US poised to crank up tariffs on EVs and strategic sectors
US President Joe Biden’s administration will announce as soon as this week plans to sharply raise import tariffs on Chinese electric vehicles and a range of other goods related to the new energy economy, according to American media reports.
Following its review of Section 301 tariffs originally put in place by the administration of former president Donald Trump in 2018, the US Trade Representative office (USTR) was expected to raise the tariff rate on EVs from China to roughly 100 per cent from a rate of 27.5 per cent, The Wall Street Journal reported.
Citing people familiar with the situation, the Journal reported that critical minerals from China would also be targeted, without specifying the new rate.
Bloomberg also reported the USTR would also raise tariffs on batteries and solar cells, while other existing China levies from the Trump years, on some US$300 billion worth of goods, were expected to remain intact. An announcement would likely be made on Thursday, it said.
Existing tariffs on Chinese EVs include a 2.5 per cent levy on all autos imported to the US.
While the Biden administration has not yet confirmed the plan, some of the president’s top economic officials have signalled their concerns about manufacturing overcapacity in China, and the possibility that the overflow could flood American markets.
During her visit to China last month, US Treasury Secretary Janet Yellen called on her counterparts to address the country’s industrial overcapacity issues, particularly in new-energy vehicles and solar modules.
On Wednesday, in testimony to the House Appropriations Committee, Commerce Secretary Gina Raimondo voiced concerns that, in response to slowing economic growth, China could boost its percentage of global manufacturing output to 60 per cent from “about 30 per cent” now. She signalled a response was on the horizon.
“It’s … no secret [the Chinese government’s] strategy is to crank up production,” she told the lawmakers.
“I worry greatly about the possibility that they … dump their cheap products, whether it’s electric vehicles, legacy semiconductor chips, critical minerals – the list is long.
“We’re working very closely with [the US Trade Representative office] to try to identify where are we most vulnerable and what actions could we take,” she added.
Once announced, the tariff increase would follow similar efforts Biden has made amid a rising chorus of concerns from policymakers, legislators and trade unions across the US about how much damage Chinese imports could potentially cause.
Last month, Biden called on US Trade Representative Katherine Tai to triple the existing tariff rate on Chinese steel and aluminium, just as Tai’s office announced the launch of a separate Section 301 investigation into China’s maritime, logistics and shipbuilding sectors.
While a substantial tariff rise on Chinese EVs appeared significant, the move did not come as a surprise given the Biden administration’s recent messaging, and would not change much since imports of the products from China to the US were largely non-existent, said Mary Lovely, a senior fellow at the Peterson Institute for International Economics.
Lovely noted that EV battery and critical mineral imports from China already faced non-tariff restrictions. Under the Inflation Reduction Act signed by Biden, to get the maximum US$7,500 tax credit for new electric vehicles and US$4,000 for used ones, at least 40 per cent of the minerals used in EV batteries – including cobalt, lithium, graphite and nickel – must be extracted and processed in North America or at least not from a “foreign entity of concern”.
That would “Balkanise” supply chains and push Chinese manufacturers to set up factories in countries that were not subject to tariffs and other restrictions, Lovely said. “It’s like putting more protection on protection, and that’s why I think some of it is going to be called a bit performative.”