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Biden Hiking Tariffs on China EVs,Steel05/14 06:22
The Biden administration announced plans to slap new tariffs on Chinese
electric vehicles, advanced batteries, solar cells, steel, aluminum and medical
equipment -- an election-year move that's likely to increase friction between
the world's two largest economies.
WASHINGTON (AP) -- The Biden administration announced plans to slap new
tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel,
aluminum and medical equipment -- an election-year move that's likely to
increase friction between the world's two largest economies.
The tariffs come in the middle of a heated campaign between President Joe
Biden and his Republican predecessor, Donald Trump, in which both candidates
are vying to show who's tougher on China.
The tariffs are unlikely to have much of an inflationary impact because of
how they're structured. Administration officials said they think the tariffs
won't escalate tensions with China, yet they expect that China will explore
ways to respond to the new taxes on their products. It's uncertain what the
long-term impact on prices could be if the tariffs contribute to a wider trade
dispute.
The tariffs are to be phased in over the next three years, with those that
take effect in 2024 covering EVs, solar cells, syringes, needles, steel and
aluminum and more. There are currently very few EVs from China in the U.S., but
officials worry that low-priced models made possible by Chinese government
subsidies could soon start flooding the U.S. market.
Chinese firms can sell EVs for as little as $12,000. Their solar cell plants
and steel and aluminum mills have enough capacity to meet much of the world's
demand, with Chinese officials arguing that their production keeps prices low
and would aid a transition to the green economy.
Lael Brainard, director of the White House National Economic Council, said
the tariffs will raise the cost of select Chinese goods and help thwart
Beijing's efforts to dominate the market for emerging technologies in ways that
pose risks to U.S. national security and economic stability.
"China is simply too big to play by its own rules," Brainard told reporters
on a Monday call previewing the announcement.
Administration officials have stressed that the decision on tariffs was made
independently of November's presidential election. But Brainard noted in her
remarks that the tariffs would help workers in Pennsylvania and Michigan, two
of the battleground states that will decide who wins the election.
Under the findings of a four-year review on trade with China, the tax rate
on imported Chinese EVs is to rise to 102.5% this year, up from total levels of
27.5%. The review was undertaken under Section 301 of the Trade Act of 1974,
which allows the government to retaliate against trade practices deemed unfair
or in violation of global standards.
Under the 301 guidelines, the tariff rate is to double to 50% on solar cell
imports this year. Tariffs on certain Chinese steel and aluminum products will
climb to 25% this year. Computer chip tariffs will double to 50% by 2025.
For lithium-ion EV batteries, tariffs will rise from 7.5% to 25% in 2024.
But for non-EV batteries of the same type, the tariff increase will be
implemented in 2026. There are also higher tariffs on ship-to-shore cranes,
critical minerals and medical products.
The new tariffs, at least initially, are largely symbolic since they will
apply to only about $18 billion in imports. A new analysis by Oxford Economics
estimates that the tariffs -- which would be implemented over time -- will have
a barely noticeable impact on inflation by pushing up inflation by just 0.01%.
Still, Chinese officials voiced their frustration with the move.
Chinese embassy spokesperson Liu Pengyu rejected U.S. claims that Beijing
has encouraged excess factory capacity in order to dominate global trade in
these goods. He also said that more expensive EVs and solar panels will make it
more difficult to transition away from fossil fuels to renewable energy.
"Despite its professed willingness to strengthen cooperation with China on
climate change, the U.S. 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 said. "This is
self-defeating."
The Chinese economy has been slowed by the collapse of the country's real
estate market and past pandemic lockdowns, prompting Chinese President Xi
Jinping to try to jumpstart growth by ramping up production of EVs and other
products, making more than the Chinese market can absorb.
This strategy further exacerbates tensions with a U.S. government that
claims it's determined to strengthen its own manufacturing to compete with
China, yet avoid a larger conflict.
"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 U.S. election season add up to a perfect recipe for
escalating U.S. trade fractions with China,'' said Eswar Prasad, professor of
trade policy at Cornell University.
China's production of EVs and other green products are "coming to be seen by
the U.S. as a zero-sum game in which China plays the spoiler that could hamper
a U.S. manufacturing revival,'' Prasad said.
The Europeans are worried, too. The EU launched an investigation last fall
into Chinese subsidies and could impose an import tax 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 "are
flooding the European market. ... The world cannot absorb China's surplus
production. Therefore, I have encouraged the Chinese government to address
these structural overcapacities.''
The Biden administration views China with subsidies of its own manufacturing
as trying to globally control the EV and clean energy sectors, whereas it says
its own industrial support is geared toward ensuring domestic supplies to help
meet U.S. demand.
"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," Treasury Secretary Janet Yellen told reporters Monday.
The tensions go far beyond a trade dispute to deeper questions about who
leads the world economy as a seemingly indispensable nation. China's policies
could make the world more dependent on its factories, possibly giving it
greater leverage in geopolitics. At the same time, the United States says it's
seeking for countries to operate by the same standards so that competition can
be fair.
For it's part, China maintains that the tariffs are in violation of the
global trade rules that the United States originally helped establish through
the World Trade Organization.
Chinese Foreign Ministry spokesperson Lin Jian said Friday that the new
tariffs compounded the problems caused by tariffs that the Trump administration
had previously put on Chinese goods, which Biden has kept.
"Instead of ending those wrong practices, the U.S. continues to politicize
trade issues, abuse the so-called review process of Section 301 tariffs and
plan tariff hikes," he said. "This will just double the U.S.'s fault."
Those questions are at the heart of November's presidential election, with a
bitterly divided electorate seemingly united by the idea of getting tough with
China. Biden and Trump have overlapping but different strategies.
Biden sees targeted tariffs as needed to defend key industries and workers,
while Trump has threatened broad 10% tariffs against all imports from rivals
and allies alike.
Biden has staked his presidential legacy on the U.S. pulling ahead of China
with its own government investments in factories to make EVs, computer chips
and other advanced technologies.
"So far, we've created $866 billion in private-sector investment nationwide
-- almost a trillion dollars -- historic amounts in such a short time," Biden
said last week in Wisconsin. " And that's literally creating hundreds of
thousands of jobs."
Trump tells his supporters that America is falling further behind China by
not betting on oil to keep powering the economy, despite its climate change
risks. The former president may believe that tariffs can change Chinese
behavior, but he believes that the U.S. will be reliant on China for EV
components and solar cells.
"Joe Biden's economic plan is to make China rich and America poor," he said
at a rally earlier this month in Wisconsin.
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