Biden Hiking Tariffs on China EVs,Steel05/14 06:22

   The Biden administration announced plans to slap new tariffs on Chinese 
electric vehicles, advanced batteries, solar cells, steel, aluminum and medical 
equipment -- an election-year move that's likely to increase friction between 
the world's two largest economies.

   WASHINGTON (AP) -- The Biden administration announced plans to slap new 
tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, 
aluminum and medical equipment -- an election-year move that's likely to 
increase friction between the world's two largest economies.

   The tariffs come in the middle of a heated campaign between President Joe 
Biden and his Republican predecessor, Donald Trump, in which both candidates 
are vying to show who's tougher on China.

   The tariffs are unlikely to have much of an inflationary impact because of 
how they're structured. Administration officials said they think the tariffs 
won't escalate tensions with China, yet they expect that China will explore 
ways to respond to the new taxes on their products. It's uncertain what the 
long-term impact on prices could be if the tariffs contribute to a wider trade 
dispute.

   The tariffs are to be phased in over the next three years, with those that 
take effect in 2024 covering EVs, solar cells, syringes, needles, steel and 
aluminum and more. There are currently very few EVs from China in the U.S., but 
officials worry that low-priced models made possible by Chinese government 
subsidies could soon start flooding the U.S. market.

   Chinese firms can sell EVs for as little as $12,000. Their solar cell plants 
and steel and aluminum mills have enough capacity to meet much of the world's 
demand, with Chinese officials arguing that their production keeps prices low 
and would aid a transition to the green economy.

   Lael Brainard, director of the White House National Economic Council, said 
the tariffs will raise the cost of select Chinese goods and help thwart 
Beijing's efforts to dominate the market for emerging technologies in ways that 
pose risks to U.S. national security and economic stability.

   "China is simply too big to play by its own rules," Brainard told reporters 
on a Monday call previewing the announcement.

   Administration officials have stressed that the decision on tariffs was made 
independently of November's presidential election. But Brainard noted in her 
remarks that the tariffs would help workers in Pennsylvania and Michigan, two 
of the battleground states that will decide who wins the election.

   Under the findings of a four-year review on trade with China, the tax rate 
on imported Chinese EVs is to rise to 102.5% this year, up from total levels of 
27.5%. The review was undertaken 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 to double to 50% on solar cell 
imports this year. Tariffs on certain Chinese steel and aluminum products will 
climb 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% in 2024. 
But for non-EV 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 since they will 
apply to only about $18 billion in imports. A new analysis by Oxford Economics 
estimates that the tariffs -- which would be implemented over time -- will have 
a barely noticeable impact on inflation by pushing up inflation by just 0.01%.

   Still, Chinese officials voiced their frustration with the move.

   Chinese embassy spokesperson Liu Pengyu rejected U.S. claims that Beijing 
has encouraged excess factory capacity in order to dominate global trade in 
these goods. He also said that more expensive EVs and solar panels will make it 
more difficult to transition away from fossil fuels to renewable energy.

   "Despite its professed willingness to strengthen cooperation with China on 
climate change, the U.S. has been hyping up the so-called 'overcapacity' in 
China's new energy sector and vowing to impose additional tariff hikes on 
Chinese electrical vehicles and solar products," Liu said. "This is 
self-defeating."

   The Chinese economy has been slowed by the collapse of the country's real 
estate market and past pandemic lockdowns, prompting Chinese President Xi 
Jinping to try to jumpstart growth by ramping up production of EVs and other 
products, making more than the Chinese market can absorb.

   This strategy further exacerbates tensions with a U.S. government that 
claims it's determined to strengthen its own manufacturing to compete with 
China, yet avoid a larger conflict.

   "China's factory-led recovery and weak consumption growth, which are 
translating into excess capacity and an aggressive search for foreign markets, 
in tandem with the looming U.S. election season add up to a perfect recipe for 
escalating U.S. trade fractions with China,'' said Eswar Prasad, professor of 
trade policy at Cornell University.

   China's production of EVs and other green products are "coming to be seen by 
the U.S. as a zero-sum game in which China plays the spoiler that could hamper 
a U.S. manufacturing revival,'' Prasad said.

   The Europeans are worried, too. The EU launched an investigation last fall 
into Chinese subsidies and could impose an import tax on Chinese EVs.

   After Xi's visit to France last week, European Commission President Ursula 
von der Leyen warned that government-subsidized Chinese EVs and steel "are 
flooding the European market. ... The world cannot absorb China's surplus 
production. Therefore, I have encouraged the Chinese government to address 
these structural overcapacities.''

   The Biden administration views China with subsidies of its own manufacturing 
as trying to globally control the EV and clean energy sectors, whereas it says 
its own industrial support is geared toward ensuring domestic supplies to help 
meet U.S. demand.

   "We do not seek to have global domination of manufacturing in these sectors, 
but we believe because these are strategic industries and for the sake of 
resilience of our supply chains, that we want to make sure that we have healthy 
and active firms," Treasury Secretary Janet Yellen told reporters Monday.

   The tensions go far beyond a trade dispute to deeper questions about who 
leads the world economy as a seemingly indispensable nation. China's policies 
could make the world more dependent on its factories, possibly giving it 
greater leverage in geopolitics. At the same time, the United States says it's 
seeking for countries to operate by the same standards so that competition can 
be fair.

   For it's part, China maintains that the tariffs are in violation of the 
global trade rules that the United States originally helped establish through 
the World Trade Organization.

   Chinese Foreign Ministry spokesperson Lin Jian said Friday that the new 
tariffs compounded the problems caused by tariffs that the Trump administration 
had previously put on Chinese goods, which Biden has kept.

   "Instead of ending those wrong practices, the U.S. continues to politicize 
trade issues, abuse the so-called review process of Section 301 tariffs and 
plan tariff hikes," he said. "This will just double the U.S.'s fault."

   Those questions are at the heart of November's presidential election, with a 
bitterly divided electorate seemingly united by the idea of getting tough with 
China. Biden and Trump have overlapping but different strategies.

   Biden sees targeted tariffs as needed to defend key industries and workers, 
while Trump has threatened broad 10% tariffs against all imports from rivals 
and allies alike.

   Biden has staked his presidential legacy on the U.S. pulling ahead of China 
with its own government investments in factories to make EVs, computer chips 
and other advanced technologies.

   "So far, we've created $866 billion in private-sector investment nationwide 
-- almost a trillion dollars -- historic amounts in such a short time," Biden 
said last week in Wisconsin. " And that's literally creating hundreds of 
thousands of jobs."

   Trump tells his supporters that America is falling further behind China by 
not betting on oil to keep powering the economy, despite its climate change 
risks. The former president may believe that tariffs can change Chinese 
behavior, but he believes that the U.S. will be reliant on China for EV 
components and solar cells.

   "Joe Biden's economic plan is to make China rich and America poor," he said 
at a rally earlier this month in Wisconsin.