Joe Biden has unveiled US tariffs on an array of Chinese imports, unleashing a potential trade war with Beijing, as the president seeks to woo American voters less than six months out from what’s set to be a close election rematch with Donald Trump.
The new measures affect $18bn in imports, including steel, aluminium, computer chips, solar cells, cranes and medical products – however it is the 100% tariff on Chinese-made electric vehicles (EVs) that has dominated headlines.
Why have the tariffs been imposed?
Biden’s national economic adviser, Lael Brainard, perhaps best summed up the purpose of the huge new tariffs when she said that they would ensure that government investments in jobs are not undercut by “underpriced exports from China”.
The US is concerned by the prospect of cheap, subsidised Chinese goods flooding US markets and undercutting the billions of dollars of government investment that have been poured into key manufacturing sectors via Biden’s Chips and Inflation Reduction acts.
In the electric vehicle market, for instance, there are reports that China is producing 30m EVs a year, but can only sell 22m to 23m domestically.
The Alliance for American Manufacturing has said the dumping of Chinese EVs to the US market would be an “extinction-level event” for its carmakers.
“We’re not going to let China flood our market, making it impossible for American auto manufacturers to compete fairly,” Biden said in his speech announcing the tariffs.
What will the tariffs mean for the sale of Chinese electric vehicles in the US?
The huge new tariffs on Chinese-made EVs are unlikely to have any immediate impact on US consumers; that’s because China currently sells almost zero EVs in the US.
However, experts say that the new tariffs are likely a preventive measure to stop China flooding the US market with its surplus product – and by that measure they’re likely to be effective.
Chinese EVs could still enter the US through other avenues though, as tariffs are applied based on where the final assembly for the vehicle takes place.
Some experts are warning that there could be an accelerated shift of Chinese production to Mexico, as carmakers seek to bypass the tariffs, with some signs that this is already occurring. The US is mindful of this risk, according to trade representative Katherine Tai, and there will probably be future efforts to head off tariff evasion problems.
This week China’s BYD, the world’s largest EV maker, unveiled the Shark, a hybrid-electric pickup truck that will be exclusively sold in Mexico. It is the first time it has launched a new product outside its home country.
BYD’s chief of Americas, Stella Li, said it chose Mexico because of the rapid growth in demand for pickup trucks in the country. Li has previously dismissed speculation about any US ambitions, saying in February: “We’re not planning to come to the US.”
“It’s an interesting market, but it is very complicated,” Li added.
How will China respond?
China’s commerce ministry said it would retaliate and take measures to defend its interests.
An editorial in Chinese state media said US consumers would bear the consequences of the moves, adding that the Biden government was “writing a new chapter in undermining fair trade and environmental protection”.
Late on Tuesday, Biden looked ahead to a potential response from China, saying Beijing will probably try to raise tariffs as well, possibly on unrelated products.
Biden has said in the past that he is not seeking to launch a trade war, nor does he want the new economic measures to undercut efforts in recent months to ease tensions with Chinese president Xi Jinping.
What do the new trade measures mean for the US election?
Despite the high-profile economic legislation pushed through by his administration, polling shows Biden has struggled to convince voters of the efficacy of these policies.
Against a background of low unemployment and economic growth above that of most other western nations, the White House will be hoping that the new tariffs don’t worsen inflation levels that have already angered US voters.
“Some US industries and manufacturers will experience cost increases and supply chain disruptions as a result of these tariffs but the Biden administration is clearly taking the view that these will be modest and can be managed,” said Cornell University’s policy experts, Eswar Prasad.
Biden has followed the hard line on trade that Trump took as president, but says his measures are more targeted and less likely to harm US consumers than that of his Republican rival.
Trump, who has floated the idea of tariffs of 60% or higher on all Chinese imports, said on Tuesday Biden’s new tariffs should be applied to other types of vehicles and products – and has threatened to go even harder on Chinese-made EVs by applying tariffs of 200% should he be elected in November.
With Reuters
• This article was amended on 17 May 2024 to include BYD’s reason for launching its Shark truck in Mexico, and its view on the US EV market.
