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The Atlantic
The Atlantic
China Has Only Itself to Blame for a Trade War
A global trade war is starting, and China is at the center of it. A reckoning for Beijing’s economic model, which is designed to promote Chinese industry at the expense of the rest of the world, has long been coming. China’s trading partners have had enough. The result will be a wave of protectionism, with potentially dire consequences for both China and the global economy.The most obvious and dramatic evidence for this was unveiled yesterday by President Joe Biden, who announced that his administration would quadruple the existing tariffs on imported Chinese electric vehicles, to 100 percent. He will also hike tariffs on steel, aluminum, medical equipment, semiconductors, solar cells, and lithium batteries. The Chinese government instantly protested and threatened action of its own. “The United States should immediately correct its wrong practices,” the Chinese Ministry of Commerce said in a statement. “China will take resolute measures to defend its own rights and interests.”Yet China’s leaders have no one to blame but themselves. They joined a global trading system and then gamed that system. Biden’s tariffs are the natural response, though not an entirely positive one. Protectionism raises costs, hurts consumers, shields unworthy companies from competition, and punishes worthier ones. Disputes over trade will only intensify the rivalry between the world’s two great powers.This souring of trade relations wasn’t always foreordained—but it had become virtually unavoidable. Chinese leader Xi Jinping has failed to reform his economy in ways that would have made this trade war less likely. Facing this confrontation with the United States, he is even less likely to make reforms today. The result is trade conflict and heightened political tensions that benefit no one.[Derek Thompson: Trade wars are not good, or easy to win]Biden targeted EVs for a reason. Beijing’s leaders wanted to dominate that industry and threw the weight of the state behind Chinese companies. The program was undeniably successful. China is at the forefront of the EV industry, while the United States, with the exception of Tesla, has barely gotten out of the parking lot. But electrical automotive is also a sector in which China’s government has played such a heavy role, and created so much manufacturing capacity, that other governments believe their own industries are at risk.Both that prowess and that excess were on display recently at the Beijing Auto Show. The exhibition included no fewer than 278 EV models. That’s indicative of a market jammed with 139 EV brands. The already gridlocked Chinese car market didn’t dissuade the Chinese smartphone maker Xiaomi from jumping in, with its first EV offering in the show’s spotlight. China simply has too many car companies with too many factories making too many cars. Counting both EVs and internal-combustion-engine vehicles, China’s auto industry now has the capacity to produce almost twice as many vehicles as Chinese consumers are buying, according to the Shanghai-based consultancy Automobility Limited. Although oversupply in the EV sector, where demand is still growing, is not as severe as in the legacy business, Chinese automakers are still adding assembly lines. BYD, for instance, plans to more than double its EV production capacity by 2026.China now has the largest domestic car market in the world, but even Chinese consumers cannot sustain so many factories, especially as the country’s economy slows. So automakers are off-loading their surplus products into the global marketplace. China vied with Japan for the title of world’s largest car exporter last yearThis hefty outflow of Chinese cars has earned unwelcome attention from policy makers in the U.S. and Europe. They contend that the Chinese government unduly supports and promotes China’s bloated automobile sector; as a consequence, their own automakers are threatened by a deluge of cheap Chinese vehicles. During an official visit to China in late April, U.S. Secretary of State Antony Blinken said that the issue of China’s excess capacity was “front and center” for Washington. Chinese industry, he added, is “flooding markets, undermining competition, putting at risk livelihoods and businesses around the world.” While also visiting China in April, Germany’s chancellor, Olaf Scholz, expressed similar concerns.“The one thing that must always be clear is that competition must be fair,” Scholz said in a speech in Shanghai. China’s leaders think it already is. They retort that the success of Chinese automakers is due entirely to their competitive advantages. Premier Li Qiang told Scholz that greater supply “is conducive to full market competition and promoting the survival of the fittest.”[Michael Schuman: To China, all’s fair in love and trade wars]The state news agency Xinhua argued that China’s edge “has been honed through diligent efforts and genuine expertise, rooted in market competition, innovation, and entrepreneurship,” and went on to claim that “the world doesn’t want less of China’s capacity, but wants more.” Therefore, the criticism of China’s industry “may look like an economic discussion,” a spokesperson for the Chinese foreign ministry said, but it “ignores more than 200 years of the basic concept of comparative advantage in Western economics.”The fact that some Chinese EV companies have developed highly competitive products and technology, and benefit from real cost advantages in a relatively low-wage economy, is certainly true. Yet the government’s role in building and sustaining that sector is undeniable as well. Chinese economic planners wished to accelerate the EV sector’s development, so, almost a decade ago, they targeted electric vehicles for special state assistance through their Made in China 2025 industrial program. The assistance was controversial from the start because American and European business leaders and policy makers feared—rightly, it now appears—that Beijing’s backing for its favored industries would distort global markets. Tax breaks, low-interest loans, subsidies to make EVs more affordable, and other aid followed.These interventions encouraged private capital to jump in as well. The result was an explosion of investment in start-ups, factories, and supply chains. As Bert Hofman, an expert on China’s economy