Trade tension between China and the United States, simmering over Washington's repeated tariff increases and policy restrictions against Chinese exporters and enterprises, has escalated again with Washington's launch of a Section 301 investigation targeting China's maritime, logistics and shipbuilding sectors.
However, the old playbook of unilateralism and protectionism pursued by the White House will not only fail to bring about the reshoring of manufacturing desired by the U.S., but will also result in the U.S. facing the challenge of a more expensive supply chain, experts said.
China expressed on Wednesday night its strong dissatisfaction with and firm opposition to the U.S. Trade Representative's initiation of the Section 301 investigation, emphasizing that it will keep abreast of the progress of the probe and take all necessary measures to defend its own rights and interests, the Ministry of Commerce said in a statement.
Section 301 of the Trade Act of 1974, as amended, is used to respond to so-called unjustifiable, unreasonable or discriminatory foreign government practices that burden or restrict U.S. commerce.
The investigation petition was jointly filed on March 12 by five U.S. labor unions. "The number of commercial shipyards in the U.S. has plunged by more than 70 percent, tens of thousands of jobs have been lost, and the U.S. now produces only a fraction of 1 percent of the world's commercial vessels, falling to 19th place," they said in the petition.
Multiple U.S. research reports have shown, however, that the U.S. shipbuilding industry lost its competitive edge years ago due to excessive protectionism. While the U.S. provides discriminatory subsidies amounting to hundreds of billions of dollars to its own industries, it accuses China of adopting so-called nonmarket practices, the Chinese ministry said.
Noting that the U.S. petition is rife with unfounded allegations, distorting normal trade and investment activities as threats to U.S. national security and business interests, the ministry said that "blaming China for the U.S.' own industrial issues lacks factual basis and contradicts economic common sense".
The main anticipated objective of the petitioner unions is to urge the U.S. government to enhance policy support and subsidies for its domestic maritime and shipbuilding industries, said Sun Lei, a trade lawyer at Beijing Dacheng Law Offices, adding that the investigation is expected to last approximately one year.
In an election year, supporting labor unions has become an effortless decision for U.S. President Joe Biden, who, in his bid for reelection, hopes to garner support from the working class, said He Weiwen, executive director of the China Association of International Trade.
The investigation, using an old narrative to position China as a threat, aims to redirect attention away from domestic issues that have long been unaddressed, He said.
The Chinese shipbuilding sector began its path toward internationalization in the 1980s, constructing a large number of vessels for European and Asian shipowners. But there has never been direct competition between the U.S. and Chinese shipbuilding industries, said Zhao Yifei, a professor of Antai College of Economics and Management, which is part of Shanghai Jiao Tong University.
China's shipbuilding industry secured the top position for the 14th consecutive year in 2023 in terms of completed vessels, which accounted for 50.2 percent of the global total, new orders, at 66.6 percent of the world total, and order backlog, at 55 percent, according to data from the China Association of the National Shipbuilding Industry.
Currently, orders from U.S. shipowners account for less than 5 percent of the total new orders received by Chinese shipyards each year. Even if the U.S. government were to impose additional Section 301 tariffs, that would have a minimal impact on Chinese shipyards, Zhao said.
Moreover, the investigation comes as the ability of the U.S. to reindustrialize and regain its position as a global manufacturing powerhouse has become a focal point of the White House in the lead-up to the November election.
The White House also announced on Wednesday that it plans to triple the existing Section 301 tariffs on Chinese steel and aluminum products and collaborate with neighboring countries to prevent indirect exports of Chinese steel and aluminum to the U.S..
China has urged the U.S. to confront its internal challenges, while also demanding the immediate removal of imposed tariffs, according to a separate statement by China's Commerce Ministry on Thursday.
Since 2018, the U.S. has selectively imposed tariffs on steel and aluminum products from its global trading partners under the guise of "national security". The World Trade Organization has ruled that the U.S. measures violate global trade rules, the ministry said.
However, the U.S. has abused the Section 301 tariff review process, openly demanding arbitrary adjustments to tariffs on Chinese products, the ministry said, adding that U.S. pressure on other countries to restrict Chinese products will further disrupt the security and stability of global industrial and supply chains.
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