Getty Images: Employees work on the assembly line of new energy vehicles at a factory of Chinese EV startup Leapmotor on April 1, 2024, in Jinhua, Zhejiang Province of China. Getty Images
US President Joe Biden is ramping up tariffs on Chinese-made electric cars, solar panels, steel, and other goods. The White House announced that the measures, including a 100% border tax on electric cars from China, were a response to unfair policies and intended to protect US jobs. China expressed strong opposition to the hikes and indicated it would take retaliatory measures. Analysts view the tariffs as largely symbolic, aiming to secure votes in a challenging election year.
Biden vowed that he would not let China “unfairly control the market” for electric vehicles and other key goods, including batteries, computer chips, and basic medical supplies. “If the pandemic taught us anything – we need to have a secure supply of essentials here at home,” he emphasized. The tariffs announced on Tuesday will impact an estimated $18bn worth of imports, according to the White House.
The increased tariffs mark a significant escalation in the trade conflict between the world’s two largest economies. Alongside the hike from 25% to 100% on electric vehicle tariffs, levies on solar cells will increase from 25% to 50%. Tariff rates on certain steel and aluminum products will more than triple to 25%, up from 7.5% or less.
China’s commerce ministry responded by stating that the new moves would “severely affect the atmosphere for bilateral cooperation,” criticizing what it sees as the politicization of economic issues. A spokesperson for China’s foreign ministry said it “will take all necessary measures to safeguard its legitimate rights and interests.”
The tariffs expand sweeping border taxes that the US imposed on Chinese goods under former President Donald Trump, who cited unfair trade practices. During the Biden administration’s review of the measures, the government received nearly 1,500 comments, the majority from business owners arguing that the tariffs were driving up prices for everyday Americans and requesting their removal.
Mr. Biden’s decision to leave the tariffs in place and expand them into new areas is a testament to the dramatic shift in trade views for both political parties in the US, which had long championed the benefits of global commerce. Wendy Cutler, a former trade official now vice-president of the Asia Society Policy Institute, believes Americans are willing to accept higher priced cars in exchange for protecting US companies and jobs. “We’ve seen this movie before – with solar, with steel and aluminum, and when it comes to cars and other products, the United States needs to get ahead of the curve,” she said.
In a briefing with reporters, White House officials denied that domestic politics influenced the decision. They argued that Beijing has shown no sign of moving away from practices that harm the US, including rules forcing Western companies to share information with the aim of stealing it and subsidies that enable firms to flood the market with products beyond expected demand. “They’re flooding the market,” Mr. Biden stated. “It’s not competing – it’s cheating.”
The tariffs are targeted, and the White House does not expect them to stoke inflation, contrasting their approach with that of Mr. Trump. The former president has campaigned on a proposed across-the-board 10% tariff on foreign imports, which could jump to 60% for goods from China. He has also criticized Mr. Biden for promoting electric vehicles, arguing it will destroy US car companies, key employers in states like Michigan that will be crucial in the upcoming election.
Erica York, a senior economist at the Tax Foundation, commented that both candidates are “heading down the same path” of higher barriers to trade, focusing inward rather than considering policies to make sectors more competitive. She noted that the administration’s promotion of the tariffs as strategic is a “euphemism for protection for sectors that are politically important for this administration.”
The US already imposes steep tariffs on Chinese-made electric vehicles, resulting in negligible sales of such cars. However, Washington is watching warily as sales by Chinese companies in Europe and other countries increase. Ensuring that green technologies are not dominated by a single country is critical to making the transition successful and sustainable in the long run, White House officials said.
While the moves targeting electric vehicles are likely to have minimal practical effect, the business world is watching to see if Europe will take similar steps. Natasha Ebtehadj of Artemis Investment Management noted that investors and Chinese companies anticipated these measures, especially in the run-up to an election where both candidates are not pro-China. “Given the relatively small volume of imports to the US, it’s maybe more interesting what happens next in Europe,” she added.
The US and China have been locked in a trade war since 2018, initiated by Mr. Trump who imposed tariffs on approximately two-thirds of goods imported from China. The measures prompted retaliation by Beijing, ending in a détente in early 2020 when Mr. Trump reduced some tariffs while China pledged to boost its purchases from the US.
Those promises have fallen short, but the tariffs have yielded more than $200bn in new border taxes for the US government while reshuffling global trade patterns. Much of that sum has been paid by everyday Americans through higher prices for goods. However, Oxford Economics described the latest plans as “more symbolic bark than bite,” estimating they would lift inflation by a negligible 0.01 percentage points and similarly weigh on growth, calling the effect a “rounding error.”
Source: BBC