at the National University of Singapore, told me: “If the central government says this is the new growth area, electric vehicles are the future, everybody and their grandmothers start something in electric vehicles.”All governments place their thumb on the scale to promote their national industries to some degree. China’s thumb simply weighs more heavily. A 2022 study by the Center for Strategic and International Studies in Washington conservatively estimated that China spent $248 billion supporting its industries in 2019. That’s twice as much as the United States did. “It’s the whole financial system, the whole economic system that is leveraged for industrial policy, which is very different than what’s been happening in market economies,” Camille Boullenois, an analyst of Chinese industry at the research firm Rhodium Group, told me. Where electric vehicles are concerned, “it’s very hard to imagine the industry growing as fast without government support.”The excess capacity, however, is not so much by design. As the automobile industry in China was revving up, the economy was slowing down. Bill Russo, Automobility’s founder, explained to me that automakers overestimated the growth of the Chinese car market and ended up building factories to churn out vehicles for customers that never materialized. Passenger-car sales are still below where they were in 2017 thanks to a stumbling economy, the ravages of the pandemic, and other factors. Such investment, he said, “has been the formula for cashing in on China’s growth, and you’re going to have a reckoning at one point in time—and that’s what we’re faced with right now.”This problem is not confined to cars. China’s steel industry has maintained its output even though demand at home has been declining. The Australian bank Westpac said recently that steel exports, which are approaching record levels, have become a “release valve” for this excess. Even as China’s leaders rebutted foreign criticism of its bloated industries, they released draft regulations in early May to rein in expansion of lithium-battery manufacturing. Chinese state-owned media are reporting that a glut of solar panels—another sector dominated by Chinese companies—is depressing prices and squeezing profits. A surge of Chinese investment into manufacturing “legacy” microchips (those using older technology) is sparking fears they could flood the global marketplace.[Richard Fontaine: The China problem isn’t going away]Facing this Chinese onslaught, governments around the world are stepping in to protect their own industries. The European Commission is currently conducting an investigation into China’s subsidizing of electric vehicles with an eye to imposing its own tariffs on their import. Rhodium anticipates that the EU will apply a duty of 15 to 30 percent on EVs, but the group argues that even this may not be sufficient to deter Chinese automakers. The Biden administration’s move to a 100 percent EV tariff no doubt reflects similar thinking. Chile has already slapped tariffs on some Chinese steel products, while Brazil imposed quotas and duties to stave off an influx of cheap steel, mainly from China.Beijing could fend off these restrictions by reforming its domestic market. The flip side of China’s excessive supply is weak demand. This is caused not just by slowing growth, but also by its entire economic model. As Michael Pettis, a specialist in China’s economy at Peking University, recently pointed out, Beijing’s dirigiste policy has a side effect of subsidizing China’s industry even more than it appears, by both directly and indirectly transferring wealth from families to factories: Rather than encouraging spending on goods, all of the economic incentives are to make capital investment in manufacturing. China’s economic model favors producers over consumers, which holds down household incomes and limits their spending. Lacking customers at home, Chinese industry is forced to seek them abroad.New policies that nudge Chinese families to spend more and save less could alleviate the problem. One way to do this would be to strengthen the country’s feeble social safety net. But Chinese leaders have done little to encourage that transition, perhaps because the necessary liberalizing reforms could weaken the Communist Party’s control over the economy and society. That leaves China’s industrial giants little option but to spew their excess into the global marketplace, in an effort to sustain growth and employment. The outcome is that China sells to the world more goods than it buys from it. Hofman calculated that China recorded trade surpluses with 173 economies in 2023 and deficits with only 50. That added up to a merchandise trade surplus of more than $800 billion.Xi Jinping seems set on making matters worse. His principal economic goal of achieving “self-sufficiency” aims to reduce what China purchases from other countries and substitute goods made by foreign companies with Chinese alternatives—especially in industries, such as green energy, that other governments find strategic. In doing so, Xi is practically inviting more intense trade disputes.In Xi’s thinking, economic growth “is going to come from churning out a lot of this stuff and exporting it to the world,” Leland Miller, a co-founder of the research firm China Beige Book, told me. “Why they think they can get away with that when they are already running giant, politically charged trade surpluses with most of the world, including the United States, and they’re going to supercharge those surpluses and think that’s going to be successful … it doesn’t make much sense.”The big point is that China is not just exporting too much stuff; it’s also exporting its economic problems. Xi intends to maintain Chinese jobs and factories at the expense of other countries’ workers and companies, to avoid necessary but potentially disruptive reform at home. That means Xi is actually undermining the great hope of China’s rise. A wealthier China was supposed to be an engine of global prosperity. Xi’s version is promoting protectionism and confrontation that threaten that prosperity.Facing political pressure at home, politicians around the world are forced to defend their economies from Xi’s strategy, even if that leads to trade wars that sour relations with Beijing. This is not a good outcome for the global economy or for geopolitical stability. But Xi’s policies have made it inevitable.
