(Bloomberg) -- National Security Adviser Jake Sullivan defended US subsidies for domestic industry and curbs on China, amid warnings from the International Monetary Fund that trade barriers pose a mounting risk to global growth.
The Biden administration’s restrictions on technology exports and financial support for investments in clean energy were necessary “to prevent a second China shock,” Sullivan said Wednesday at the Brookings Institution in Washington, referring to the loss of US manufacturing jobs in the early 2000s as companies shifted output to China. “We’ve had to act.”
Sullivan’s comments come less than two weeks ahead of a presidential election that could lead to intensified US economic pressure on China if former President Donald Trump — who’s vowed to ramp up tariffs – defeats Vice President Kamala Harris. The speech also coincides with the annual meeting in Washington of the IMF, which said Tuesday that “protectionist policies” and disruptions in trade threaten the world economy’s expansion.
The US under Biden has raised concerns about overcapacity in Chinese industry that’s flooding the world with exports, threatening domestic businesses and jobs. Washington has also sought to enlist allies to help stifle China’s technological advance, including by limiting Beijing’s access to high-end semiconductors and equipment to manufacture them. The effort has found some willing partners but also encountered resistance.
‘What Is Right?’
In an interview at the Bloomberg Tech Summit in London on Tuesday, Christophe Fouquet – chief executive of ASML Holding NV, the Dutch firm that makes some of the most advanced chipmaking machinery – said he expects the pressure from Washington to grow. “The question is, what is right for the Netherlands? What is right for Europe?” he said.
Sullivan said US actions are guided by principles such as identifying the most sensitive technologies for US national security, and the ones where the US has the biggest edge.
Asked about other countries’ resistance to follow suit on some of the curbs, he said there is broad alignment on the policy but room for “give and take.”
“It’s an extended dialog that we’ve had with a widening group of allies and partners,” Sullivan said.
Sullivan, who declined to comment on his own future in a potential Harris administration, criticized the use of broad-based tariffs and their impact on consumers.
Trump has proposed an across-the-board duty of 10% on all countries, as well as 60% rates for China. Harris has sought to label the charge a “sales tax,” though she’s had to walk a fine line because many union voters in swing states are supportive of tariffs.
The evidence shows that “indiscriminate” tariffs hurt consumers and businesses, Sullivan said. “We chose instead to target tariffs at unfair practices in strategic sectors.”
‘Yard Is Small’
He also acknowledged that Biden’s Inflation Reduction Act caused unease among allies around the world, as some countries worried that the program of subsidies for US-based industry was designed to undercut them.
“That wasn’t the case, and it isn’t the case,” Sullivan said. “We’ve encouraged our partners to invest in their own industrial strength.”
It was at Brookings in April last year that Sullivan first laid out the US approach on export curbs, saying the goal was to protect key technologies with a “small yard and high fence.” That framing has since drawn criticism from impacted countries and companies, who accused the US of moving the goalposts by widening its curbs.
Sullivan returned to the theme Wednesday to defend the policy. “The fence is high, as it should be,” he said. “In the context of broader commerce, the yard is small, and we’re not looking to expand it needlessly.”
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