In September, the U.S. Department of Commerce announced a rule that effectively bans all Chinese-made cars in the United States. Biden administration policy calls for immediate danger to national security, without presenting evidence or considering alternatives, says only eliminating Chinese auto companies entirely will keep Americans safe claims that it can be done.
This is the latest sign that America’s political elite, panicked by the challenge China poses to American power and prosperity, is creeping toward cutting the United States off entirely from China’s advanced sectors. Not too much. This approach not only furthers the path toward a coalition of great powers, but could also seriously damage the long-term global competitiveness of U.S. companies.
On this issue, as with many other issues related to China, U.S. leaders have identified real problems that require changes in U.S. laws, regulations, and even governance philosophy. But rather than a prudent and pragmatic response that could turn Chinese competition into a force that strengthens U.S. business, boosts the global economy, and accelerates global climate change, the U.S.’s xenophobic response It reinforces a world of zero-sum competition in which all sides lose. .
The rule in question, “Securing the Supply Chain of Information and Communications Technology and Services: Connected Vehicles” (15 CFR Part 791), was proposed by the Department of Commerce’s Bureau of Industry and Security, which is implementing the Biden administration’s blockade on advanced vehicles. Semiconductors vs. China. This builds on a landmark executive order issued by President Trump in 2019, in which he gave the executive branch the power to ban any communications technology associated with “foreign adversaries.” In this case, as with most of President Trump’s China policies, the Biden administration chose to maintain existing restrictions and steadily expand them.
BIS regulations prohibit the use of hardware and software designed or manufactured in China in a vehicle’s external connectivity systems. This may seem like a niche concern, but McKinsey predicts that 95% of cars sold globally will be connected by 2030, up from 50% in 2020. I am. Regardless of where their headquarters are located, every automaker is moving to a revenue model that relies heavily on sales. Leverage connected car software and the consumer data available to connected cars. The transition to electric vehicles will strengthen this trend as they are 97% connected.
Chinese automakers have been at the forefront of both of these developments. In August, electric and hybrid vehicles accounted for 54% of sales in China, compared to 19% in the United States. Chinese companies are also outpacing traditional automakers from the US and Japan in terms of digital performance, with the only real competition being US startups like Tesla and Rivian. The Commerce Department’s rules therefore get to the heart of Chinese companies’ appeal to consumers.
It is also likely to close off the last avenue for Chinese companies to enter the U.S. market. In 2023, China’s EV exports to the US accounted for only 2% of the total. The Biden administration announced in May that it would raise tariffs on Chinese electric vehicle exports from 27.5% to 100%, effectively closing the U.S. market to China-based producers. However, this left open the possibility that China could set up factories in third countries or the United States to sell to the American market. Mexico, with its established auto industry, low wages, and free trade to the American market through NAFTA’s successor, USMCA, would have been particularly attractive. BIS rules effectively eliminate that possibility.
Importantly, the administration has justified the rule on national security grounds. Commerce Secretary Gina Raimondo said: “Today’s vehicles are equipped with Internet-connected cameras, microphones, GPS tracking, and other technology. If a foreign adversary were to access this information, it could pose a threat to both national security and the privacy of U.S. citizens. It doesn’t take a lot of imagination to understand that it can pose significant risks.”
The administration has presented no evidence that the Chinese state forced auto companies to use its technology to collect information or manipulate their hardware to introduce secret vulnerabilities. . Whether the near-existence of U.S. protections for data privacy makes it easier to obtain such information or the weak U.S. regulation of vehicle connectivity systems that allows foreign adversaries of any national origin to There is no consideration as to whether it will be possible to hack.
It does not take into account whether the Chinese government’s strong interest in cultivating a strong global car brand might deter it from taking actions that could have a disastrous impact on its public image around the world. The administration has only said that Chinese law conceptually allows such abuses, and that with a little imagination, one can come up with all sorts of horrifying scenarios.
Such reasoning reflects a rapid change in the thinking of policy makers in recent years. Previously, they found it easier to tolerate the risks associated with international connections and interdependence. Now they are proving absolutely intolerant of any risks they can imagine, especially if they can be imagined to involve sinister intentions on the part of China. This shift not only forces U.S. leaders to underestimate other types of risks, it also causes them to ignore large-scale great power conflicts, which may pose a much more serious threat.
After all, calling for a ban on Chinese-made vehicles without any evidence of national security wrongdoing clearly shows that the US government already considers China an enemy. Indeed, in Trump’s final days in office in 2021, the Commerce Department listed China as one of six “foreign adversaries” countries officially designated by the United States for the purpose of banning communications technology. The Biden administration has not moved to revoke the designation.
Chinese observers are getting the message loud and clear. Professor Li Haidong of China Foreign Affairs University said: “In recent years, it has become a constant practice among American politicians to impose normal economic activities in the name of “national security” in order to denigrate and suppress China. It is using it to create an anti-China consensus and laying the foundations for increasingly extreme policies against China.”
Each new exclusionary measure deepens China’s disillusionment, further divides the global economy, and exacerbates the core zero-sum pressures that caused the U.S.-China relationship to collapse in the first place.
Encouraging global conflict is not the only outcome. Excluding Chinese companies from the U.S. market on national security grounds would impede any path to restoring market access. It appears that the Biden administration has not considered the possibility of creating safeguards that Chinese companies could meet in principle to address real concerns about hacking and data security. This means that U.S. automakers will no longer have to face challenges from more advanced Chinese competitors that could undermine the long-term viability of the U.S. auto industry itself.
U.S. car companies, which have refused to invest in electric vehicle production for decades, say they need more time to transition. The same companies that spent hundreds of millions of dollars to undermine government proposals to accelerate the EV transition are also willing to accept subsidies and incentives similar to those currently offered by the U.S. government. However, they complain that China’s efforts to develop new industries are unfair. The same companies that lagged behind the digital innovations of Chinese auto companies discovered national security concerns and were forced to support the removal of those companies from the U.S. market.
A better way to address the challenge of Chinese competition comes from studying China’s response to the more difficult competitive environment of the second half of the 20th century. As China integrated into the global economy, it faced corporations from rich countries that dominated its own sectors and left little room for Chinese producers. Rather than exclude foreign companies, Chinese leaders focused on having a presence in the Chinese market to gain access to advanced technology and know-how and apply competitive pressure on Chinese companies. However, China’s leaders also used methods of managed trade, industrial policy, and state-structured market competition to adjust to overwhelming foreign competitiveness in order to catch up before fully opening the domestic market.
Although U.S. automakers bear much of the blame for their own uncompetitive position, the auto industry is essential to the jobs and innovation of the U.S. economy and cannot be sacrificed. But absolute protection from Chinese competition effectively guarantees that American companies will fall further behind and become increasingly powerless in global auto production. Fear of China’s presence in American society is not only leading us into international conflict, but is also simultaneously weakening the core sources of American power.
