Biden raises tariffs on Chinese EVs, chips and other goods

WASHINGTON (AP) — The Biden administration has announced It plans to impose new tariffs Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum and medical equipment – an election-year move that is increasing friction between the world’s two largest economies.

Fees come in between A hot campaign between President Joe Biden And his Republican predecessor, Donald TrumpBoth candidates are competing to show who is tougher in China.

The Chinese government quickly pushed back, issuing a statement on Tuesday saying the tariffs would “seriously affect the atmosphere of bilateral cooperation.” The Ministry of External Affairs used the word “harassment”.

Due to how the tariffs are structured, inflation is unlikely to have much of an impact. Administration officials said they don’t think the tariffs will escalate tensions with China, although they expect China to explore ways to respond to new tariffs on its products. If the tariffs contribute to a broader trade dispute, it is uncertain what the long-term impact on prices will be.

The tariffs will be phased in over the next three years, and will come into effect in 2024, covering electric vehicles, solar cells, syringes, needles, steel and aluminum, and more. The U.S. currently has very few EVs from China, but officials worry that lower-cost models made possible by Chinese government subsidies could soon flood the U.S. market.

Chinese companies can EVs can be sold for $12,000. Their solar cell plants and steel and aluminum plants have enough capacity to meet most of the world’s demand, which Chinese officials argue will keep production costs low and help the transition to a green economy.

Lael Brainard, director of the White House’s National Economic Council, said the tariffs would raise the price of select Chinese goods and help curb Beijing’s efforts to dominate the market for emerging technologies that threaten U.S. national security and economic stability.

“China is too big to play by its own rules,” Brainard told reporters ahead of Monday’s call.

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Administration officials have insisted that the decision on tariffs was made independently of the November presidential election. But Brainard noted in his comments that the tariffs would help workers in Pennsylvania and Michigan, two of the battleground states that will determine who wins the election.

But China’s commerce ministry said in a statement that the tariffs were “routine political manipulation” as it expressed its “strong displeasure” and pledged to “take firm measures to protect its rights and interests”.

According to the findings of the quadrennial review of trade with China, the tariff rate on imported Chinese EVs will rise to 102.5% this year, accounting for 27.5% of the total. The review was carried out under Section 301 of the Trade Act of 1974, which allows the government to retaliate against trade practices deemed unfair or in breach of international standards.

Under the 301 guidelines, the tariff rate on imports of solar cells will double to 50% this year. Tariffs on some Chinese steel and aluminum products will rise to 25% this year. Computer chip payments will double to 50% by 2025.

For lithium-ion EV batteries, tariffs will rise by 7.5% to 25% this year. But for the same type of non-EV batteries, the rate hike will be implemented in 2026. There are also higher tariffs on ship-to-shore cranes, critical minerals and medical supplies.

The new tariffs, at least initially, are largely symbolic, as they apply to only about $18 billion in imports. A new analysis by Oxford Economics estimates that the tariffs will have a significant impact on inflation by raising inflation by just 0.01%.

The auto industry is still trying to assess the impact of the tariffs. But for now, it seems that the evaluation can only be done on two Chinese-made vehicles, the Polestar 2 luxury EV and Volvo’s S90 luxury gas-electric hybrid mid-size sedan.

“We are still reviewing the charges to understand what is affected and how,” said Russell Dodds, a spokesman for Volvo, the Swedish brand under China’s Geely Group. A message was returned seeking comment from Polestar, which also falls under Geely.

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Chinese Foreign Ministry spokesman Wang Wenbin said the United States was trampling on the principles of market economy and international economic and trade rules.

“It’s a blatant act of bullying,” Wang said.

The Chinese economy has been slowed by a slump in the country’s real estate market and past coronavirus lockdowns, prompting Chinese President Xi Jinping to spur growth by ramping up production of EVs and other products.

The strategy also raises tensions with the U.S. government, which says it is determined to bolster its own manufacturing to compete with China but avoids a major confrontation.

“China’s factory-led recovery and weak consumption growth, which translates into excess capacity and an aggressive search for overseas markets, combined with the US election season, add up to the perfect recipe for increasing US trade deficits with China,” he said. Ishwar Prasad is a professor of trade policy at Cornell University.

Europeans are also concerned. The EU has launched an investigation into Chinese subsidies and may impose import duties on Chinese EVs.

After Xi’s visit to France last week, European Commission President Ursula von der Leyen warned that government-subsidized Chinese EVs and steel were “flooding the European market” and said “the world cannot absorb China’s surplus production”.

Biden’s Democratic administration sees China as trying to dominate the EV and clean energy sectors globally with subsidies for its own production, while saying its own industry support lies in ensuring domestic supplies to meet US demand.

“We are not seeking global dominance in manufacturing in these sectors, but these are strategic industries and for the resilience of our supply chains, we want to make sure we have healthy and active companies,” Treasury Secretary Janet Yellen said.

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The tensions go beyond a trade conflict to deeper questions about who leads the global economy as a vital nation. China’s policies could make the world more dependent on its industries, giving it greater influence in geopolitics. At the same time, the U.S. says countries must operate at the same standards that competition can be fair.

China says the tariffs violate global trade rules the United States helped establish through the World Trade Organization. It accuses the U.S. of continuing to politicize trade issues, and on Friday said the new tariffs compounded problems caused by tariffs previously imposed on Chinese goods by the Trump administration.

Those issues are at the heart of November’s presidential election, with a bitterly divided electorate united by a desire to get tough with China. Biden and Trump have overlapping but different strategies.

Biden sees targeted tariffs as necessary to protect key industries and workers, while Trump has threatened broad 10% tariffs against all imports from rivals and allies.

Biden has credited his presidential legacy with pulling the U.S. ahead of China through its own government investments in factories to make EVs, computer chips and other advanced technologies.

“We’ve generated $866 billion in private sector investment across the country — almost a trillion dollars — a historic amount in such a short period of time,” Biden said last week in Wisconsin. “That literally creates hundreds of thousands of jobs.”

Despite climate change risks, Trump is telling his supporters that the U.S. is holding back China by not betting on oil to power the economy. The former president may hope that tariffs will change Chinese behavior, but he believes the US will rely on China for EV parts and solar cells.

“Joe Biden’s economic plan is to make China rich and America poor,” he said at a rally this month in Wisconsin.

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AP Autos writer Tom Krisher contributed to this report from Detroit.

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