(Bloomberg) -- US politicians should be careful not to go too far with trade restrictions and tariffs on China while trying to safeguard national security, according to former Treasury Secretary Robert Rubin.
Tariffs should be limited and made difficult to apply to ensure they are used cautiously, Rubin said via a video link at the Bund Summit in Shanghai. “The danger is that politicians will go beyond reasonable boundaries,” he said on Thursday, noting that this doesn’t apply to just the US.
“There are legitimate concerns about having secure supply chains,” Rubin added. “The question is where do you draw the line?”
President Joe Biden announced plans in May to raise tariffs on Chinese imports, including semiconductors, solar cells, and critical minerals, with rates ranging from 25% for batteries to 100% for electric vehicles. The decision followed a review of predecessor Donald Trump’s tariff increases — none of which were rolled back. The new tariffs are set to be formally approved soon.
Rubin said many in the US believe that China’s investment in manufacturing and its overcapacity are affecting the global market. While he’s unsure if this perception is accurate, he said Beijing should expect a response.
Officials in the US, Canada and Europe have accused China of unfairly using government subsidies to create excess capacity in industries like electric vehicles. This has led to cheap products flooding global markets and threatening jobs elsewhere. Beijing has pushed back against this criticism, saying the success of its products is due to market competition and innovation.
Other prominent economists at the forum urged the US to abandon its strategy of excluding China from the global supply chain for key products.
C. Fred Bergsten, director emeritus at the Peterson Institute for International Economics and a former US Treasury official, said China is too big to be excluded from the global economy. He called for a “functional decoupling,” where both countries identify areas for competition and also opportunities for collaboration.
Yu Yongding, a former advisor to the Chinese central bank, urged Washington and Beijing to resolve their disputes over subsidies and industrial policy through the World Trade Organization by establishing new common ground.
Yu noted that the Chinese economy suffers from insufficient domestic demand and that authorities should adopt policies to boost it. He also rejected the idea that overcapacity in sectors like new energy is driven by government actions.
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