Washington DC, May 14, 2024 — New tariffs on Chinese electric vehicles and batteries, solar cells, medical equipment and other goods are intended to protect U.S. jobs and manufacturers. They could raise prices on certain specific items, experts say, though a broad inflationary impact is unlikely in the short term.
The tariffs will be phased in over the next three years, officials said. Those that take effect in 2024 include EVs and EV batteries, along with solar cells, syringes, needles, steel and aluminum and more. Some would not take effect until 2026.
The election-year tariffs could increase friction between the world’s two largest economies. China’s foreign ministry said in a statement that the tariffs “will seriously affect the atmosphere of bilateral cooperation.”
Administration officials say they don’t expect the tariffs to significantly escalate tensions between the two counties, although China is likely to explore ways to respond to the new taxes on its products.
WHY IS THE WHITE HOUSE IMPOSING NEW TARIFFS ON CHINA?
President Joe Biden said Chinese government subsidies for EVs and other consumer goods ensure that Chinese companies don’t have to turn a profit, giving them an unfair advantage in global trade.
“For years, the Chinese government has poured state money into Chinese companies …. it’s not competition, it’s cheating,’’ the Democratic president said Tuesday at the White House.
The tariffs come in the middle of the presidential campaign between Biden and his Republican predecessor, Donald Trump, in which they are vying to show who’s toughest on China. The Biden administration has insisted that its approach is more targeted and less inflationary than the across-the-board tariffs proposed by Trump.
HOW DO THE TARIFFS AFFECT THE U.S. AUTO INDUSTRY?
Under the White House action, tariffs on EVs from China will quadruple, from 25% to 100% this year.
There are currently very few EVs from China in the U.S., but the Biden administration and U.S. automakers worry that low-priced, heavily subsidized EVs could soon flood the U.S. market. China’s global exports of EVs grew by 70% from 2022 to 2023.
“A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices,″ the White House said in a statement.
John Bozzella, president and CEO of the Alliance for Automotive Innovation, a major industry group, applauded the White House action, saying it would help prevent the U.S. from becoming a “dumping ground” for subsidized Chinese EVs.
“We can’t let China’s EV overcapacity problem turn into a U.S. auto industry problem,’’ he said.
While Chinese EVs are largely a future threat, tariffs on EV batteries may have a more immediate impact because China dominates mining and processing of critical minerals such as lithium, cobalt and graphite used in EV batteries.
U.S. automakers such as Ford and Tesla use lithium iron phosphate batteries made in China, said Sam Abuelsamid, principal mobility analyst for Guidehouse Insights.
Tesla uses battery cells from China’s Contemporary Amperex Technologies Ltd., or CATL, in versions of its Model 3 car. Ford uses CATL products in some versions of the F-150 Lightning electric pickup and the Mustang Mach E electric SUV.
Lithium iron phosphate batteries generally cost less but don’t go as far per charge than the lithium-ion chemistry now in use in most EVs. However, they can handle more frequent fast-charging than other battery chemistries.
Ford didn’t immediately respond to a question about battery tariffs but said in a statement that it favors U.S. policies that support American manufacturing and protect supply chains, national security and data privacy.
The tariffs could raise the cost of batteries and battery materials for EVs that likely would be passed on to the consumer as part of the vehicle cost.
WHAT ABOUT THE SOLAR INDUSTRY?
The price of solar panels also may rise because of the new tariffs. The tariff rate on solar cells will increase from 25% to 50% in 2024.
The White House said China has used unfair practices to dominate upwards of 80% to 90% of the global solar supply chain. Chinese policies are flooding global markets with artificially cheap solar modules and panels, undermining investment in solar manufacturing outside of China, the White House said.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, commended the Biden administration for acting to support the continued buildout of U.S. solar and storage manufacturing.
The administration was “thoughtful” to exclude tariffs on key machinery used to manufacture solar components in the United States, Hopper said. A temporary tariff exclusion will encourage domestic manufacturing of solar products, she said.
Colorado Gov. Jared Polis, a Democrat and clean-energy advocate, was less optimistic. He called the tariffs on solar cells and other items “horrible news for American consumers and a major setback for clean energy.’’
“Tariffs are a direct, regressive tax on Americans and this tax increase will hit every family,’’ Polis said on X, the social media site.
STEEL AND ALUMINUM
Tariffs on steel and aluminum products will triple in some cases, from the current range of zero to 7.5% to 25% in 2024. China controls over 50% of global production of steel and aluminum, and its products are “among the world’s most carbon intensive,” the White House said.
While the exact effect of the higher tariffs is uncertain, “tariffs do create deadweight loss, so we can expect them to exact some costs on the U.S. economy,’’ said Sarah Bauerle Danzman, an associate professor of international studies at Indiana University.
Still, “the certainty in price protection that these tariffs afford producers could induce new investments in the U.S. supply chains for these items,’’ she added.
MEDICAL PRODUCTS
Tariff rates on syringes and needles will increase from zero to 50% in 2024, while certain personal protective equipment, including some respirators and face masks, will see tariffs increase from zero to 7.5% now to 25% in 2024. Tariffs on rubber medical and surgical gloves will increase in 2026.
The tariffs on needles and syringes should not have a noticeable impact on U.S. supply, according to Steve Brozak, a health care analyst and president of WBB Securities. New Jersey-based Becton, Dickinson and Co. is the largest supplier in the U.S., where manufacturing has increased since the COVID-19 pandemic, Brozak said.
The Food and Drug Administration said earlier this month that the supply and manufacturing capacity for plastic syringes made outside China is enough to support current demand. The FDA had warned last fall it was evaluating plastic syringes made in China for potential problems like leaks and breaks. The agency has since recommended that suppliers avoid using those syringes if possible, cooling demand for the Chinese products.
Greta Peisch, a former Biden administration trade lawyer, said the tariffs will bolster health and national security by ensuring domestic supplies of crucial medical equipment. “We can argue about whether and how much prices will rise, but this heads off a potential supply bottleneck’’ now and during a future pandemic, she said. – AP
