Jose Fernandez, the under secretary for economic growth, energy, and the environment at the U.S. Department of State, expressed concerns about China’s oversupply of lithium during a visit to Portugal on Oct. 8. According to Fernandez, China’s predatory pricing strategy is causing global competitors to be priced out of the market.
Fernandez stated that China is producing significantly more lithium than what is currently needed worldwide and is flooding the market with it. As a result, there has been an 80 percent drop in lithium prices over the past year. China now accounts for two-thirds of global refined battery-grade lithium production.
Portugal possesses 270,000 tonnes of lithium reserves and aims to increase mining activities to advance its energy goals. However, local communities have opposed these projects due to concerns about their impact on livelihoods and the environment.
In recent months, Western countries have taken measures against trade practices by the Chinese Communist Party (CCP). While China joined the World Trade Organization in 2001, it does not operate as a free-market economy under CCP rule. Instead, industries produce goods based on state goals.
For instance, after investigating subsidies provided by the regime that led to overproduction and dumping of low-priced electric vehicles on international markets, the European Union raised tariffs on Chinese electric vehicles.
During a visit to Washington D.C., Indian Minister of Commerce and Industry Piyush Goyal highlighted how China had “killed” India’s manufacturing sector using similar tactics decades ago.
Asian countries have also increased tariffs on Chinese imports. Japan raised duties on Chinese electrolytic manganese dioxide this year while Korea reduced subsidies for vehicles using Chinese batteries in its already dominant electric vehicle market.
Trade officials acknowledge that tariffs alone may not be sufficient as Chinese manufacturers can bypass them by partnering with international manufacturers or trade partners. For example, Mexico relies heavily on parts supplied by Chinese manufacturers and is currently America’s largest auto parts supplier.
China’s trade partners’ shift away from key industries coincides with struggles faced by its faltering economy due to overcapacity issues. This could lead to business closures resulting in job losses and financial strain for indebted local governments while potentially sparking social unrest due to unemployment.