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Janet Yellen has urged the EU to join US efforts in clamping down on Beijing’s green-tech exports, warning that a glut of cheap Chinese goods could threaten the survival of factories across the world.
The US and its western allies must react “in a united way” to China’s growing manufacturing power or put their own industries at risk, the Treasury secretary said in a speech in Germany on Tuesday.
Yellen also rejected criticism from European allies that the US’s own sweeping tax breaks and subsidies for green manufacturing represented “a turn towards American protectionism”.
The Treasury secretary was speaking just a week after the White House sharply raised tariffs on Chinese cleantech exports to the US, in a move to protect industry in states such as Pennsylvania and Michigan, where President Joe Biden and Republican Donald Trump are courting blue-collar votes for November’s presidential election.
She said the tariff increases, which included a quadrupling of the rate on Chinese electric vehicles to 100 per cent, were “strategic and targeted steps”.
Yellen’s speech in Frankfurt, to an audience featuring German finance minister Christian Lindner, comes as Europe seeks a middle ground amid deepening trade tensions between Washington and Beijing.
European Commission president Ursula von der Leyen has already said it would not join the US in imposing levies, adding that Brussels would take a different approach to Washington’s “blanket tariffs”.
“We want competition, we want to trade together, but we want it to be fair and by the rules,” she told the Financial Times on Tuesday before Yellen’s remarks.
Responding to Biden’s announcement of the US tariff increases last week, German Chancellor Olaf Scholz said western brands were responsible for “at least 50 per cent of the imports of EVs from China”. Swedish Prime Minister Ulf Kristersson said it was “a bad idea to start dismantling global trade”.
By contrast with Washington, Brussels, which exports a greater share of its own goods to China, has tried to address a flood of cheap Chinese solar panels, wind turbines and EVs through investigations and reports that it says are in line with World Trade Organization rules.
However, Scholz, von der Leyen and French President Emmanuel Macron have echoed Yellen’s warnings to Beijing — made during a visit in April — that China’s bumper manufacturing subsidies risk exacerbating geopolitical tensions.
“China’s industrial policy may seem remote as we sit here in this room, but if we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk,” Yellen said on Tuesday at the Frankfurt School of Finance & Management.
“Support to low- and middle-income countries and to workers around the world is essential for the strength of the global economy,” she added.
The US Treasury secretary also hit back at EU claims that the Biden administration’s Inflation Reduction Act had fuelled investment in US manufacturing at Europe’s expense.
“We’re not creating opportunities just at home. US-EU trade in green energy products exceeded $2bn in 2022, and European countries can be leaders in this area,” Yellen said. “As we produce more in the US, we will drive down the costs of clean energy technologies globally, benefiting people and economies around the world.”
She added that, with more than $3tn in investment opportunities each year between now and 2050, mitigating climate change was compatible with increasing energy security and driving economic growth.
“As we look ahead, there’s scope for much more joint and complementary action that will further these three objectives,” she said. “The IRA is working, and we welcome similar action around the world, including the European Green Deal.”
Yellen also called for more co-operation between the US and the EU on critical minerals, saying both jurisdictions’ supply chains were “overconcentrated in China”, and on the evolution of multilateral development banks, such as the World Bank, artificial intelligence and semiconductors.