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theatlantic.com
The Writer Who Leaves Behind a Pounding Heart
Because of my reverence for Alice Munro’s work, I was often asked if I’d ever met her. I felt that I had totally met her in her books and said as much. I never desired to meet her in person, for what I loved would not necessarily be there. The one time I was scheduled actually to meet her—at a reading and ceremony in her honor—she canceled. Stupidly, I was relieved. Because what could one possibly say to this human, Alice Munro, who was also a genius but would probably turn out to resemble a nice, ordinary, once-beautiful-now-forever-middle-aged woman with an Ontario accent (though perhaps also a sparkle in her eyes)? Reality was too full of annoying disguises—one of her many themes. Would she appear to lack something?Throughout her stories, there is admiration for skills of every sort—piloting an airplane, horseback riding, plucking turkeys—but she did not drive a car. This boggled my mind! Yet it also caused me to think that maybe marriages could be held together this way. The husband would have to drop you off and pick you up so he always knew where you were, even if you didn’t always know where he was (or deeply care). Perhaps this was an essentially literary—Munrovian—condition. Also, in the plus column, I could see in her work that she did not admire rich people but also did not sentimentalize the poor, though her sympathies and interests were more deeply located there. The way a hired girl in “Hired Girl” sweeps the floor and then hides the dirt behind the broom propped in the corner was exactly how I swept when young. A metaphor for secrets, but also an actual (poor) way of sweeping. I was always thinking about her in one way or another, so actually meeting her seemed beside the point. I loved her forensic plots and her gothic gruesomeness. In one collection, she has two decapitations. What would be the point of actually meeting her?Her stories were radically structured—built like avant-garde sculpture. In this way, she completely revolutionized the short story, pulling it away from conventional form altogether. She understood that life was layered, that stretches of time did not neaten themselves out into a convenient linear shape but piled themselves up in layers that were sometimes translucent and contained revisions of thought and opinion, like a palimpsest. These layers seemed to have access to one another. This nonlinear way of course mimics the mind and memory and how life is bewilderingly lived and then recalled. She embraced Chekhov’s movement away from the judgmental finish and built on it, supplying similar narrative oxygen to the lives of North American girls and women. Because the story genre is end-oriented—one must stick the landing—she brought this power to her open endings as well, which were sometimes torn from the middle of the story and thrown down like a beating heart on an altar.One wonders whether she felt that all of her artistic devotion and productivity had been worth it. I hope so. I do not want to pity her; I want only to treasure her. Munro’s career seemed to involve an entire life handed over to art, so, from a distance, it is hard to know whether she felt she’d missed out on some other, easier, sweeter life. (Though, I suppose, for a writer there is no other kind of life.) She is one of those women writers who took a rebel’s stance toward motherhood and partially (not completely) left their children in order to get the literary work done and be free of conventional and gendered expectations. (Literary men, of course, leave their children all the time.) To turn one’s life inside out in order to make short stories for people you’ve never met is a kind of contortion and sacrifice one cannot stop to measure, or the gift may flee. Such hesitation, I suppose, would be like a magician stopping to feed and then cage the tiresome rabbit, who then will not go back into the hat.When someone of Munro’s stature passes away, the world feels a little empty for a while and may never completely get back to its ever-elusive purpose. Still, there remains her great, great work. Even if, like all literature, it wrestled un-victoriously with the meaning of the world, even if, like all interesting characters, hers were not always at their most admirable, her writing kept its eye on the dramas of power in human relations and communities. She explored the upset and consequences of love, hate, desire, devotion, despair, illness, social class, gender—and, most of all, time, its magical uses in art and its sly surprises in life. And so, at the culminating close, there is a still-pounding heart. May she reside in pages forever.
