Published: 16:26, June 13, 2024
US tariff hikes set to backfire
By Zhang Yongjun

Biden administration’s levies on Chinese firms set to hurt domestic industry, global supply chains


The United States announced additional tariffs on a variety of imports from China, including electric vehicles, lithium batteries, solar cells, critical minerals, semiconductors, steel, aluminum, and port cranes on May 14.

China’s Foreign Ministry said the US side has continued its wrongdoing and such a move will negatively impact China-US economic and trade relations. In addition, it will adversely affect the US supply chain and disrupt the global supply chain.

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The Donald Trump administration imposed tariffs on around $300 billion worth of Chinese imports based on a review of Section 301. According to analysis of data from the US Census Bureau by Chinese analysis company Sinoimex, from 2017 to 2023, US imports of Chinese goods included in Section 301 decreased by $51.58 billion, a decline of 17.3 percent.

Generally speaking, tariffs are imposed on imported products to protect the development of domestic industries. However, the latest tariff hike by the Joe Biden administration cannot play the role.

Take the EV industry as an example. Despite a rapid increase in Chinese auto exports, the export volume to the US market has been quite small.

China exported 4.91 million vehicles in 2023, a jump of 57.9 percent from 2022, with new energy vehicle exports surging by 77.6 percent to 1.2 million units, according to data released by the China Association of Automobile Manufacturers. The export destinations cover over 180 countries across Europe, Asia, Oceania, the Americas, and Africa.

The US ranked 14th among China’s auto export destinations in 2023, when China exported 74,800 cars to the US, accounting for a meager 1.5 percent of its total car exports — and most of them fuel vehicles.

The recent tariff increase will adversely affect the supply chain of US automakers.

The volume of Chinese lithium battery exports to the US has been quite large. In 2023, China’s lithium battery exports to the US surged to $13.55 billion, accounting for 20.8 percent of China’s total lithium battery exports and making the US the largest single-country export market for Chinese lithium battery makers.

The impact of the recent tariff hike on US lithium battery imports is significantly greater than that on EVs. US automakers have to import a large number of EV parts from China, as China is the world’s largest producer of lithium batteries, accounting for over 70 percent of global output. Thus, the tariff increase will have a large impact on the supply chain of US carmakers.

According to the analysis of auto experts, the three top US EV new producers other than Tesla — Rivian, Lucid, and Fisker — are all mired in difficulties, with excessive inventory, heavy losses, and survival difficulties. The tariff hike will not help expand the market for US domestic carmakers, but rather, will significantly increase their production costs.

The latest tariff hike on Chinese products will also be detrimental to the efficiency of US supply chains.

International shipping is an important part of the global supply chain, and increased tariffs on Chinese products such as port cranes will undermine the efficiency of the shipping industry. With a low level of automation, US ports have lagged behind those in many parts of the world.

China is a major producer of port cranes, with strong international competitiveness in this regard, so the newly imposed tariffs will increase the cost of technical renovation and transformation by US ports.

In a nutshell, the Biden administration’s tariff hike on Chinese imports violates the basic principles of international division of labor, and such a protectionist move will also hurt US domestic industries.

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As a matter of fact, the Biden administration’s tariff hike is mostly driven by domestic political concerns. The 2024 US presidential election is now set — Biden representing the Democrats against Trump representing the Republicans. Trump imposed tariffs on Chinese exports to the US during his term of office and has vowed massive new tariffs if he wins this year’s election. To undercut the impact of Trump’s campaign rhetoric, the Biden administration launched a new round of tariff hikes on Chinese products.

Meanwhile, the recent tariff hike aims to appease US automakers and win over their support, as major US NEV manufacturers are mired in difficulties. However, the above-mentioned analysis shows that the move will fail to support the US EV industry.

Besides the political pandering, the Biden administration’s tariff hike on Chinese products is ultimately aimed at continuing to contain and suppress China strategically and hindering the development of Chinese industries.

The author is secretary-general of the China Center for International Economic Exchanges. The author contributed this article to China Watch, a think tank powered by China Daily. 

The views do not necessarily reflect those of China Daily.