The U.S. finally has a strategy to compete with China. Will it work?
The new tariffs President Biden announced last week aren’t economically significant. Symbolically, they are huge. The U.S.
buys almost no electric vehicles, steel or semiconductors—all targets of the tariffs—from China. But, by adding to, rather than rescinding, tariffs imposed in 2018 by former President Donald Trump, it signals that the decoupling of the Chinese and U.S. economies is becoming irreversible.
More important, the tariffs are the final piece of an economic strategy for competing with China. This strategy is a three-legged stool. The first consists of subsidies to build a viable technology manufacturing sector, from clean energy to semiconductors.
The second is tariffs on Chinese imports that threaten those efforts. The third is restrictions on access to money, technology and know-how that could help China compete. A fourth leg, a unified economic front with allies, remains unrealized.
When it comes to economic strategy, the U.S. is something of a neophyte. China maps its path to economic dominance in five-year plans.
Japan’s postwar economic rise was steered by its powerful Ministry of International Trade and Industry. The U.S. strategy doesn’t have a name or even a home.
Blame that on the historical wariness of industrial policy (state support for favored sectors) and the fragmentation of economic authority between the president and Congress, different administrations and sometimes factions within the same administration. Indeed, the U.S. strategy emerged piecemeal.
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