The US President Joe Biden announced a new bundle of tariff increases on a handful of Chinese imports in a bid to curb Beijing’s development of critical technologies and boost US production.
The new tariffs package includes steel and aluminum, electric vehicles (EVs), computer chips, battery components, critical minerals, solar cells, cranes, and medical products. They will be phased in over the next three years. As Biden is trying to court voters on his economic policies before election, these measures risk a standoff with China.
Sharp Increase
The White House said the new tariffs will impact Chinese imports worth $18bn. Under Section 301 of the Trade Act of 1974, the Biden administration will increase tariffs from 25% to 100% on EVs, from 7.5% to 25% on battery components, and from 25% to 50% on photovoltaic cells used in solar cells.
In addition, tariffs on certain critical minerals and ship-to-shore cranes will rise from zero to 25%. Tariffs on syringes and needles will increase from zero to 50%. Some personal protective equipment (PPE) will have their tariffs increased from nothing to 25%. The US faced a shortage in PPE, made largely in China, which slowed its Covid-19 response.
Tariffs on steel and aluminum products will increase from 0-7.5% to 25%. Semiconductors’ tariffs will rise from 25% to 50%, with more tariffs to be imposed in 2025 and 2026.
Unfair Practices
In a statement, the White House said that these measures aim to counter China’s “unfair trade practices.” It noted that these practices create “unacceptable risks” to the US’s supply chains and economic security.
In 2023, the US imported goods worth $427bn from China. Its exports to the world’s second largest economy stood at $148bn, Reuters reported, citing the US Census Bureau.
Lael Brainard, White House National Economic Adviser, told reporters: “China’s using the same playbook it has before to power its own growth at the expense of others by continuing to invest, despite excess Chinese capacity and flooding global markets with exports that are underpriced due to unfair practices.”
Beijing’s Response
The US move caused frustration among Chinese officials, reported the Associated Press (AP). Liu Pengyu, Chinese embassy spokesperson, rejected US claims that Beijing is attempting to dominate global trade by overflooding markets with cheap goods.
He said: “Despite its professed willingness to strengthen cooperation with China on climate change, the US has been hyping up the so-called ‘overcapacity’ in China’s new energy sector and vowing to impose additional tariff hikes on Chinese electrical vehicles and solar products.”
Liu added that the increased costs of EVs and solar panels will make it more difficult to transition away from fossil fuels to renewable energy.
According to the Chinese Foreign Ministry spokesperson, Lin Jian, the new tariffs exacerbated the problems caused by the Trump administration’s tariffs on Chinese goods, which Biden has kept in place.
He said: “Instead of ending those wrong practices, the US continues to politicize trade issues, abuse the so-called review process of Section 301 tariffs and plan tariff hikes. This will just double the US’s fault.”
Perceived Risk
The Chinese economy has suffered a slowdown resulting from the collapse of China’s real estate market and pandemic lockdowns. In a bid to boost growth, the Chinese leader Xi Jinping has ramped up EVs production with increased government subsidies. This has led to producing more goods than the Chinese market can absorb.
The Biden administration views Chinese subsidies as an attempt to control the global markets of EVs and clean energy sectors. Meanwhile, Washington says that its support for US industries aims to ensure domestic supplies in order to meet US demand.
The US Treasury Secretary Janet Yellen told reporters Monday: “We do not seek to have global domination of manufacturing in these sectors, but we believe because these are strategic industries and for the sake of resilience of our supply chains, that we want to make sure that we have healthy and active firms.”
More Tensions
Beijing’s strategy adds to the tensions with the US government. Washington claims it is intent on strengthening its manufacturing sector to compete with China, without triggering a larger conflict.
In this regard, Eswar Prasad, professor of trade policy at Cornell University, told AP: “China’s factory-led recovery and weak consumption growth, which are translating into excess capacity and an aggressive search for foreign markets, in tandem with the looming US election season add up to a perfect recipe for escalating US trade fractions with China.”
Prasad added that the US views China’s production of EVs and other green products as a “zero-sum game in which China plays the spoiler that could hamper a US manufacturing revival.”
According to AP, the tensions are not merely a trade dispute. They raise questions about who leads the world economy. Beijing’s policies could increase the world’s reliance on its factories, giving it more leverage in geopolitics. At the same time, Washington claims it seeks fair competition by making all countries operate by the same standards.
