faced unfair competition in China due to Beijing’s focus on procuring domestically manufactured medical devices and technologies. Once concluded, the EU could move to restrict Chinese companies from bidding for medical device tenders in the bloc.
Chinese firms will also face increased attention from EU regulators following the EU Parliament’s approval of the regulation Prohibiting Products made with Forced Labour on the Union market (FLR) on April 23. The FLR will prohibit the manufacture, import, or export of products made with forced or child labor in the EU common market and will apply to all companies irrespective of size.
Chinese companies in the polysilicon, rare metals, cotton, and seafood industries that are already facing scrutiny under the U.S. Uyghur Forced Labor Prevention Act (UFLPA) are likely to receive further attention from the media and regulators leading up to the FLR’s implementation in 2027.
Cross-strait tensions could rise as Taiwan prepares to inaugurate new president
Tensions between China and Taiwan could increase over the course of the next month as Willliam Lai Ching-Te from the independence-leaning Democratic Progressive Party (DPP) is set to be inaugurated as the island’s new president on May 20. This tension could take the form of increased aerial and naval drills around the Taiwan Strait, with China recently having sent as many as 22 warplanes and drones around the island on April 22.
In addition to increased military activity, China also appears to be applying economic pressure on the island by announcing new duties on Taiwanese-manufactured polycarbonate for the next five years, officially for anti-dumping reasons. The tariffs are speculated to be as high as 22.4% and could adversely impact Taiwanese chemicals manufacturers as sales to China account for 78.5% of all Taiwanese polycarbonate exports.
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