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theatlantic.com
Listen to What Jerry Seinfeld Actually Said
On Sunday at Duke University, the comedian Jerry Seinfeld delivered a commencement address that was, bizarrely, overshadowed in the media by a tiny, nondisruptive protest.Seinfeld gave a compliment and a warning to his Gen Z audience.First came the compliment. “I totally admire the ambitions of your generation to create a more just and inclusive society,” he said. “I think it is also wonderful that you care so much about not hurting other people’s feelings in the million and one ways we all do that.”Then came the warning. “What I need to tell you as a comedian: Do not lose your sense of humor. You can have no idea at this point in your life how much you are going to need it to get through. Not enough of life makes sense for you to be able to survive it without humor.”Seinfeld went on to defend “the slightly uncomfortable feeling of awkward humor,” arguing that it is “not something you need to fix,” because even as Gen Z improves the world, it will remain “a pretty insane mess.” Humor, he said, is “the most survival-essential quality you will ever have or need to navigate through the human experience.”[Tyler Austin Harper: America’s colleges are reaping what they sowed]All of that is newsworthy. Seinfeld is a perceptive observer of life and an undeniable expert on comedy. Plus, as he told the graduates, “I am 70. I am done. You are just starting. I only want to help you.” If he is convinced that humor is a crucial salve—“the most important thing I am confident that I know about life”—those of us who’ll never enjoy his success or wealth had really better keep laughing. Yet coverage of the commencement treated something just before his speech as more newsworthy: As the Associated Press reported, roughly 30 student protesters walked out of the graduation ceremony as Seinfeld was introduced. They represented a tiny fraction of the 7,000 students present.Media outlets covered the Duke graduation with headlines like these: “As Seinfeld Receives Honorary Degree at Duke, Students Walk Out in Protest” (The New York Times); “Duke Students Walk Out to Protest Jerry Seinfeld’s Commencement Speech in Latest Grad Disruption” (USA Today); “Duke Students Walk Out of Jerry Seinfeld’s Commencement Speech Amid Wave of Graduation Antiwar Protests” (NBC News); “Jerry Seinfeld’s Speech at Duke Commencement Prompts Walkout Protesting His Support for Israel” (Reuters); “Duke University Students Walk Out on Jerry Seinfeld’s Commencement Speech, Chant ‘Free Palestine’” (Fox News); “Watch: Anti-Israel Students Walk Out of Duke University Commencement to Protest Jerry Seinfeld” (Breitbart News).Why was that the focus? The war in Gaza is, of course, more newsworthy than any commencement and has been covered extensively. Many protests about the war are newsworthy, too.[Read: This is helicopter protesting]But the airing of grievances at Duke was not notable for the number of people who participated, or for any insight offered on Gaza, or for even a remote prospect of affecting the conflict. To the credit of the students who walked out, it didn’t even disrupt the speech. So it was suspect, I think, to treat the protest as more important than the event that the activists sought to leverage for attention. A protest in and of itself does not confer importance.Journalists often fail to distinguish between substantively newsworthy protests and mere deployment of the protest mode—a bias that activists have learned to exploit. Social media is optimized to signal-boost conflict more than attempts at distilling wisdom. And too many Americans revel in rather than resist conflicts.The result at Duke: Coverage of a newsworthy speech was informed, more than any other factor, by the subset of the audience that did not hear it. At least, in the midst of a tragic war abroad and a vexing culture war at home, we can shake our heads and laugh about that absurdity.
