Biden unveils historic wave of tariffs on Chinese imports
Most of the new US tariffs announced this week could be felt quickly and are set to be implemented this year. Others – such as new duties on semiconductors and batteries – are set to phase in more slowly, in 2025 and 2026
Washington, US – The White House formally unveiled a sweeping array of new tariffs on Chinese goods Tuesday that will raise duties on $18bn in Chinese imports.
The long-awaited announcement will touch an array of sectors, with steel to semiconductors to medical products feeling new duties as soon as this year.
Electric vehicles are a key focus of the announcement, with duties there set to quadruple in 2024 from 25% to 100%. The actions also notably do not include the lowering of more than $300bn in Trump-era duties on China. Biden largely re-upped former President Donald Trump's policy — and added new tariffs on certain sectors on top.
"The President is taking a tough, strategic approach combining investment at home with enforcement against China in key sectors," national economic advisor Lael Brainard said ahead of the news.
Biden's top economic aide also drew a sharp contrast with Trump's trade record in her comments to reporters. She said Trump's moves in office "did not deliver" and that his current 2024 campaign trail promises would spike inflation.
Most of the new tariffs announced this week could be felt quickly and are set to be implemented this year. Others – such as new duties on semiconductors and batteries – are set to phase in more slowly, in 2025 and 2026.
In total, the sweeping White House announcement Tuesday will impose increased duties on Chinese steel, aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and various medical products.
New trade war?
Tuesday’s announcement is the culmination of a two-year government review of the so-called "Section 301" duties on China that were first imposed in the Trump administration.
The announcement also sets up a marked contrast between how trade policy may look in 2025 depending on which man wins.
These new muscular tariffs from Biden still are a contrast with what is promised by his White House challenger.
Trump is proposing historically high new tariffs, including a 60% tariff on imports from China. His allies say that sharp hike will allow US manufacturing to grow in the US, but it's an idea often criticized by some economists and trade experts as being too blunt.
But Biden's aggressive posture on the topic also promises to ratchet up tensions between the world's two largest economies.
China's Foreign Ministry responded to advance reports of today’s news by charging Biden with politicizing trade and adding that "China will take all necessary measures to defend its rights and interests."
On Monday, a senior Biden official downplayed the chances of Chinese retaliation, saying the US government has been telegraphing its concerns to the Chinese for years through many channels. Of Tuesday news, this official added: "I don’t think these concerns will come as a surprise."
Others are less sanguine, including Ashley Craig, a D.C.based international trade lawyer at Venable LLP.
He said this week's news means "we are looking at a further deterioration of the Us/sino trade relationship," adding "perhaps the biggest catalyst here is the presidential election cycle."
How it will affect the US economy will certainly be a focus for investors.
They need to pay attention, Interactive Brokers Chief Strategist Steve Sosnick told Yahoo Finance Monday in advance of the news. That's because "a tariff is a tax and although there's been some rhetoric that it's a tax on the foreigners, it's really a tax on the Americans."
Sosnick added he'll be watching to see if increased duties could "throw sand in the gears" of the overall US economy that has been outperforming expectations.
New research out of Goldman Sachs economist Jan Hatzius said Trump's 2018-2019 tariffs on China led to price increases being borne "entirely" by US businesses and households.
The tariffs also enabled both domestic producers and nonChinese exporters to the US to "opportunistically" raise their prices as well.
Hatzius estimates that every one percentage increase in the effective tariff rate would increase core consumer prices by just over 0.1%.
"The direct impact of higher tariffs on GDP is likely to be modestly negative, with the hit to real income and consumer spending from higher prices outweighing the decline in the trade deficit, especially if other countries retaliate," Hatzius warned.