WASHINGTON (Reuters) - U.S. President Joe Biden has announced a series of substantial tariff increases on various Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products. This move risks sparking a confrontation with Beijing in an election year, as Biden aims to appeal to voters critical of his economic policies. China swiftly promised to retaliate, with its commerce ministry expressing opposition to the tariff hikes and pledging to defend its interests, while urging the U.S. to cancel the measures.
Biden's plan retains tariffs established by his predecessor, Donald Trump, while also escalating others. This includes quadrupling tariffs on EVs to over 100% and doubling semiconductor tariffs to 50%, according to the White House. The decision stems from concerns over what the White House deems as unfair Chinese practices flooding global markets with inexpensive goods, posing "unacceptable risks" to U.S. economic security. The new tariffs will impact $18 billion worth of imported Chinese goods, spanning steel, aluminum, semiconductors, electric vehicles, critical minerals, solar cells, and cranes, the White House reported.
The U.S. Census Bureau data from 2023 indicates a significant trade gap between the two countries, with the U.S. importing $427 billion in goods from China while exporting $148 billion. This longstanding gap has become a sensitive issue in Washington.
Lael Brainard, a Biden economic adviser, accused China of pursuing growth at the expense of others by investing heavily, maintaining excessive capacity, and flooding global markets with underpriced exports due to unfair practices.
U.S. Trade Representative Katherine Tai justified the revised tariffs by accusing China of intellectual property theft. However, she recommended excluding hundreds of industrial machinery import categories from China, including 19 related to solar product manufacturing equipment.
Financial markets responded with muted reactions, with U.S. stock index futures largely unchanged. Chinese EV makers Li Auto and Xpeng saw their shares dip around 3% in U.S. premarket trading. Treasury yields remained steady, indicating limited concerns about the tariffs exacerbating U.S. consumer price pressures.
Despite aligning with Trump's stance on trade measures, Biden criticized his predecessor's 2020 trade deal with China for failing to boost American exports or manufacturing jobs. The White House also opposed Trump's proposed 10% across-the-board tariffs on goods from all origins, arguing that it would upset U.S. allies and raise prices. Trump had suggested tariffs of 60% or higher on all Chinese goods.
Administration officials defended their targeted measures, stating they were combined with domestic investment, coordinated with allies, and unlikely to worsen inflation, a key concern for U.S. voters and Biden's re-election bid. Despite a strong economic backdrop, including low unemployment and above-average economic growth, Biden has struggled to convince voters of the effectiveness of his economic policies, as shown in a recent Reuters/Ipsos poll where Trump held a 7-point lead over Biden on economic issues.
Analysts warn that trade tensions could increase costs for EVs, potentially hindering Biden's climate and job creation goals. Biden has expressed a desire to compete with China in this era without instigating a full-blown trade war, engaging in talks with Chinese President Xi Jinping to ease tensions.
Both 2024 U.S. presidential candidates have departed from the previous free-trade consensus in Washington, especially after Trump's tenure, marked by a tariff war with China. As part of the recent tariff update, Biden plans to increase tariffs under Section 301 of the Trade Act of 1974. This includes raising tariffs to 100% on EVs, 25% to 50% on photovoltaic cells for solar panels, and implementing tariffs on other products like lithium-ion EV batteries and parts.
Further tariff increases are expected in 2025 and 2026 on items such as semiconductors, certain lithium-ion batteries not used in EVs, graphite, permanent magnets, and rubber medical and surgical gloves. Biden's previously announced tariff hikes on some steel and aluminum products will also take effect this year.
While some lawmakers have called for more significant tariff hikes or a complete ban on Chinese vehicle imports over data privacy concerns, there are currently few Chinese-made light-duty vehicles being imported. The United Auto Workers union, which endorsed Biden, praised the tariff moves, stating they would ensure a fair transition to electric vehicles.