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Biden Boosts Tariffs on Chinese Imports Amid Economic Standoff

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Benjamin Hughes

May 14, 2024 - 09:25 am

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President Biden Escalates Tariffs on Chinese Goods to Fortify US Industries

In a decisive move to support domestic manufacturing in pivotal sectors, President Joe Biden is poised to elevate tariffs on a vast array of Chinese imports. As the United States heads into an election year, this strategic maneuver targets key commodities including semiconductors, batteries, solar cells, and essential minerals.

With the objective of fostering domestic innovation, the US administration also plans to augment duties on port cranes and various medical products. This extension also applies to earlier delineated increments on steel, aluminum, and electric vehicles. According to the White House, these amended tariffs will influence approximately $18 billion worth of current annual imports.

These robust measures symbolize Biden's most expansive overhaul of the China tariffs instituted by his predecessor, Donald Trump. Furthermore, this comprehensive approach indicates that a stringent stance on trade with Beijing continues to garner favor among American voters. Remarkably, there will be no deductions in the tariffs set forth by the Trump administration. Instead, Biden plans to intensify rates on goods which experienced importation difficulties during the global coronavirus pandemic. He also remains steadfast in his dedication to reinforcing key industries such as those centered around chips and green energy – sectors he has energetically championed since his inauguration.

Nevertheless, Biden is faced with a delicate equation. Heightened tariffs could potentially amplify consumer prices at a time when inflation already burdens households. Additionally, this strategy risks provoking China to inflict retaliatory tariffs as a response.

The tariff adjustments are designed to gradually come into effect between the years 2024 to 2026. These tariffs are more selective compared to the blanket 60% tariff previously suggested by Trump. Of particular note is the increase for electric vehicles (EVs), with the tariff rate poised to quadruple. Other imports will see their levies doubled or charged for the first time.

President Biden will formally unveil the detailed measures at an event in the White House Rose Garden on Tuesday. Officials, speaking confidentially before the announcement, conveyed that these new tariffs will be coupled with domestic investments sourced from the bipartisan infrastructure act and the Chips and Science Act. This combination aims to level the competitive field with China.

In some instances, the levies are directed at markets where China's presence is nominal within the US. However, they serve to preempt a potential flood of imports from gaining market share.

National Economic Council Director Lael Brainard addressed journalists, articulating the underlying concern: "China is simply too big to operate by its own set of norms." Brainard highlighted China's historical pattern of powering its own economic expansion at the expense of other economies by investing heavily, notwithstanding an excess capacity, thereby inundating worldwide markets with underpriced exports, originating from unfair economic practices.

The Pressure on Targeted Industries

The semiconductor industry, a pillar of Biden's manufacturing agenda, will see its tariff rate doubled from 25% to 50% by 2025. This aggressive stance aims to counterbalance China's swift penetration into the market for so-called legacy chips. Despite being older-generation, these components are vitally important to the global economy. The Biden administration's recent completion of a thorough survey covering over 100 companies, including automotive, aerospace, and defense sectors regarding their supply chains for these essential semiconductors, reflects the urgency of the issue. The European Union is also contemplating a similar inquiry.

For further reading on the apprehensions regarding China’s surge in legacy chips, readers may refer to the Bloomberg Article.

Starting this year, various critical minerals will incur a new 25% tariff, with natural graphite and permanent magnets facing the same levy in 2026. Ship-to-shore cranes will also bear a novel 25% tariff effective immediately.

Electric vehicles bear the brunt of these changes with a tariff that will skyrocket this year to a staggering rate of 102.5%, a significant jump from the current 27.5%. Moreover, specified steel and aluminum imports from China will experience a tariff rise to 25% from either existing rates of 0% or 7.5%.

This year will also witness a hike in tariffs on lithium-ion batteries for EVs, alongside battery parts, increasing to 25% from the present 7.5%. The same escalation is scheduled for non-EV lithium-ion batteries in 2026. Tariffs on solar cells will scale up from 25% to 50%.

Furthermore, a fresh tariff imposition of 50% will affect Chinese syringes and needles starting this year. Personal protective equipment, including respirators and face masks, will see their tariffs rise to 25%, a significant increase from their current rates of either 0% or 7.5%. Rubber medical and surgical gloves will experience a tariff jump to 25% from 7.5% in the year 2026.

The potential for these policy updates to provoke retaliatory tariffs from China remains an open question. Currently, the tariff regime under Trump applies to roughly $226 billion worth of goods, as per the administration's estimate based on 2023 figures.

Treasury Secretary Janet Yellen shared her insights with Bloomberg Television, "Hopefully, we will not witness a noteworthy response from China – though that always remains a possibility."

Yellen expressed the administration's determination in a statement, saying, "President Biden and I have borne witness to the effects of surges of certain artificially cheap Chinese imports on American communities in the past, and we will not stand by and let that happen again."

She added, "These problems have built up over time and are not resolvable overnight."

Concluding the Long Review

The announcement made on Tuesday is the culmination of a mandatory year-long review of Trump's tariffs – a process deeply influenced by the upcoming election. Both candidates have attempted to project a tough stance toward Beijing. Trump has pledged comprehensive tariffs on China if re-elected. Meanwhile, Biden applauds a domestic manufacturing surge, claiming it preserves American jobs, while his allies have critiqued Trump's proposals, blaming them for exacerbating the inflation that has become an enduring challenge.

Of note, Biden's tariff revisions do not contemplate any concomitant reductions. One official underscored the absence of advancements on numerous unfair Chinese trading practices, such as forced technology transfers since the original imposition of tariffs, rendering any reductions as unjustifiable.

Echoing sentiments of domestic priorities, Brainard reflected on the repercussions of unfair practices, "China's unfair practices have inflicted harm on communities in Michigan, in Pennsylvania, and across the nation, which now see a glimmer of hope for revival," alluding to two pivotal swing states essential for a favorable outcome in the 2024 elections.

(Source: Bloomberg L.P.)