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President Biden Unveils Historic Wave of Tariffs on “Strategic” Chinese Imports
The White House on Tuesday formally unveiled a wide range of new tariffs on Chinese goods that will increase tariffs on $18 billion in Chinese imports.
The long-awaited announcement will affect a range of sectors, with steel, semiconductors and medical products feeling new obligations later this year.
Electric vehicles are the main focus of the announcement, with tariffs expected to quadruple in 2024, from 25% to 100%.
The actions also do not include, inter alia, the reduction of more than $300 billion in Trump-era rights over China. Biden largely renewed former President Donald Trump’s policy – and added new tariffs on certain sectors.
“The president is taking a strategic and tough approach, combining domestic investment with law enforcement against China in key sectors,” said national economic adviser Lael Brainard before the news.
Biden’s top economic adviser also sharply contrasted Trump’s trade record in her comments to journalists. She said Trump’s actions in office “didn’t work” and that his current campaign promises for 2024 would increase inflation.
President Joe Biden arrives in Washington, D.C., on Monday after traveling to the West Coast and spending Sunday in Delaware. (MANDEL NGAN/AFP via Getty Images) (MANDEL NGAN via Getty Images)
Most of the new tariffs announced this week could be felt quickly and are expected to be implemented this year.
Others — such as new taxes on semiconductors and batteries — are expected to take effect more slowly in 2025 and 2026.
In total, the White House’s sweeping announcement on Tuesday will impose increased tariffs on steel, aluminum, semiconductors, electric vehicles, batteries, essential minerals, solar cells, shipping cranes and various medical products. from China.
Will this lead to a new trade war?
Tuesday’s announcement is the culmination of a two-year government review of “Section 301” rights to China that were first imposed by the Trump administration.
The announcement also draws a stark contrast between what trade policy will look like in 2025 depending on who wins.
These new vigorous tariffs from Biden still contrast with what is promised by his opponent in the White House.
Trump is proposing new historically high tariffs, including a 60% tariff on imports from China. His allies say a sharp increase will allow U.S. industrial production to grow in the U.S., but it’s an idea often criticized by some economists and trade experts as too blunt.
But Biden’s aggressive stance on the issue also promises to increase tensions between the world’s two largest economies.
Chinese Ministry of Foreign Affairs responded to advance reports of today’s news, accusing Biden of politicizing trade and adding that “China will take all necessary measures to defend its rights and interests”.
The story continues
On Monday, a senior Biden official downplayed the chances of Chinese retaliation, saying the US government has been telegraphing its concerns to the Chinese for years through multiple channels. Regarding Tuesday’s news, this official added: “I don’t think these concerns come as a surprise.”
Others are less optimistic, including Ashley Craig, an international business lawyer at D.C.-based Venable LLP.
He said this week’s news means “we are looking at a further deterioration in the trade relationship between the US and China”, adding: “perhaps the biggest catalyst here is the presidential election cycle.”
Chinese President Xi Jinping and his wife Peng Liyuan wave as they arrive at Budapest’s Liszt Ferenc Airport during a recent trip to Europe. (SZILARD KOSZTICSAK/POOL/AFP via Getty Images) (SZILARD KOSZTICSAK via Getty Images)
How will this affect the US economy
How it will affect the US economy will certainly be a focus for investors.
They need to pay attention, Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance on Monday before the news broke. That’s because “a tariff is a tax, and while there has been some rhetoric that it’s a tax on foreigners, it’s really a tax on Americans.”
Sosnick added that he will be watching to see if the tariff hike could “throw sand in the gears” of the overall U.S. economy, which has been exceeding expectations.
New research from Goldman Sachs economist Jan Hatzius said Trump’s 2018-2019 tariffs on China caused price increases to be borne “entirely” by U.S. businesses and households.
The tariffs also allowed both domestic producers and non-Chinese exporters to the US to “opportunistically” increase their prices.
Hatzius estimated that each percentage increase in the effective tariff would increase basic consumer prices by just over 0.1%.
See more information: Inflation persists – this is where prices rise and fall
“The direct impact of higher tariffs on GDP will likely be modestly negative, with the impact on real income and consumer spending resulting from higher prices offsetting the decline in the trade deficit, especially if other countries retaliate,” Hatzius warned.
Other increases announced Tuesday include a jump in solar cell tariffs, which are expected to double from 25% to 50%. There will also be an increase in semiconductor tariffs from 25% to 50% and an increase in battery parts tariffs to 25%.
Other industries will see new obligations entirely. Ship-to-shore cranes will see new rates jump from 0% to 25%. Syringes and needles will increase from 0% to 50%.
The tariff policy
One thing Biden and Trump seem to agree on now is that tariffs should go up, not down.
The question is for how much?
In addition to the new tariffs on China, Trump also launched a 10% tariff on major US trading partners which he calls the “ring” around the US economy. He also suggested a 100% tariff on foreign cars coming from China and Mexico.
Trump weighed in on Biden’s announcement during a rally this weekend in New Jersey, calling the move “about four years late” and saying Biden should have gone further and expanded the 100% tariff on electric cars to all imported vehicles.
Biden’s action is “just a ploy to go beyond the election,” concluded Trump.
Donald Trump arrives to speak during a campaign rally in New Jersey on May 11. (JIM WATSON/AFP via Getty Images) (JIM WATSON via Getty Images)
Biden has also come under significant pressure from some key allies to keep tariffs high.
One influential figure in this debate is Senator Sherrod Brown. The Ohio Democrat is chairman of the Senate banking committee and is also in the midst of a difficult re-election fight that is set to be one of the most expensive races in the country this year.
And even Brown is pushing Biden to go furtherposting last week that tariffs are not enough and “we need to ban Chinese EVs from the US.”
Brian Sozzi is the executive editor of Yahoo Finance. He is also the host of “Opening bid“podcast. Follow Sozzi on Twitter/X @BrianSozzi and so on LinkedIn. Ben Werschkul is the Washington correspondent for Yahoo Finance, covering economic policy and the intersection of financial issues and the nation’s capital.
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