WASHINGTON – President Joe Biden imposed sweeping tariff hikes Tuesday on electric vehicles, semiconductors and other goods imported from China, countering what the White House calls unfair trade practices by China that it says have put U.S. industries at a disadvantage.
The Biden administration has accused China of flooding the global markets with goods at artificially low prices, giving Chinese competitors an unfair advantage against their U.S. counterparts.
“Bottom line: I want fair competition with China, not conflict,” Biden said at a White House Rose Garden ceremony before signing a memorandum ordering the tariff hikes.
White House officials say the tariff hikes are designed to create a “level playing field” for U.S. manufacturing in clean energy and microchips − areas the Biden administration has targeted with major government investments to try to catch up with China.
Other goods from China slapped with higher tariffs include solar cells, batteries, battery materials, cranes used at ports, and certain medical supplies, as well as steel and aluminum imported from China.
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More:Biden sets huge new tariffs on electric vehicles, chips and other goods from China
Here’s what to know about the tariff increases:
What is a tariff?
A tariff is a tax imposed by one country on goods and services imported from another country, according to Investopedia.
A tariff can have several purposes: to raise revenue in the country that imposes the tariff, to protect domestic industries against competition from abroad, or to leverage political influence in the country that pays the tariff, among others.
Bottom line: A tariff generally makes an imported product less appealing to domestic consumers.
Why is Biden doing this now?
The White House says the tariff increases are designed to protect American industries the administration has targeted with major investments to try to catch up with China. These sectors include manufacturing in clean energy, electric vehicles and microchips.
Biden has staked his economic agenda on reigniting a U.S. manufacturing boom centered on clean energy, but the White House has accused China of flooding the markets with cheaper products that put U.S. industries at a disadvantage.
How large are the tariff hikes?
Biden has levied substantial tariff hikes.
The tariff rate of electric vehicles imported from China will increase from 25% to 100% beginning this year, while tariffs on semiconductors from China will double from 25% to 50% by 2025.
Among other changes, the tariff rate on lithium-ion batteries from China used in electric vehicles will triple from 7.5% to 25%. The tariff on solar cells imported from China will double from 25% to 50%. And steel and aluminum products will triple this year to 25%.
How many electric vehicles does the U.S. import from China?
China is not a major player in the U.S. market for electric vehicles, at least not yet, according to an analysis by the Atlantic Council think tank. China shipped $368 million in electric vehicles to the U.S. in 2023. By contrast, the European Union exported nearly $7.4 billion in EVs to the U.S. last year.
EV imports from China are low largely because the U.S. already charged a relatively steep tariff on Chinese imports, 25%.
Biden accuses China of unfairly flooding the market. What does that mean?
White House officials say China wields unfair trade practices to deluge global markets with exports at artificially low prices.
What are the unfair practices? China subsidizes manufacturers with cheap land and easy credit, the Biden administration says, and affords few rights to workers, who often earn low wages and work long hours. In the automotive industry, components such as steel and electronics are relatively cheap in China, giving Chinese manufacturers another advantage.
Chinese factories are producing more products than its citizens can buy in a slowing economy. That surplus gives China another incentive to export underpriced items.
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What will it mean for consumers?
Analysts and automakers warn that a trade battle with China could raise costs for EVs, ultimately hurting consumers and impeding the Biden administration’s climate goals.
Higher tariffs on electric vehicles, solar cells, semiconductors and other items will potentially make those products more costly for American consumers.
To many economists, tariffs amount to an extra tax on consumers because they raise prices. Biden officials counter that they do not expect the new tariffs to significantly raise prices, because they affect a narrow range of items.
Will it worsen inflation?
Biden officials say the new tariffs are “carefully targeted” and unlikely to raise inflation, which has vexed the nation over the past few years.
An analysis by the Economic Policy Institute found no link between Trump-era tariffs, imposed during his presidency, and the subsequent run-up of inflation in 2021 and 2022.
However, economists and politicians have long recognized a connection between tariffs and higher prices. Tariffs effectively add an extra tax on what consumers already pay for imported goods.
Is Biden playing election politics?
White House officials insist the tariff hikes were not done for political reasons, but it’s impossible to ignore that the 2024 election is now six months away.
Higher tariffs play into Biden’s efforts to court the support of working-class voters in Midwest battleground states including Michigan, the center of the U.S. auto industry.
What does Donald Trump say about it?
Biden is borrowing the trade playbook of former President Donald Trump, the Republican presumptive nominee, who routinely raised tariffs on Chinese goods during his four years in office.
“Where have you been for the last three and a half years? They should have done it a long time ago,” Trump said Tuesday of Biden’s tariffs.
Yet Biden’s moves are significantly more limited in scope than Trump’s campaign proposals. While the Biden White House opted for targeted tariffs in certain industries, Trump has proposed a 60% or more tariff on all Chinese imports as well as imports from other countries. Biden has warned Trump’s plan would result in higher consumer prices for Americans.
“They’ve also got to do it on other vehicles, and they have to do it on a lot of other products,” Trump said. “Because China’s eating our lunch right now.”
Will this spark a trade war with China?
Potentially. Last week, as the likelihood of the tariffs was reported by several media outlets, a spokesman for the Chinese Foreign Ministry criticized the move. “China will take all necessary measures to defend its rights and interests,” the spokesman said.
Stellantis plans to sell Chinese EVs in other parts of the world
Amsterdam-based Stellantis and Chinese EV startup Leapmotor have teamed up to sell Chinese-made electric vehicles in nine European countries and other parts of the world, starting this September.
The Tuesday announcement did not include any plans for bringing Chinese EVs into the U.S. market.
“There is no real Chinese competition right now in the U.S. market,” said Stellantis CEO Carlos Tavares, noting that Europe is a different case. “It looks like the U.S. is going for a very strong protectionism whereas for the time being Europe is keeping the market reasonably open with a lower tariff of 10%.”
Whether Stellantis, which owns the Jeep, Ram, Chrysler, Dodge and Fiat brands, would consider bringing Leapmotor EVs to the United States in the future would depend on tariffs, Tavares said, also weighing in on the possibility of entry through Mexico.
“I understand that, of course, if the Chinese would like to come to the U.S. they would eventually use Mexico as a sourcing base. I don’t know if this is something that would be acceptable for the U.S. administration,” Tavares said.