President Biden just made it official that there will be significant tariff increases on a range of Chinese imports, from electric vehicle (EV) batteries to medical products, igniting fears of a potential trade war. The decision comes amid growing White House concerns over unfair competition and intellectual property theft.
However, tensions have now escalated as China promises retaliation, which means the already sticky inflationary environment will be even more difficult to tame.
The U.S. President’s Announcement on Tariffs
The new tariffs target a wide range of Chinese goods, including electric vehicle (EV) batteries, computer chips, medical products, steel and aluminum, semiconductors, critical minerals, solar cells, and cranes.
The total value of these affected imports is estimated at $18 billion. The most notable increase is the quadrupling of EV duties to over 100% and the doubling of semiconductor tariffs to 50%.
Biden Says “Necessary,” But China Vows Retaliation
Despite the potential rise in costs for American consumers, the Biden administration argues that these measures are necessary to protect American industries and jobs.
However, the announcement has been met with an immediate promise of retaliation from China, which has vowed to defend its interests. This escalating trade conflict could have significant implications for global trade and economic growth.
Inflation Is a Key Concern for Economists
Inflation is a key concern in the current economic climate, and these new tariffs could exacerbate the problem. The United States trade deficit with China has persisted for decades, and this move by the U.S. could further strain relations between the two countries.
Analysts have warned that a trade war could raise costs for electric vehicles and other products, potentially undermining Biden’s climate goals and his aim to create manufacturing jobs.
The U.S./China Trade Imbalance is Substantial
The Biden administration has justified the revised tariffs on the grounds that China is stealing U.S. intellectual property. However, the administration has also recognized the potential impact on inflation and has recommended tariff exclusions for hundreds of industrial machinery import categories from China, including those for solar product manufacturing equipment.
The United States imported $427 billion in goods from China in 2023, while exporting just $148 billion. This trade imbalance has been a contentious issue in Washington and is likely to remain a focal point in the lead-up to the 2024 presidential election.
Biden vs. Trump on Tariffs
Both President Joe Biden and his predecessor, Donald Trump, have taken a hard line on trade with China. However, their approaches differ in some respects. Trump had proposed a 10% across-the-board tariff increase on all Chinese goods, while Biden has focused on specific sectors and products.
As the trade war with China heats up, it remains to be seen how the Biden administration will balance the desire to protect American industries with the potential for increased inflation and the broader implications for global trade.
Key Takeaway
The U.S. President has gambled that raising tariffs by as much as 50-100% on imported goods from China will be good for U.S. industry. Nevertheless, China has expressed disagreement and plans to retaliate. The growing tension between the two nations and the rising inflationary pressures are expected to negatively impact the global economy.
