14 May 2024

Biden announces major tariff increase on Chinese-imported green tech

President Biden has sharply increased tariffs on billions of dollars of Chinese imports, targeting electric cars and other green technologies.

The White House says it’s trying to stop unfair competition, but China has threatened to retaliate.

Neil Macdonald: I think this is a battle over who controls critical technologies that many believe could be powering economic growth for years into the future. This affects $18 billion of Chinese imports into the United States – that is only 4% of the total. But I think it’s also symbolic of the deteriorating trade relationship between the world’s two largest economies. On semiconductors, the tariff’s set to go up from 25% to 50%. For solar panels, again it doubles. And what’s getting a lot of attention is the tariff on electric vehicles, which is set to quadruple. A lot of these tariffs started life under President Trump. And so I think they also show how both sides of America’s political divide have actually been moving together towards greater protectionism.

Krishnan Guru-Murthy: But these are all green technologies. Why is America doing it?

Neil Macdonald: I think the Biden White House sees this as protecting an industrial policy, which they believe is transforming their country. $866 billion of private sector investment – factories producing clean technology and electric cars and so on. Many of those dots, you may be surprised to hear, are in places like Michigan and Pennsylvania and other swing states. Biden says he’s encouraged all this. The White House concern is – could all of this be at risk? Could American companies that have just got going now be swept away by the arrival of cheap, Chinese imports? The U.S. fears Chinese industrial overcapacity. China can now produce huge volumes of things like electric cars. They want to export them. But do they just end up undercutting local producers, for example, in the U.S.A.?

Krishnan Guru-Murthy: And do they have a point?

Neil Macdonald: There’s no doubt that China has established a remarkable dominance in some of these technologies. If you’re talking about electric batteries, and you look at the critical minerals that are needed to make them, for lithium it’s over 50%. Cobalt is over 75%. Graphite, essentially, it’s a monopoly. Of course, China might argue, we decided to get into these industries early and we’ve beaten you to it.

Krishnan Guru-Murthy: Could tariffs backfire?

Neil Macdonald: Tariffs could help U.S. producers get established in this area. Of course, U.S. consumers might quite like the idea of a Chinese electric vehicle. Particularly it’s going to be thousands of dollars cheaper than the alternative. And that could matter because President Biden does have another target here, which is he wants new car sales to be 50% electric by 2030. And until that point, I think, those vehicle prices need to be falling rather than going up.