Chinese EV Trade War Commences

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The Biden Administration has announced today that it will increase tariffs under Section 301 of the Trade Act of 1974 passed overwhelmingly under the Republican President Gerald Ford administration on $18 billion of imports from China to protect American workers and businesses. The immediate effects are negligible. However, there are longer term implications for U.S. trade and possibly consumers. One thing is clear, slightly priced imports in large volumes across sectors have negative consequences for the country being flooded with them.  (read AutoInformed on: Trump’s Losing Trade Wars – Auto and Other Deficits Grow)

“The President’s actions reflect the conclusions of U.S. Trade Representative Katherine Tai’s mandatory four-year review that China continues to engage in unfair practices, such as forced technology transfer and restrictions and intellectual property theft from U.S. companies,” media were told on a background briefing by National Economic Advisor Lael Brainard and Senior Administration Officials.

Key here are differences with Trumps failed trade war with China in AutoInformed’s view. The previous administration’s phase one trade deal with China did not deliver on its promises to increase exports to China from the U.S., to create manufacturing jobs here in America, or to end China’s unfair practices. Biden’s approach also contrasts with proposals to impose an across-the-board tariff on all goods from all countries that would raise costs by $1500 per year on each American family. What remains is a core economic problem. The U.S. needs high levels of employment to support our consumer-consumption based economy. Moreover, effectively dealing with climate change is vital for not only the U.S. but every country. Clean energy is mandatory.

“President Biden is taking decisive action to ensure unfair trade practices do not threaten our competitiveness and economic security, while also strengthening American manufacturing. This is a strategic approach to trade policy that will help protect key U.S. industries, like the clean energy and semiconductor sectors,” said U.S. Secretary of Commerce Gina Raimondo. “We know the PRC’s playbook – we’ve seen their non-market actions on solar and steel – and cannot allow China to undermine U.S. supply chains by flooding the market with artificially cheap products that hurt American businesses and workers.”

Key Aspects of the New Tariff Policy as Stated by the Administration

• The tariff rate will increase to 100% on Chinese electric vehicle imports to offset China’s unfair practices and subsidies and level the playing field for U.S. automakers and autoworkers. These practices favor Chinese automakers at the expense of U.S. and other foreign automakers and autoworkers and are leading to a massive surge of unfairly under-priced Chinese vehicles into foreign markets. The President won’t let that happen here.
• The tariff rate will double to 50% on solar cell imports from China. As a result of unfair practices, China’s anticipated manufacturing capacity in solar is more than double the forecasts of near-term global demand. High levels of non-market overcapacity have led to extreme concentration of production in China and underpriced exports that undermine fair competition. China controls over 70% of global production in each step of the manufacturing process for solar, from polysilicon to solar modules, which creates unacceptable risks for our supply chains and clean energy goals. We’re also closely monitoring attempts by Chinese firms to avoid our trade enforcement remedies outside of China.
• The Section 301 tariff will increase to 25%, triple the current level, on certain steel and aluminum imports from China. The President recently called out unfair trade in steel and aluminum, where China controls over 50% of global production.
• China’s steel producers rely on more carbon-intensive production processes. In contrast, U.S. industries are investing in decarbonization, supported by Department of Energy programs.
• “The President is committed to a stable bilateral relationship with China. He is committed to responsibly managing competition with China, and this action is consistent with that approach. “
• We are working with our partners around the world to address our shared concerns about China’s unfair practices. We know China’s unfair practices have harmed communities in Michigan, in Pennsylvania, and around the country that are now having the opportunity to come back due to President’s Biden’s investment agenda.
• The President’s actions ensure that American business and workers have the opportunity to compete on a level playing field in industries that are vital to our future, such as clean energy and semiconductors.
• The President is taking a tough strategic approach, combining investment at home with enforcement against China in key sectors, in contrast with the prior administration that failed to follow through either on investments, like Foxconn in Wisconsin, or on China’s trade commitments.