Biden raises tariffs on Chinese electric vehicles, chips and other goods

WASHINGTON (AP) — President Joe Biden Significant new tariffs were imposed On Chinese electric cars, advanced batteries, solar cells, steel, aluminum and medical equipment on Tuesday, Donald Trump was criticized along the way as he embraced a strategy that increases friction between the world’s two largest economies.

The Democratic president said Chinese government support ensures that Chinese companies do not have to make profits, giving them an unfair advantage in global trade.

“American workers can outwork and outwork anyone as long as competition is fair,” Biden said in the White House Rose Garden. “But for a long time, it wasn’t fair. For years, the Chinese government has pumped state money into Chinese companies… This is not competition, it is cheating.

Definitions come in the middle Hot campaign between Biden And Trump, his Republican predecessor, to show who is tougher in dealing with China. In a nod to the presidential campaign, Biden acknowledged Michigan lawmakers in his remarks and spoke about workers in Pennsylvania and Wisconsin, all battleground states in the November election.

Asked to respond to Trump’s comments that China is eating America’s lunch, Biden said of his rival: “He’s been feeding them for a long time.” The Democrat said Trump failed to crack down on Chinese trade violations as he pledged he would during his presidency.

Carolyn Leavitt, Trump campaign press secretary, called the new tariffs a “weak and futile attempt” to distract from Biden’s support for electric vehicles in the US, which Trump says will lead to layoffs at auto plants.

The Chinese government quickly reversed the tariffs, saying they would “seriously affect the atmosphere of bilateral cooperation.” The State Department used the word “bullying.”

The tariffs are unlikely to have a widespread inflationary impact in the short term because of how they are structured, and some of them will not take effect until 2026, but there may be price increases for electric vehicle batteries, solar power and some other specific items in the meantime.

Biden administration officials said they believe the tariffs will not escalate tensions with China, but they expect China to explore ways to respond to new taxes on its products. It is uncertain what the long-term impact on prices will be if the tariffs contribute to a broader trade dispute.

The tariffs are scheduled to be phased in over the next three years, taking effect in 2024 to include electric vehicles, solar cells, syringes, needles, steel, aluminum, and more. There are currently very few electric cars from China in the United States, but officials worry that lower-priced models made possible by Chinese government support may soon begin flooding the American market.

Chinese companies can Electric vehicles sell for less than $12,000. China’s solar cell plants, steel and aluminum plants have enough capacity to meet much of global demand, with Chinese officials saying their production keeps prices low and will help in the transition to a green economy.

The Chinese Ministry of Commerce said in a statement that the tariffs are “typical political manipulation,” expressing its “deep dissatisfaction” and pledging “to take firm measures to defend its rights and interests.”

Under the results of a four-year trade review with China, the tax rate on imported Chinese electric vehicles will rise to 102.5% this year, up from overall levels of 27.5%. The review was made 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 set to double to 50% on solar cell imports this year. Customs duties on some Chinese steel and aluminum products are expected to rise 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% this year. But for non-electric 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 because they will apply to imports worth only about $18 billion. A new analysis by Oxford Economics estimates that tariffs would have a barely noticeable impact on inflation by raising inflation by just 0.01%.

Chinese electric car maker BYD has explored the possibility of opening factories in Mexico for the Mexican market, perhaps creating a way to ship goods to the United States. U.S. Trade Representative Katherine Tai said she was talking with industry and workers about the possibility and “stay tuned.”

The auto industry is still trying to assess the impact of the tariffs. But for now, it seems it can only be evaluated on two Chinese-made cars, the Polestar 2 luxury EV and perhaps the Volvo S90 luxury midsize gas-electric hybrid.

“We are still reviewing the tariffs to understand exactly what has been affected and how,” said Russell Datz, a spokesman for Volvo, a Swedish brand affiliated with Chinese group Geely. A message seeking comment was left from Polestar, which is also under Geely.

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

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

China’s economy has slowed due to the collapse of the country’s real estate market and previous coronavirus pandemic lockdowns, prompting Chinese President Xi Jinping to try to stimulate growth by increasing production of electric vehicles and other products, leaving the Chinese market with more than it can absorb.

This strategy exacerbates tensions with the US government, which claims to be intent on boosting its own manufacturing to compete with China, while avoiding a larger conflict.

“China’s factory-led recovery and weak consumption growth, translating into excess capacity and a strong search for foreign markets, combined with the looming US election season, add up to a perfect recipe for escalating US trade divisions with China,” he said. Eswar Prasad, professor of trade policy at Cornell University.

Europeans are also concerned. The European Union launched an investigation last fall into Chinese subsidies and could impose an import tax on Chinese electric vehicles.

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

The Biden administration views China, through its support for manufacturing, as trying to globally control the electric vehicle and clean energy sectors, while the administration says its industrial support is directed toward ensuring domestic supplies to help meet American demand.

“We do not seek global manufacturing dominance in these sectors, but we believe they are strategic industries and for the resilience of our supply chains, we want to ensure we have healthy and vibrant businesses,” the Treasury said. Secretary Janet Yellen said.

The tensions go beyond the trade dispute to deeper questions about who leads the global economy as a seemingly indispensable nation. China’s policies could make the world more dependent on its factories, which could give it greater influence in geopolitics. Meanwhile, the United States says it seeks countries to operate to the same standards so that competition is fair.

China insists that the tariffs violate global trade rules that the United States helped establish through the World Trade Organization. It accuses the United States of continuing to politicize trade issues, and said on Friday that the new tariffs exacerbate problems caused by tariffs previously imposed by the Trump administration on Chinese goods, which Biden maintained.

These issues are at the heart of the presidential election scheduled for November, where bitterly divided voters appear united on the idea of ​​getting tough on China. Biden and Trump have overlapping but different strategies.

Biden sees targeted tariffs as necessary to defend key industries and workers, while Trump has threatened to impose broad 10% tariffs on all imports from competitors and allies alike.

Biden has staked his presidential legacy on the United States getting ahead of China through its government investments in factories to manufacture electric cars, computer chips and other advanced technologies.

Trump is telling supporters that America is falling further behind China by not betting on oil to keep the economy running, despite the risks of climate change. The former president may believe that tariffs can change Chinese behavior, but he believes that the United States will depend on China for electric car components 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 Auto Writer Tom Krischer contributed to this report from Detroit.