Biden Administration Ramps up Tariffs
The Biden administration plans to announce a 100% tariff on Chinese EV imports. This will quadruple the previous tariff rate of 25%. The hike is simply the latest product of the ongoing trade conflict between the US and China. The Biden administration believes that China’s ‘overcapacity’ to manufacture’ is hurting the profitability of domestic markets.
While China doesn’t directly sell EVs to the US, they hold large stakes in Chinese EV manufacturing companies that sell to other countries. Being able to undercut US prices whilst providing more advanced and sophisticated technology.
China also funnels many US-bound imports through Mexico to avoid the bulk of US security. With future imports soon to be a majority of smart and software-dominant cars, some fear the possibility of cars being hacked by Beijing. Import levies would solve some of these issues.
Hurting US Jobs?
The Democrats will also increase tariffs on Chinese batteries and solar panels, of which they have invested a significant amount domestically. The government claims that China’s overcapacity is ‘hurting US jobs and security’. The US is struggling to match China’s rate of production, leading to more expensive US products vs ‘synthetically’ cheaper Chinese ones.
A few months ago, Biden also called for tripling tariffs on Chinese aluminium and steel, as well as an investigation into Chinese shipbuilding. This was all an effort to gain support from union workers. He first announced steel levies when addressing union members in Pennsylvania.
However, increasing Chinese levies was a program first initiated by Trump’s Republican party. He increased EV tariffs to 27.5% in 2018 and sought across-the-board hikes. He also administered the same for batteries, solar panels, metals, appliances and more. This gained roaring approval from the public.
In March, Trump said that if he is elected in November, he will pass a 60% tax hike on all Chinese imports, including a 100% hike on every car that crosses the US border.
While Biden continues to allow Trump’s past measures to pass, he rejected the idea of across-the-board hikes. In the face of an upcoming presidential election, however, he has suddenly taken multiple measures at once to check Beijing’s manufacturing dominance- the same ones Trump proposed in 2018. We expect further tax raises in July.
Impact of Inflation
Experts say that, amidst the nationwide and global struggle against inflation, raising prices even further may hinder the economy in the long run. The EU is in the same predicament to raise import taxes during inflation.
They launched an investigation into the Beijing government, which is under fire for illegally subsidising Chinese EV companies. The subsidy margin was around 4%-17%. This would incentivise the EU to raise tariffs.
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