China produces far more manufactured goods than it can consume domestically, leading to massive exports and a domestic price war. While Chinese officials have repeatedly refuted US accusations of overcapacity, Beijing has launched a campaign to combat deflation and price wars in certain sectors. Bessant, Trade Representative Jamieson Greer (and Commerce Secretary Howard Lutnick) began talks in Madrid on Sunday with a Chinese delegation led by Vice Premier He Lifeng. Greer was mentioned in the letter.
The Treasury and Commerce departments have not yet responded to questions about the letter.
The letter, from members of the House Select Committee on China, reiterates arguments from the Biden administration, particularly former Treasury Secretary Janet Yellen, and is unlikely to have an impact on President Donald Trump's Republican administration. However, the letter highlights the depth of Washington's concerns about China, an issue on which bipartisan consensus is rare.
"The People's Republic of China's historic and destructive exploitation of structural overproduction to fuel economic growth has imposed indisputable costs on American industry, jobs, and international market stability," the letter reads, referring to China's official name. The world's two largest economies have been trying to transform a 90-day truce in triple-digit tariffs extended last month into a lasting trade deal to address issues ranging from fentanyl to the U.S. trade deficit to the ownership of TikTok.
The letter states that negotiations should address overcapacity, citing China's steel and solar panel industries as examples of industries that, after massive supply expansions, triggered a wave of exports that undermined jobs and industries in the United States and elsewhere. The letter also states that the U.S. government should capitalize on the anxiety these exports have caused allies and partners and work with them to develop an international response to China's overcapacity.
The report added that this requires a "more balanced" approach to tariffs, a favored economic policy tool of the Trump administration.
The Trump administration has imposed tariffs on close allies such as South Korea and Japan, though some of these tariffs have subsequently been reduced in exchange for investment commitments or reciprocal tariff cuts.