The House will soon be moving ahead on Senate Majority Leader Chuck Schumer’s China-targeted $250 billion U.S. Innovation and Competition Act (USICA), designed to preserve a competitive technological edge over China through the injection of tens of billions of taxpayer dollars for various initiatives, including U.S. semiconductor manufacturing and “buy American” requirements for federally funded infrastructure projects.
Chinese officials have warned that reprisals are coming, should the bill become law. Those reprisals may include deliberate disruptions in imported parts’ supplies for U.S. manufacturers and curbs on Chinese purchases of U.S. exports. With supply chains already strained to the breaking point, Beijing’s response could test Biden and Chinese leader Xi Jinping’s resolve to create a less-rancorous U.S.-China relationship.
“We have been clear publicly and privately with [China’s government] that we intend to strengthen our own competitive hand,” a senior administration official said. “And the investments outlined in this legislation do just that.”
Schumers previous announcement is here:
Mary Lovely, a senior fellow at the Peterson Institute for International Economics said that China does not have many ways to hurt the U.S. now without damage to itself, but reducing the flow of strategic inputs for electrical vehicles would be a possible avenue for retaliation, adding: “China could use those supply chains to try to inflict pain, and [because] the Chinese leadership sees the West as moving to reduce their dependence on China, adding uncertainty about Chinese supply won’t be overly costly for China because the U.S. policy direction is mostly set.”
The Chinese Embassy in Washington declined to comment on how China will respond to USICA’s passage. But Min Ye, associate professor of international relations at Boston University said that China’s retaliatory policy tools include purchasing orders, targeted sanctions against individuals and companies or a pause on ongoing bilateral dialogues.
“When China says ‘tit-for-tat,’ it means ‘tit-for-tat,’” said Min Ye.