The USA is once again stepping up its stance in dealing with China. The move has few immediate consequences; in the long term, it threatens to further divide the global economy into two spheres.
American President Joe Biden is continuing the hard line his administration has adopted toward China.
Abaca / Imago
The Biden administration wants to keep cars equipped with digital technology from China and Russia off America’s streets. As it announced on Monday morning, it sees the software as a potential gateway for Chinese attackers and a threat to national securityThe new rule would be introduced gradually from 2027 to 2030, so it has no immediate consequences. In the long term, however, the import ban could further the technological division of the world into a Western sphere and a China-dominated sphere.
The conflict with China is expanding
On the one hand, it concerns technology that allows the vehicle to communicate with the outside world, for example via Bluetooth, mobile communications or satellite. Chinese hardware used in such communication systems is also affected by the ban; for example, sensors. On the other hand, systems that enable autonomous driving are no longer allowed to be imported into or sold in the USA.
According to the Biden administration’s communiqué, software is considered Chinese or Russian if it was “designed, developed, manufactured or provided by companies with a sufficient connection to the People’s Republic of China or Russia.”
The USA is thus stepping up its defensive fight against Chinese technology. Using similar arguments, it has already banned equipment from telecom equipment manufacturer Huawei and Chinese software for port cranes from American soil. Jake Sullivan, the US national security advisor, told media representatives that there are existing concerns that China is deliberately trying to inject malicious codes into critical American infrastructure that could be activated in the event of a crisis. This could include pumping stations or substations, for example.
The import ban is just a proposal, but it is not entirely surprising. Joe Biden commissioned an investigation in February to assess the danger posed by technology installed in Chinese cars.
Biden wants to introduce the import ban before the end of his term in January 2025. His administration will now receive feedback from those affected for 30 days, and the Commerce Department will draw up the final regulation. Details could therefore still be changed.
United against China
However, it is questionable whether the initiative will face any significant opposition. Distrust of China and the desire to distance themselves from the Middle Kingdom in terms of security and trade policy are widespread among both Republicans and Democrats. Both Donald Trump and Kamala Harris are likely to continue the restrictions on Chinese car software – and possibly extend them to other areas, security experts are convinced.
The USA and China have been involved in a complicated trade dispute for almost a decade, which has been spreading across ever wider areas. The Americans are disappointed by the lack of political and economic reforms in China. They are increasingly convinced that the previous strategy of integrating the country into the rule-based, Western-style world economic order has failed.
However, the American Secretary of Commerce, Gina Raimondo, justified the current step on Monday primarily with security considerations. The Chinese state should neither be able to track the journeys of American citizens nor attack critical infrastructure via car software. The Biden administration seems to be more concerned with precautionary regulation. There is no knowledge of any concrete attempt to paralyze important infrastructure in the USA using malware that was introduced via cars.
The US is using a similar argument in relation to the Tiktok ban, which will come into force in a few months if the Chinese parent company does not sell the US version of the social network. If trade considerations were to be placed too much in the spotlight, this could open up a new avenue for lawsuits.
Hardly any Chinese cars on US roads
It is still uncertain how great the direct impact on international vehicle trade will be. The rule is unlikely to have any particular effect on direct car imports from Chinese manufacturers, simply because there are hardly any. At present, very few Chinese cars are on American roads.
It is unlikely to increase much, as the Biden administration announced enormous tariffs of 100 percent on electric cars from China back in May.
The move was justified on trade policy grounds: Biden specifically wanted to protect jobs in the USA. China has built up enormous overcapacity thanks to subsidies for electric cars and is using the cheaper vehicles to put pressure on foreign competition – in China itself, but also in other markets. The USA would not allow this to happen to them. The Democratic government has also distributed enormous subsidies to companies that want to build electric cars in the USA or generate sustainably produced electricity.
Third countries also affected
However, numerous Western and Japanese car manufacturers also manufacture vehicles in China. Or they source components from the country, for which the ban on imports into the USA would also apply. Lawyers will now look at the exact wording and companies will have to take a close look at their entire value chain: Is every sensor from China, no matter how small, considered a security risk? How can you ensure that the supplier of the supplier has not used Chinese software?
The situation is particularly tricky in Mexico. The country has a large and rapidly growing automobile industry that is closely linked to that in the USA thanks to a comprehensive free trade agreement.
At the same time, Mexico is one of the most important export markets for Chinese car manufacturers such as BYD. The Chinese industry leader has long expressed interest in opening a large factory for electric cars in Mexico – to supply the domestic market, but also for exports. The USA already suspects that China could use Mexico as a gateway to smuggle electric cars to America bypassing the high tariffs.
