WASHINGTON (AP) — New tariffs on Chinese electric vehicles and batteries, solar panels, medical devices and other goods aim to protect U.S. jobs and manufacturers. They could raise prices on certain items, experts say, although a widespread inflationary effect is unlikely in the miniature term.
The tariffs will be phased in over the next three years, officials said. Those coming into effect in 2024 include electric vehicles and electric vehicle batteries, as well as solar cells, syringes, needles, steel and aluminum, and more. Some would not come into effect until 2026.
Election year tariffs could raise tensions 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 do not expect the tariffs to significantly raise tensions between the two countries, although China will likely look for ways to respond to the recent taxes on its products.
Why is the White House imposing recent tariffs on China?
President Joe Biden said Chinese government subsidies for electric vehicles and other consumer goods ensure Chinese companies don’t have to turn a profit, giving them an unfair advantage in global trade.
“For years, the Chinese government has funneled state money into Chinese companies…. It’s not a competition, it’s fraud,” the Democratic president said Tuesday at the White House.
The tariffs come amid the presidential campaign between Biden and his Republican predecessor, Donald Trump, as they compete to show who is toughest on China. The Biden administration has insisted its approach is more targeted and less inflationary than the blanket tariffs proposed by Trump.
What impact will tariffs have on the US automotive industry?
Under the White House’s actions, tariffs on electric vehicles from China will quadruple from 25% to 100% this year.
There are currently very few Chinese electric vehicles in the U.S., but the Biden administration and U.S. automakers fear that low-cost, heavily subsidized electric vehicles could soon flood the U.S. market. China’s global exports of electric vehicles increased 70% from 2022 to 2023.
“A 100% tariff on electric vehicles 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, welcomed the White House move, saying it would lend a hand prevent the U.S. from becoming a “dumping ground” for subsidized Chinese electric vehicles.
“We cannot allow China’s electric vehicle overcapacity problem to become a problem for the U.S. auto industry,” he said.
While Chinese electric vehicles are largely a future threat, tariffs on electric vehicle batteries could have a more immediate impact because China dominates the mining and processing of critical minerals such as lithium, cobalt and graphite used in electric vehicle batteries.
U.S. automakers such as Ford and Tesla operate lithium iron phosphate batteries made in China, said Sam Abuelsamid, senior mobility analyst at Guidehouse Insights.
Tesla uses battery cells from Chinese company Contemporary Amperex Technologies Ltd. in versions of its Model 3 car. (CATL). Ford uses CATL products in some versions of the F-150 Lightning electric pickup and Mustang Mach E electric SUV.
Lithium iron phosphate batteries generally cost less but do not go as far per charge as the lithium-ion batteries currently used in most electric vehicles. However, they can be rapid charged more often than other battery chemistries.
Ford did not immediately respond to a question about battery tariffs, but said in a statement that it supports U.S. policies that support American manufacturing and protect supply chains, national security and privacy.
The tariffs could raise the cost of electric vehicle batteries and battery materials, which would likely be passed on to the consumer as part of the vehicle cost.
What about the solar industry?
The price of solar modules could also rise due to the recent tariffs. The tariff rate for solar cells will raise from 25% to 50% in 2024.
The White House said China has dominated more than 80 to 90 percent of the global solar supply chain through unfair practices. Chinese policies are flooding global markets with artificially inexpensive solar modules and panels, undermining investment in solar production outside China, the White House said.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, praised the Biden administration for its actions to support further expansion of U.S. solar and storage production.
The administration had “considered” excluding tariffs on key machinery used to make solar components in the United States, Hopper said. A fleeting tariff exclusion will encourage domestic manufacturing of solar products, she said.
Colorado Gov. Jared Polis, a Democrat and immaculate energy advocate, was less sanguine. He called the tariffs on solar panels and other items “terrible news for American consumers and a major setback for clean energy.”
“Tariffs are a direct, regressive tax on Americans and this tax increase will affect 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 zero currently to 7.5% and rising to 25% in 2024. China controls over 50% of global steel and aluminum production and its products are “among the most carbon-rich of the world”. intensive,” the White House said.
While the exact impact of higher tariffs is uncertain, “tariffs actually create deadweight losses, so we can expect them to impose some cost on the U.S. economy,” said Sarah Bauerle Danzman, an associate professor of international studies at Indiana University.
Still, “the certainty of price protection that these tariffs provide to manufacturers could lead to new investments in U.S. supply chains for these items,” she added.
MEDICAL PRODUCTS
Tariffs on syringes and needles will rise from zero to 50% in 2024, while tariffs on certain personal protective equipment, including some respirators and face masks, will rise to 25% in 2024 from zero now to 7.5% and surgical gloves will raise in 2026.
The tariffs on needles and syringes are not expected to have a significant impact on U.S. supply, according to Steve Brozak, healthcare analyst and president of WBB Securities. New Jersey-based Becton, Dickinson and Co. is the largest supplier in the U.S., where production has increased since the COVID-19 pandemic, Brozak said.
The Food and Drug Administration said earlier this month that the supply and production capacity for plastic syringes made outside China is sufficient to meet current demand. The FDA warned last fall that it was testing plastic syringes made in China for potential problems such as leaks and breakages. The agency has since recommended suppliers avoid using those syringes if possible, cooling demand for Chinese products.
Greta Peisch, a former Biden administration trade lawyer, said the tariffs would strengthen health and national security by ensuring domestic supplies of critical medical equipment. “We can argue about whether and how much prices will rise, but this prevents a potential supply shortage,” she said now and during a future pandemic.
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Associated Press writers Tom Krisher in Detroit and Tom Murphy in Indianapolis contributed to this story.
