Commentary
China’s export economy is going gangbusters—at a record $3.4 trillion in 2024—according to data released by Beijing on Jan. 14. Much of that money will feed military spending meant to conquer Taiwan and defeat any attempt by the United States to defend the island democracy.
U.S. and allied tariffs on China will subdue China’s economic expansion somewhat, but they will not fix the entire problem.
Many Chinese companies are moving abroad—including to Vietnam, Mexico, Indonesia, Thailand, Hungary, and Germany—to evade U.S. tariffs. Some global logistics companies, among them American and European countries, are jumping in to help their Chinese clients (and profit) by sending some of their Chinese staff abroad.
All of these companies have also had contracts with the U.S. government. Their clients include the U.S. Army, State Department, and FBI, which raises national security concerns. Chinese nationals working for logistics companies in countries abroad could more easily access data about U.S. government shipments to or through these countries.
Also of concern is the potential for the Chinese Communist Party (CCP) to use Chinese nationals who work for global logistics companies for industrial espionage or political influence.
A Jan. 12 report in the Financial Times quoted the greater China managing director of a French company headquartered in Marseille as saying that the company’s overseas Chinese staff could assist Chinese clients in better “communicating and understanding local politics.” There’s a gray area here in which there could be security issues involved.
A third issue is that some logistics companies could assist China in evading U.S. tariffs. While this may currently be legal, there is movement in Washington to close the loophole, for example, of Chinese companies assembling Chinese parts into products in Mexico for tariff-free export to the United States.
President Donald Trump’s nominee for U.S. trade representative, Jamieson Greer, has proposed a solution for this problem. Greer would like to limit Chinese goods from entering the United States through third countries by denying those imports preferential treatment, such as due to the U.S.–Mexico–Canada free trade agreement. The restriction would also apply to goods made with a large quantity of Chinese parts, such as autos and home appliances. It ought to apply to any proportion of a good’s value, including just 1 percent, that comes from China-origin parts.
A related issue in Europe is the expanding role of China’s state-owned commercial airlines due to flight bans for Western airlines over Russia. Moscow retaliated against most U.S. and European airlines as part of the Ukraine war by banning their flights over Russian airspace. But Moscow did not ban Chinese airlines, which gives the big three—Air China, China Eastern, and China Southern—a critical advantage over their Western competition in reduced flight times and fuel costs.
Beijing is putting additional pressure on Western airlines by subsidizing its own airlines despite persistent losses. The big three Chinese airlines lost $1.8 billion in 2023, for example. Beijing’s subsidies may be geared to increase the Chinese regime’s political and economic influence in Europe, not to mention European tourist spending to boost China’s economy.
China’s big three offer direct flights between Western Europe and China at a cost savings of as much as 35 percent compared to Western airlines. As a result, the big three likely enjoyed a 45 percent increase in traffic between China and three European countries—the United Kingdom, Spain, and Italy—over the first three quarters of 2024 compared to 2019.
Flights between China and Saudi Arabia have also seen a massive increase of over 700 percent over the same period. This is concerning given the importance of Saudi Arabia to U.S. energy imports and the U.S. alliance system in the Middle East. Compare the rise in China–Saudi flights to China–U.S. flights, which are down 70 percent since 2019.
There is no good reason that China’s airlines should benefit at the expense of Western airlines due to Russia’s ban and Beijing’s unfair subsidies. At the very least, the United States and European Union should impose tariffs to countervail both effects.
The global expansion of China’s airlines, logistics companies, and export-oriented factories has created a powerful network that will fuel Beijing’s military spending. This network is largely under the command of the CCP and can be used for espionage, hacking, sabotage, bribery, and political influence operations.
The United States, Europe, and our other global allies should do far more to limit the expansion of this global network and roll it back where possible. To save democracy, the gloves must come off.
