Biden hikes US tariffs on Chinese imports of EVs, chips, and medical products

Biden increases tariffs on Chinese imports: US President Joe Biden, on Tuesday, announced major tariff increases on various Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products. The move risks igniting an election-year confrontation with Beijing while aiming to appeal to American voters dissatisfied with his economic policies.

During a White House Rose Garden speech before unions and companies, Biden declared, "American workers can out-work and out-compete anyone as long as the competition is fair, but for too long it hasn't been fair. We're not going to let China flood our market." In response, China immediately promised retaliation, with its commerce ministry stating it opposed the US tariff hikes and would take measures to defend its interests.

Biden plans to maintain the tariffs imposed by his predecessor, Donald Trump, while increasing others. These include a fourfold increase in EV duties to over 100 per cent and a doubling of semiconductor tariffs to 50 per cent. The new measures target $18 billion in imported Chinese goods, including steel, aluminium, semiconductors, EVs, critical minerals, solar cells, and cranes. Although the EV tariff is notable, it may have limited practical impact as the US imports few Chinese EVs.

Trump has been feeding China for a long time: Joe Biden

The US imported $427 billion in goods from China in 2023 and exported $148 billion, according to the US Census Bureau. This trade gap has been a persistent and sensitive issue in Washington. US Trade Representative Katherine Tai justified the revised tariffs by accusing China of stealing US intellectual property. However, Tai recommended tariff exclusions for hundreds of industrial machinery import categories from China, including 19 for solar product manufacturing equipment.

Despite Biden's alignment with Trump's tough trade measures, he criticised Trump's 2020 trade deal with China for failing to boost American exports or jobs. Biden also argued that Trump's proposal to raise import tariffs by 10 per cent across the board would increase prices. 

Trump, who suggested tariffs of 60 per cent or higher on all Chinese goods, responded that Biden's new tariffs should extend to other vehicles and products "because China's eating our lunch right now." Biden retorted, "He's been feeding them a long time."

Domestic investment in key industries 

Administration officials believe the measures, coupled with domestic investment in key industries, will not exacerbate inflation, which has already frustrated US voters. Despite low unemployment and robust economic growth, Biden has struggled to convince voters of his economic policies' effectiveness. A Reuters/Ipsos poll last month showed Trump leading Biden by 7 percentage points on economic issues.

Analysts warn that the trade dispute could increase EV costs, potentially undermining Biden's climate goals and job creation ambitions. Although Biden aims to win the competition with China without initiating a trade war, he has recently sought to ease tensions in talks with Chinese President Xi Jinping.

Both Biden and Trump have moved away from the free-trade consensus that prevailed in Washington, especially since China's entry into the World Trade Organisation in 2001. Trump's broader tariff impositions during his presidency sparked a trade war with China.

Under the updated tariffs, Biden will raise EV tariffs this year from 25 per cent to 100 per cent, bringing total duties to 102.5 per cent. Tariffs on lithium-ion EV batteries and parts will increase from 7.5 per cent to 25 per cent, and photovoltaic cell tariffs will rise from 25 per cent to 50 per cent. Tariffs on some critical minerals will increase from zero per cent to 25 per cent.

Tariffs on medial products 

Tariffs on ship-to-shore cranes will rise from zero per cent to 25 per cent, while those on syringes and needles will increase from 0 per cent to 50 per cent. Some personal protective equipment (PPE) used in medical facilities will see tariffs rise from as low as 0 per cent to 25 per cent, addressing shortages that hampered the US COVID-19 response. 

Additional tariffs on semiconductors, lithium-ion batteries not used in EVs, graphite, permanent magnets, and rubber medical and surgical gloves will follow in 2025 and 2026.

Previously announced tariffs on certain steel and aluminium products will take effect this year, according to the White House. Some lawmakers have called for substantial hikes on Chinese vehicle tariffs or an outright ban over data privacy concerns, though few Chinese-made light-duty vehicles are currently imported.

The United Auto Workers, a politically influential union that endorsed Biden, supported the tariff measures, stating they would ensure a "just transition" to electric vehicles.

(With Reuters inputs)