In a move aimed at safeguarding American industry, the Biden administration has moved to announce plans to significantly raise tariffs on Chinese electric vehicle (EV) imports from 25 percent to a whopping 100 percent, the FT has reported, citing sources.
This decision, set to be officially announced on Tuesday, underscores the administration’s intensified efforts ahead of the upcoming US election to shield domestic industries from perceived threats posed by foreign competition.
Sources familiar with the situation revealed that the sharp escalation in tariffs is driven by mounting concerns that China could inundate the US market with cheap EVs, potentially jeopardizing the American car industry.
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President Joe Biden, keen on appeasing union members in key swing states, has made protecting jobs a focal point of his agenda, prompting a series of actions aimed at bolstering domestic industries.
The Biden administration has been engaged in a three-year-long review of tariffs imposed by former President Donald Trump on Chinese imports as part of the broader trade war initiated in 2018. The decision to ramp up tariffs on EVs coincides with the conclusion of this review, overseen by the US Trade Representative (USTR).
China’s industrial prowess comes with cheaper manufacturing that has made its products more affordable, threatening goods and services in the US as the Asian giant’s export grows.
Against this backdrop that has seen most Americans choosing Chinese-made goods over their domestic products, Washington is moving to use tariffs and import restrictions to protect domestic manufacturers.
During a recent visit to Pennsylvania—a crucial swing state in the upcoming election—President Biden expressed his desire to triple tariffs on Chinese steel and aluminum, signaling his administration’s intent to take a tough stance on trade issues. Moreover, the USTR has initiated an investigation into unfair practices within the Chinese shipbuilding industry following a petition from the United Steelworkers union.
The decision to increase tariffs on EVs reflects growing concerns within the Biden administration regarding China’s dominance in the green industrial sector, particularly in areas such as solar panel production. Wendy Cutler, a former trade official and vice-president of the Asia Society Policy Institute, highlighted the administration’s proactive approach to prevent a repeat of the decimation witnessed by the US solar industry due to unfairly traded Chinese imports.
“The Biden administration is trying to get ahead of the curve and ensure that the US car industry does not suffer the same fate as the US solar industry, which was virtually decimated by unfairly traded Chinese imports,” Cutler was quoted by the FT as saying.
While Chinese automakers had previously absorbed the costs of existing tariffs to gain a competitive edge over their US counterparts, the proposed tariff hike presents a significant obstacle to this strategy. Cutler noted that quadrupling the tariff rate would effectively shield US auto manufacturers from unfair competition posed by Chinese vehicles, safeguarding American jobs and industries.
“A quadrupling of this tariff rate, however, would more effectively shield US auto manufacturers from unfairly traded Chinese vehicles before they can gain a foothold in the US market,” Cutler said.
In addition to tariff measures, the Biden administration has allocated substantial subsidies for EV and battery production in the US, signaling a broader strategy to foster investment in domestic clean tech sectors. This initiative is part of a larger effort to reindustrialize regions affected by economic decline, reduce carbon emissions, and reduce dependence on Chinese supply chains.
Furthermore, President Biden recently ordered an investigation into whether Chinese “connected vehicles,” including EVs, pose a national security risk to the US. These tariffs represent the latest in a series of actions demonstrating the Biden administration’s resolve to impose costs on China while simultaneously engaging in efforts to stabilize bilateral relations, particularly in areas such as climate cooperation.
China, in recent times, has learned to reciprocate tariff imposition, restrictions, and other bilateral moves made by Washington. It is not clear how Beijing will respond to this latest US’ move.