Reviving domestic manufacturing has been a key focus for President Joe Biden since he took office, and on Tuesday he announced a new plan to do just that. In a bid to level the playing field for American automakers and workers, Biden has imposed a drastic tariff increase on Chinese electric vehicles and new levies on computer chips, solar cells, and lithium-ion batteries.
“We’re not going to let China flood our market, making it impossible for American auto manufacturers to compete fairly,” Biden declared. “We will follow international trade laws to ensure a fair and balanced market.”
The new tariffs will quadruple the rate on Chinese electric vehicles to 100%, double the rate on solar cells and semiconductors to 50%, and increase the rate on certain steel and aluminum imports to 25%. These tariffs will cover $18 billion worth of Chinese products, with the tariffs on electric vehicles, steel and aluminum, and solar cells taking effect this year and next year for chips.
United States Trade Representative Katherine Tai stated that the administration has provided pre-notification to Beijing about the new tariffs. “We have made it clear that this is not about escalation,” she said. “This is about the consequences of decades of economic policy and the need for the United States to defend our rights.”
The move is aimed at offsetting China’s unfair practices and subsidies, which have allowed them to control the majority of global production for critical inputs. This has created unacceptable risks to America’s supply chains and economic security, according to the White House.
In response to the announcement, China expressed their disapproval, stating that the move “will seriously affect the atmosphere of bilateral cooperation.”
“The U.S. is essentially using the ‘overcapacity’ narrative to kneecap other countries’ strong industries and practice protectionism, trampling on market principles and international trade rules in the name of ‘fair competition.’ This is nothing but bullying,” said Foreign Ministry spokesperson Wang Wenbin during a press conference in Beijing.
This move follows a three-year review of the policies of Biden’s predecessor, Donald Trump, who is the Republican presumptive presidential nominee. Both candidates have been competing to show who is tougher on China ahead of the November election.
“My predecessor promised to increase American exports and boost manufacturing, but he did neither. He failed,” Biden stated. Trump, on the other hand, believes that the new tariffs will not be enough to compete against Beijing. “China’s eating our lunch right now,” he said, adding that the tariffs should also be applied to other products.
However, the Biden administration maintains that these tariffs are not meant to be a chaotic or emotional response, but rather a strategic one. “They are designed to be effective and not emotional,” stated Tai when asked about criticism from the Trump campaign.
The new tariffs are also part of a larger policy initiative to ensure that Chinese companies cannot benefit from U.S. government subsidies. This is in line with Biden’s climate and energy legislation, as well as legislation to boost domestic semiconductor research and manufacturing.
The move is likely to increase friction between the two largest economies in the world, but it is not expected to change Beijing’s behavior. “China opposes unilateral tariffs that violate WTO rules and will take all necessary measures to defend our legitimate rights and interests,” stated Foreign Ministry spokesperson Wang.
Biden reiterated his desire for “fair competition with China, not conflict,” stating that the U.S. is in a stronger position to win because of the investments his administration has made to revive domestic manufacturing. This sentiment is supported by a 2022 report from the Center for Strategic and International Studies, which states that China spends more on industrial policy than it does on defense spending.
However, there is concern that China may try to circumvent these tariffs through Mexico, as Chinese automaker BYD has unveiled a new midsize hybrid-electric pickup truck in Mexico. This could potentially qualify for tariff-free entry into the U.S. market under the 2020 United States-Mexico-Canada Agreement (USMCA).
The administration has stated that they are investigating this issue, calling it a “pattern” of “serious concern.” They are looking into ways to block China’s circumvention efforts, such as amending the USMCA or implementing a separate investment screening mechanism.
In the end, the goal of these tariffs is not to engage in a trade war with China, but rather to level the playing field for American businesses and workers. As Biden stated, “We want fair competition with China,
