China’s overcapacity and the rise of tariffs

The world economy has been shaken by Trump’s policy of increasing tariffs. It has become the primary economic tool to get companies to set up factories in the United States. At the same time, it has now become a political tool.

- ELFREN S. CRUZ

Trump increases tariffs for countries he perceives as enemies. He uses tariffs also to reward nations whose leaders treat Trump like an emperor or a king. It has become known in international circles that the best way to treat Trump in any diplomatic meetings is to shower him with praises.

There is, however, another underlying reason why tariffs have become popular in the rest of the world. Tariffs have become a tool to protect national economies from being swamped with Chinese imports.

China’s role has entered a new phase while continuing to produce and export goods across the world. Instead of its attempt to produce manufactured goods of higher value, it has now continued to export due to the fact that China’s economy produces much more than what the domestic market can consume.

During the Biden administration, it imposed tariff hikes up to 100 percent on a variety of Chinese goods. This action was justified as a defensive responsive to Beijing “flooding global markets with artificially low-priced exports.” The European Commission also imposed additional duties on Chinese goods like electric vehicles, complaining that China’s unfair government subsidies were causing a threat to the European Union economy and manufacturers.