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theatlantic.com
Biden’s Weakness With Young Voters Isn’t About Gaza
America’s young voters are fired up about the war in Gaza—aren’t they? Campus protests and the controversies around them have dominated media attention for weeks. So has the possibility that youth anger about the war will cost President Joe Biden the election. “Joe Biden Is Losing Young Voters Over Israel,” a USA Today headline declared last month. The New York Times columnist Thomas B. Edsall recently argued that nothing would help Biden more with young voters than negotiating a cease-fire in Gaza.The available evidence, however, overwhelmingly suggests otherwise. For all the attention they’ve drawn, the campus protesters are outliers. Biden has a problem with young voters, but it does not appear to be because of Gaza.This may feel counterintuitive. More than 80 percent of young people disapprove of the way Biden is handling the war, according to a recent CNN survey—the most of any cohort. And poll after poll shows Biden losing support among 20-somethings, the group that helped propel him to victory four years ago. In 2020, Biden won the 18-to-29-year-old vote by 24 percentage points. This time around, some polls suggest that the demographic is a toss-up between him and Donald Trump. If Biden is losing support from young people, and young people overwhelmingly object to his handling of the war in Gaza, a natural conclusion would be that the war is the reason for the lack of support.[Jill Filipovic: Say plainly wha]t the protesters wantBut that’s a mistake, because there’s a big difference between opinions and priorities. People have all kinds of views, sometimes strong ones, on various topics, but only a few issues will determine how they vote. And very few Americans—even young ones—rank the Israel-Hamas war as one of their top political priorities.“Obviously for some people it is the most important issue, and we need to respect that,” John Della Volpe, who directs polling at Harvard’s Institute of Politics, told me. “But what we’re seeing on college campuses, based upon this data, is not reflective of what the youth voter in general is thinking about.”In the April 2024 edition of the Harvard Youth Poll, which Della Volpe runs, 18-to-29-year-olds rated the Israel-Palestine conflict 15th out of 16 possible priorities. (Student debt came last.) Among self-identified Democrats, it was tied for third from the bottom. In another survey of registered voters in swing states, just 4 percent of 18-to-27-year-olds said the war was the most important issue affecting their vote. Even on college campuses, the epicenter of the protest movement, an Axios/Generation Lab poll found that only 13 percent of students considered “the conflict in the Middle East” to be one of their top-three issues. An April CBS poll found that the young voters who wanted Biden to pressure Israel to stop attacking Gaza would vote for him at about the same rate as those who didn’t.In fact, most young people don’t seem to be paying much attention to what’s going on beyond America’s borders. The 18-to-29-year-old age group is the least likely to say they’re following the war, according to a March survey from the Pew Research Center: 14 percent said they were closely tracking updates, while 58 percent said they weren’t following news of the conflict at all. “If you take a broader view, people who are in their teens and 20s are the least likely group of Americans to pay attention to politics, period,” David Barker, a professor of government at American University, told me. Many seem to be unsure how to feel about the war. “I think that the natural response for anybody, let alone young people, is just to be like, ‘Okay, what’s the price of milk?’” Barker said.Granted, if 2016 and 2020 are any guide, the election will likely be so close that any Democratic defections could be said to have determined the results, particularly in the swing states that Biden needs to win. In 2020, young people voted for Biden by a bigger margin than any other age group. “This is going to come down to small numbers of votes in six or seven key states,” Robert Lieberman, a political-science professor at Johns Hopkins University, told me. Any change, no matter the size, “could tip the election one way or the other.” A New York Times/Siena College swing-state poll out this week found that 13 percent of people who said they voted for Biden in 2020, but don’t plan to in 2024, are basing their decision on the war in the Middle East or on foreign policy. That’s a sliver of a sliver of the population, far fewer than those who cited the economy or inflation—but any sliver could be the decisive one.[David Frum: The plot to wreck the Democratic convention]Even if people don’t vote based on the conflict itself, they might vote based on what it represents. The chaos of an international conflict, and the domestic protests it inspires, could contribute to the impression that Biden is not in control.Still, with the election six months away, some experts predict that young voters will shift back toward Biden as they start paying closer attention to politics. If that doesn’t happen, it will likely be for the same reasons that are depressing his standing with other age groups—above all, the economy. “I ultimately expect that Biden’s fate will be determined less by something like this conflict in Gaza and more, frankly, by which direction inflation and unemployment go over the course of the next few months,” Barker said.There’s no denying that the Israel-Palestine conflict, along with the related controversies emanating from it, has affected and will continue to affect domestic U.S. politics—and the moral questions posed by the war extend far beyond electoral calculations. But the issue is unlikely to trigger any demographic realignment. When it comes to the issues they care about most, young Americans appear closer to the overall electorate than to the activist groups that claim to represent them.
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theatlantic.com