The Biden Administration May Just Be Getting Tough on China in 2023

But not tough enough.

Whether or not you agreed with former president Donald Trump's tariff war on China, he was the first president in modern history to take seriously the threat that is China's unchecked dominance in the American market. 

One of the biggest problems facing the American economy, one that no one really likes to talk about outside of right-leaning media, is the slavish devotion many large American companies have to the Chinese market. From the NBA to Apple, there is a major dependence on the billions of dollars made in China every year. But that gives China a lot of economic leverage over the U.S., and Trump took that seriously.

There are a lot of issues at play here. These American companies allow China to make a lot of money off of them, which strengthens China's economy and essentially funds their government's extremely problematic expansions and threatening maneuvers against others. Also, because of the Chinese government's economic controls, they have access to a lot of information and the ability to restrict products coming out of China than we have of keeping them out. This includes various tech products and pharmaceuticals.

A Chinese lockdown on these could put America in a bind.

But now it seems that the Biden administration, long plagued by a major economic rough patch, is looking at long-term solutions to 1) make the American economy and market better able to stand on their own and 2) keep China's growth and aggressive play for regional dominance in check.

China's authoritarian government has been making extremely aggressive moves, particularly into the sea and against Taiwan. They have apparently sensed weakness in American resolve and are aiming to take advantage. The Biden administration, however, looks like it is finally taking China seriously, and combined with Congress, there may actually be some good coming in 2023.

The new federal rules, executive orders and pending legislation aimed at China’s high-tech sectors, which began this fall and will continue in 2023, are the culmination of years of debate spanning three administrations. Taken together, they represent an escalation of former President Donald Trump’s tariffs and trade disputes against Beijing that could ultimately do more to slow Chinese technological and economic development — and divide the two economies — than anything the 45th president did while in office.

“You really have seen a sea change in the way that they’re looking at the relationship with China,” said Clete Willems, who helped design China economic policy in the Trump White House as Deputy Assistant to the President for International Economics and Deputy Director of the National Economic Council. “[The Biden] administration views Chinese indigenous innovation as a per se national security threat ... and that is a big leap from where we’ve ever been before.”

If this plays out like POLITICO describes, it's a good thing. But the Biden administration has to have the resolve to see it through, otherwise, it's just another in a long line of tough-sounding administration talking points (as evidenced by the "that could ultimately do more [...] than anything the 45th president did while in office" line).

The new strategy, which the Biden administration internally calls its “protect agenda,” is being rolled out this fall and winter in a series of executive actions. In October, the Commerce Department issued new rules aimed at cutting off Chinese firms’ ability to manufacture advanced computer chips. They will soon be followed by an executive order creating new federal authority to regulate U.S. investments in China — the first time the federal government will exert such power over American industry – and an executive order to limit the ability of Chinese apps like TikTok to collect data from Americans.

Congress is participating as well, drafting its own, bipartisan versions of Chinese investment screening, potential rules on American capital flows into China, and restrictions on TikTok and other apps that hawks hope can be passed next Congress.

I don't hate the idea, personally, and with a (hopefully) hawkish Republican House in play, there is a chance for real bipartisan effort to curtail Chinese dominance in the tech marketplace and move it elsewhere.

But, there are some problems.

Yes, we've already started going after Chinese firms' ability to produce computer chips. But the materials needed to make those chips also come from China, among other places. Much like the lithium needed for electric vehicle batteries, it's not exactly environmentally friendly to get those materials. Does the Biden administration plan to go against its radical environmentalist base by encouraging mining for these materials elsewhere?

There is also the fact that the Biden administration is trying to be competitive with China without (so far) attempting any sort of decoupling with the Chinese marketplace. Taking the lead on tech and defense R&D, which is largely what the Biden administration's current plan seems to be, doesn't actually do anything to cut off China's ability to limit what we can get out of the country should they choose to kick American companies out - something they would not hesitate to do if they saw them as a threat to their own growth and dominance.

And then there's the fact that China isn't exactly being shy about its intention to do everything I'm warning about here. Even the POLITICO piece acknowledges it.

Even worse, the ruling Communist Party, national security officials believed, was developing a strategy to dominate critical industries of the future like rare earth minerals, semiconductors and solar panels. Beijing wasn’t exactly trying to hide it: In 2015, the Communist Party released its “Made in China 2025” strategy: massive state subsidies to 10 critical industrial sectors aimed at making Chinese firms globally dominant, and China’s domestic economy more self-reliant.

Such a strategy — coupled with aggressive lending to developing nations — would make much of the world reliant on Beijing for their economic growth and military development (not to mention the espionage opportunities it offered the Peoples’ Liberation Army). That got alarm bells ringing at the NSC.

So, while the Biden administration's plan isn't terrible, it's already operating way behind the curve here because they are not willing to be as tough on China as China is on us. That is a strategic mistake that will cause problems for the U.S. in the future if they don't take the issue seriously.