China's trade manipulation will destroy the global economy

A tidal wave of cheap Chinese imports is flooding the national market.

Industries are faltering, companies are going bankrupt and factories are closing their doors forever.

The livelihoods of countless families are shattered.

This is how one could describe the original “China shock,” the long-term consequence of the US policy of “free trade” with China, which cost the US 2.4 million jobs between 1999 and 2011.

But it also describes what countries around the globe are currently facing: a massive oversupply of important industrial raw materials and high-value goods, which is due to China's overproduction.

One need only look at Latin America, where a sudden flood of Chinese imports has brought Brazil's chemical industry to historic lows and put Chile's only remaining steel mill out of business.

Look to Asia, where India and Vietnam are struggling with a series of market disruptions.

Or take a look at Europe: British machine builders are forced to sell their products at a loss, and cars made in China have captured a third of the EU electric vehicle market in less than five years.

This “China Shock 2.0” could devastate a whole range of economies.

And its effects could be even more “profound” than those of the first China shock, experts say, as they affect industries that are even more important to countries’ survival.

Gone are the days when China's manufacturing ambitions seemed limited to cheap toys and clothing.

Today, Beijing openly advertises its goal of making China the sole supplier of raw materials and high-tech goods without which other countries could no longer function.

And yet elites around the world who cling to the economic status quo are determined to do… nothing.

Examples include German Chancellor Olaf Scholz and Spanish Prime Minister Pedro Sanchez.

The auto industries of these countries are reaping short-term gains from car sales in China and from Chinese investments in their own electric vehicle companies.

In other words, they depend on a good relationship with Beijing.

Not surprisingly, they are actively undermining the EU's plans to increase tariffs on electric vehicles made in China.

Another example comes from the International Monetary Fund.

This multinational agency stands for an “open, stable and transparent trade policy”, the exact opposite of Chinese export dumping.

Nevertheless, IMF economists shift the blame from Beijing’s industrial policy to “macropolitical forces” resulting from the Covid-19 pandemic – while criticizing the United States for defending domestic production.

Why?

Put simply, the institution is biased by Beijing's membership and its economists are blinded by their free trade fundamentalist training.

In fact, China's overproduction is anything but accidental: the Chinese Communist Party outlined its plan to dominate global trade in key industrial products and high-value goods almost ten years ago.

My office raised the alarm about this plan in 2019, but the world's response was too little and too late.

As my office's latest research shows, Beijing now has almost complete control over the supply chains of industries that will shape the 21st century.

This threatens countless non-Chinese companies – and the working families that depend on them – in countries around the world.

It also threatens the national security of the United States.

The more dependent we are on our main competitor for essential goods, the easier it is for them to cut us off from these goods.

The CCP is already using this power through new restrictions on antimony, a metal that is crucial for the production of many military goods, including munitions, missiles and nuclear weapons.

Half of the world's supply comes from China, which means Beijing's new trade restrictions are deliberately disrupting our defense industry.

This is not the first time we have seen this tactic: during the Covid pandemic last year, Beijing throttled the delivery of medical supplies and restricted the export of minerals critical to semiconductor manufacturing.

All this is just a taste of what China's dominance in the supply chain can do.

To ensure our economic independence, we must challenge this dominance.

We need to invest more in domestic manufacturing, develop non-Chinese sources of key manufacturing goods, deregulate our stifled manufacturing sector, and raise tariffs on Chinese imports.

We must ensure that these tariffs also cover Chinese companies that try to circumvent them by setting up in third countries such as Mexico.

And we must strengthen protections against Beijing's espionage and intellectual property theft.

Other countries must do the same.

The facts show that “free trade” with China is not a one-way street to broken industries, bankrupt companies and high unemployment – ​​and also to security dependence on a power-hungry dictatorship.

Whatever benefits political leaders hope to gain from keeping a tiger, and whatever benefits elites see in passively accepting a second China shock, these terrible costs are not worth the short-term gains.

Marco Rubio (R) is a US Senator from Florida.