United States Slaps Massive Import Taxes On Chinese E-Cars And Electronics–But Is It All About Votes?

Photo courtesy of Aradhana Gahlaut. Bermuda's iconic pink buses have been replaced by thirty clean electric vehicles brought in from China.
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US President Joe Biden has authorized massive import tax increases on Chinese-made electric cars, solar panels, steel and other Chinese-made goods. This may also include vehicles and machinery assembled in South America or Mexico.

The White House said the measures, which include a 100% border tax on electric cars from China, were a response to unfair policies and intended to protect US jobs. However it has not detailed which unfair policies it would like China to change.

Tesla, the largest electric car maker in the United States has recently reported declining sales and  laid off at least 10% of its workforce in what was described as a ‘bloodbath’.

However, during the government’s public and online review of the measures, the government received nearly 1,500 comments, the vast majority of them from American business owners and retailers arguing that they were driving up prices for everyday Americans, and asking them to be removed due to the potential damage to business.

China has also made critical comments about the tax increases, which were signalled in advance.

Global Times, an English language news site that usually presents the views of the Chinese government says that Biden’s plan to increase the tariffs on Chinese EV is a sign of panic and incompetence

Global Times says that although China makes a lot of electric vehicles, China’s current exports of electric vehicles to the US are almost zero, so Biden’s tariff is purely precautionary, which in turn signifies that the US has given up in the face of competition.
China has however exported vehicles to various Caribbean jurisdictions, for example electric buses to Barbados, garbage trucks to Jamaica, and even Bermuda’s 30 iconic pink buses were manufactured at the Xiamen Golden Dragon facility in China.
Chinese gasoline powered cars are also very prevalent in South America where they are found to be cheap, economical to run, and cheap to repair.

 

Analysts in the US said the tariffs were largely symbolic and intended to shore up votes in a tough election year. In times of hardship political leaders will often point to external dangers such as the ‘yellow peril’, a fear of Chinese influence.

They follow months of criticism by former President Donald Trump, who is running for the White House against Mr Biden and has argued his rival’s support for electric cars would “kill” the US car industry.

The tariffs announced on Tuesday would hit an estimated $18bn worth of imports, the White House said.

As well as a rise from 25% to 100% on electric vehicle tariffs, levies on solar cells would go up from 25% to 50%.

Tariff rates on certain steel and aluminium products will more than triple to 25%, up from 7.5% or less.

During the Biden administration’s public and online review of the measures, the government received nearly 1,500 comments, the vast majority of them from business owners arguing that they were driving up prices for everyday Americans, and asking them to be removed.

Mr Biden’s decision to leave the tariffs in place and expand them into new areas – even as persistent US inflation has weighed on his approval ratings – is a testament to the dramatic shift in trade views for both political parties in the US, which had long championed the benefits of global commerce.

Wendy Cutler, a former trade official for the US who is now vice-president of the Asia Society Policy Institute, told media she believed Americans were willing to accept higher priced cars, in exchange for helping to protect US companies and jobs.

“We’ve seen this movie before – with solar, with steel and [aluminium], and when it comes to cars and other products the United States needs to get ahead of the curve,” she said.

“It’s all about trade-offs and maybe in the immediate term cars become more expensive but in the longer term we want to have a competitive industry here.”

In a briefing with reporters, White House officials denied that domestic politics had influenced the decision.

They said the US measures were sparked by business practices by Beijing that harm the US, for example forcing western companies to share information and then stealing it.

They also said the moves were targeted and said they did not expect them to stoke inflation, contrasting their approach with that of Mr Trump.

The former president, who once called himself a “tariff man”, has campaigned on a proposed across-the-board 10% tariff on foreign imports, which would jump to 60% for goods from China.

He has also attacked Mr Biden for promoting electric vehicles, a move he has argued will destroy US car companies, key employers in states such as Michigan that will be key election battlegrounds in November.

The US already imposes steep tariffs on electric vehicles made in China, which has made sales of such cars negligible.

But Washington has been watching warily as sales by Chinese companies in Europe and other countries increase.

White House officials said ensuring that green technologies were not dominated by a single country was critical to making the transition successful and sustainable in the long run.

While moves targeting electric vehicles are likely to have minimal practical effect, the business world is waiting to see if Europe will take similar steps, said Natasha Ebtehadj of Artemis Investment Management.

The European Union and the UK are among the other places debating moves to curb imports of Chinese-made electric cars, even at the risk of slowing their adoption.

“It’s not really a surprise to investors or to Chinese companies, especially in the run-up to an election where both candidates are not really pro-China,” she said.

“Given the relatively small volume of imports to the US, it’s maybe more interesting what happens next in Europe.”

The US and China have been locked in a trade war since 2018, when Mr Trump imposed tariffs on some two thirds of goods imported from China, at the time worth an estimated $360bn.

The measures prompted retaliation by Beijing, a stand-off that ended in a détente in early 2020 when Mr Trump reduced the rate of some tariffs, while China pledged to boost its purchases from the US.

Those promises have fallen short, but the tariffs have since yielded more than $200bn according to the US in new border taxes for the US government, while prompting a major reshuffling of global trade patterns.

Much of that sum has been paid by everyday Americans in the form of higher prices for furniture, footwear and other goods.

However, in a research note, Oxford Economics described the latest plans as “more symbolic bark than bite”.

The firm said they were likely to lift inflation by a negligible 0.01 percentage points, while weighing on growth in a similar way, calling the effect a “rounding error”.

Sources; BBC, World Business Report radio, linkedin.com
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