Source: The Guardian
The US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.
In a move that is likely to inflame trade tensions between the world’s two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn.
Sources said the move followed a four-year review and was a preventive measure designed to stop cheap subsidised Chinese goods flooding the US market and stifling the growth of the American green technology sector.
As well as a tariff increase from 25% to 100% on EVs, levies will rise from 7.5% to 25% on lithium batteries, from zero to 25% on critical minerals, from 25% to 50% on solar cells, and from 25% to 50% on semiconductors.
Tariffs on steel, aluminium, and personal protective equipment – which range from zero to 7.5% – will rise to 25%.
Despite the risks of retaliation from Beijing, Biden said the increased levies were a proportionate response to China’s overcapacity in the EV sector. Sources said China was producing 30m EVs a year but could sell only 22-23m domestically.
Biden’s car tariffs are largely symbolic because Chinese EVs were virtually locked out of the US by tariffs imposed by Donald Trump during his presidency. However, lobby groups have suggested there is a future threat as Beijing seeks to use exports to compensate for the weakness of its domestic economy.
The Alliance for American Manufacturing has said the introduction of Chinese cars to the US market would be an “extinction-level event” for its carmakers.
Since arriving in office, the president has announced a series of measures – such as the Inflation Reduction Act and the Chips Act – to boost US industry in hi-tech sectors and in battleground states, where the 2024 election with Trump is likely to be decided.
Biden has taken a hard line on trade since arriving at the White House in 2021 and believes his plan offers a more targeted – and less risky – approach to the threat posed by China than that of his rival.
In March, Trump said that, if elected as president later this year, he would put a 100% tariff on “every single car that comes across the line” from Chinese-owned manufacturing plants in China. “They are not going to sell those cars,” he said. Trump has promised to raise taxes on all Chinese imports by 60%, an approach critics say would raise prices for US consumers already grappling with high inflation.
In April, Biden said he was “not looking for a fight with China” but that the US needed to stand up to China’s “unfair economic practices and industrial overcapacity”. “I’m looking for competition, but fair competition,” he said.
The new tariffs will kick in after 90 days from Tuesday – a period that will be closely watched for signs of tit-for-tat retaliation by China. White House sources said the aim was not to escalate trade tensions but to help parts of the US economy where there had been a cycle of disinvestment.
THE AUTHOR: Larry Elliott Economics editor
