Biden Imposes Tariffs on Chinese Imports
Domestic Politics had Role in New Tariffs on China
Biden plans to raise tariffs this year on various products under Section 301 of the Trade Act of 1974. The tariffs on electric vehicles (EVs) will increase from 25% to 100%, while lithium-ion EV batteries and other battery parts will see tariffs go up from 7.5% to 25%. Additionally, tariffs on photovoltaic cells used for solar panels will rise from 25% to 50%. Some critical minerals will also see tariffs raised from 0% to 25%.
Tariffs on ship-to-shore cranes will be raised to 25% from 0%, syringes and needles will have tariffs increased to 50% from 0%, and certain personal protective equipment (PPE) used in medical facilities will see tariffs go up to 25% from as low as 0%. Shortages in PPE, many of which are manufactured in China, hindered the United States’ response to COVID-19.
Further tariff increases are expected in 2025 and 2026 on semiconductors, lithium-ion batteries not for EVs, graphite, permanent magnets, as well as medical and surgical gloves made of rubber.
The White House confirmed that a move previously announced by Biden to increase tariffs on certain steel and aluminum products will be implemented this year. Many legislators are advocating for significant increases in tariffs on Chinese cars or even a complete ban due to worries about data privacy.
Currently, there are not many Chinese-manufactured light-duty vehicles being brought into the country. The United Auto Workers, a union that supported Biden, stated that the tariff adjustments will help guarantee a fair shift towards electric vehicles.
Key Points
- Biden unveiled steep tariff increases on Chinese imports, including EV batteries, computer chips, and medical products.
- China vowed retaliation against these tariff hikes.
- The new measures affect $18 billion worth of imported Chinese goods, impacting various industries such as steel, aluminium, semiconductors, electric vehicles, and solar cells.
- The tariffs aim to address unfair competition and protect American workers from Chinese practices like intellectual property theft.
- Biden’s administration aims to win the competition with China without launching a full trade war and has been working to ease tensions through talks with Chinese President Xi Jinping.
The tariffs have sparked concerns about potential disruptions to supply chains and increased costs for American consumers since some of the imports are intermediate goods, like batteries for EVs. The Biden administration is facing pressure to balance protecting American industries with avoiding escalating trade tensions with China. The US has more wiggle room here since China is in an economically weak position at the moment. Thus, despite the tariff increases, both countries will continue to a expressed willingness to continue discussions to find a resolution and prevent further economic fallout.
Our Take
This is more of a domestic play by the Biden administration to get key voters in the auto industry. Currently, he is behind by about 7% according to the polls. Thus, to win in the November election, he must win key states like Pennsylvania and Michigan. For the Chinese leadership, I imagine that they would prefer a Biden win and thus they see this as a short term domestic political move on the part of the US. Therefore, we think they will be less prone to retaliate since the impact will be limited and after the elections the trade relationship can de-escalate a bit.
