The U.S. administration is to slap hefty tariffs on electric cars and other goods from China. It is risky business.
A deep rift has opened between the two superpowers U.S. and China in recent years, politically and economically. It is expected to grow even deeper soon.
On Tuesday, U.S. President Joe Biden announced new tariffs on numerous products from China. Electric cars made in China will be subject to a tariff of 102.5% starting in December — many times greater than the previous rate.
The U.S. administration will impose a duty of 25% on imported lithium-ion batteries and battery parts. It had previously been 7.5%. In addition, new tariffs or tariff increases are being imposed on steel, aluminum, memory chips, solar cells, medical technology, dockside cranes and select minerals. Biden’s new rates, which will be put into place between 2024 and 2026, will have a total annual impact of $18 billion on Chinese imports.
Most Comprehensive Round of Tariff Increases
It is the most comprehensive round of tariff increases on goods from China since Biden’s predecessor Donald Trump imposed tariffs on Chinese goods in 2018, soon after he had taken office, and thus laid the cornerstone of the Chinese-American trade war. On Tuesday, Biden did not roll back a single tariff that Trump had implemented.
The trade war between the two superpowers could now reach a new level of escalation. Of course, Biden is thinking of American voters as he is raising tariffs. A hard stance on the Middle Kingdom is appealing to many average Americans. Trump has proven that.
But the Chinese government is unlikely to let Biden’s announcement go unanswered. The tariff increases are too comprehensive for that. If those in power in Beijing were to do nothing now, it would be equivalent to a loss of face. In response to the tariffs imposed by Trump, the Chinese administration responded by imposing its own tariffs on soybeans from the U.S., an important American export.
China’s New Law on Punitive Tariffs
The Chinese government put in place the legal foundation for a possible reaction to Biden’s tariffs in April. The law passed by the Standing Committee of the National People’s Congress compiled the numerous and confusing individual regulations into a single policy. This law allows the Chinese government to institute punitive tariffs against any country going forward. It will be applied starting Dec. 1.
Those who bear the consequences of the escalating trade wars will, in the end, be American consumers. Previously, they benefited from cheap consumer goods from China. The $100 color TV was only available at Walmart because a global division of labor had been established, whereby goods were produced in places with the most favorable economic conditions.
China Feels Itself under Increasing Pressure
However, because the European Commission is also reviewing a series of products from China, the world may be facing a global trade war in which China feels itself under increasing pressure. Corresponding reactions, including political ones, are to be expected.
The impression has been long held in the Chinese government — not entirely wrongly — that the West wants to put pressure on China using economic and other measures because of geopolitical concerns.
For that reason, the regime in Beijing does not care if the next U.S. president is named Biden or Trump; the pressure will continue. So, China will once again increase its efforts to become more independent from the West. The world is dividing itself, and consumers are the ones suffering for it.
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