China Accused of Using Lithium Overproduction to Edge Out Competitors

Jose Fernandez, the U.S. Undersecretary of State for Economic Growth, Energy, and the Environment, has accused China of using its lithium oversupply to eliminate global competition. Fernandez made these remarks while addressing reporters in Portugal on October 8.

China's Predatory Pricing Tactics

According to Fernandez, China is engaging in predatory pricing. The country is producing lithium in quantities far beyond the world's current needs, and then flooding the market with it. This has led to a drastic 80% drop in lithium prices over the past year. Currently, China is responsible for two-thirds of the world's refined, battery-grade lithium production.

Portugal's Lithium Reserves and Local Opposition

Portugal has 270,000 metric tons of lithium reserves, as per the 2022 U.S. Geological Survey. The Portuguese government aims to increase mining to further its energy goals. However, local communities have expressed opposition to these new projects, citing concerns about environmental damage and impact on livelihoods.

Western Countries' Response to China's Trade Practices

In recent times, Western countries have erected barriers against the trade practices of the Chinese Communist Party (CCP). Despite joining the World Trade Organization in 2001, China does not operate a free-market economy. Its industries produce in accordance with state goals set by the CCP. The European Union, for instance, increased tariffs on Chinese electric vehicles after an investigation revealed that the Chinese regime had subsidized the industry to overproduce and then dump low-priced vehicles on the international market. This strategy can potentially drive global competitors out of business.

Asian Countries' Reaction to China's Trade Practices

Asian countries have also increased tariffs on Chinese imports. Japan, for example, has increased duties on Chinese electrolytic manganese dioxide, another battery material. Similarly, Korea, where the electric vehicle market is dominated by Chinese products, is reducing subsidies for vehicles that use Chinese batteries.

Trade Officials Acknowledge Tariffs May Not Be Sufficient

Trade officials have acknowledged that tariffs alone may not be sufficient to counter China's practices. Chinese manufacturers may collaborate with international manufacturers or trade partners to circumvent tariffs. For example, Chinese manufacturers supply a significant number of parts to Mexican manufacturers, who are the largest auto-parts suppliers to the United States.

China's Economic Challenges

This shift in the stance of China's global trade partners in key industries comes at a time when the Chinese communist regime is grappling with a faltering economy. Chinese industries dealing with overcapacity may soon witness firms closing down, leading to job losses, reduced revenue for already-indebted local governments, and potential social unrest due to unemployment.

Bottom Line

The allegations against China's trade practices, particularly in the lithium industry, highlight the complexities of global trade dynamics. As countries strive to protect their industries and economies, the balance of power and competition can shift dramatically. What are your thoughts on this issue? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.