In a bid to revive domestic manufacturing, President Joe Biden announced Tuesday that he is imposing a drastic tariff increase on Chinese electric vehicles and new levies on computer chips, solar cells and lithium-ion batteries.
"We're not going to let China flood our market making it impossible for American auto – auto manufacturers to compete fairly," Biden said. "I will do it by following international trade laws."
Tariffs on Chinese electric vehicles, also known as EVs, will be quadrupled to a 100% rate. Solar cell and semiconductor imports from China will be subject to a 50% tariff, double the current rate. The rate on certain steel and aluminum imports will increase to 25%, more than triple the current level.
The tariff increase will cover $18 billion in Chinese products. Tariffs on EVs, steel and aluminum, and solar cells will take effect this year, and next year for chips.
United States Trade Representative Katherine Tai said the administration has provided pre-notification to Beijing.
"We have made clear this is not about escalation," she said. "This is about the consequences of decades of economic policy and the need for the United States to defend our rights."
The move is designed to offset "China's unfair practices and subsidies and level the playing field for U.S. automakers and auto workers," National Economic Adviser Lael Brainard told reporters Monday ahead of the announcement.
"China is simply too big to play by its own rules," she said. "China is using the same playbook it has before to power its own growth at the expense of others by continuing to invest, despite excess Chinese capacity, and flooding global markets with exports that are underpriced due to unfair practices."
China's "forced technology transfers and intellectual property theft" have contributed to its control of the majority of global production for the critical inputs "creating unacceptable risks to America's supply chains and economic security," the White House said.
Responding to the U.S. announcement, China said Tuesday the move "will seriously affect the atmosphere of bilateral cooperation."
"The U.S. is essentially using the 'overcapacity' narrative to kneecap other countries' strong industries and practice protectionism and trample on market principles and international trade rules in the name of 'fair competition.' This is nothing but bullying," Foreign Ministry spokesperson Wang Wenbin told reporters Tuesday in Beijing.
Tough on China
The move follows a three-year review of the policies of Biden's predecessor, Donald Trump, who is the Republican presumptive presidential nominee. Both candidates have used their campaign events to compete in showing who is tougher on China ahead of the November election.
"My predecessor promised to increase American exports and boost manufacturing, but he did neither. He failed," Biden said.
The former president said Tuesday that the Biden administration's new tariffs will not be enough to compete against Beijing.
"China's eating our lunch right now," Trump said, adding that Biden should slap tariffs on "much more than electric vehicles."
"They've also got to do it on other vehicles, and they have to do it on a lot of other products," Trump told reporters as he entered court for his hush money trial in New York.
Asked by reporters on Trump's comment about China eating America's lunch (unfairly taking advantage of the U.S.), Biden responded, "He's been feeding them a long time."
The Trump campaign hit back, calling Biden's action a "weak and futile attempt to distract from the grievous harm his insane Electric Vehicle mandate is doing to the U.S. auto industry."
"The fact that these tariffs do not apply to gas-powered cars and trucks but only to Chinese EVs shows that this has nothing to do with protecting American Workers," Trump campaign press secretary Karoline Leavitt said in a statement. "It's all about Crooked Joe's agenda of killing gas-powered automobiles while forcing Americans into ultra-expensive Electric Vehicles they don't want and can't afford."
Asked by VOA to respond to such criticism, Tai said the tariffs are "designed to be strategic and not chaotic. They are designed to be effective and not emotional."
Preempting future increases
Currently, the U.S. imports almost no EVs from China, but the Biden administration is trying to preempt potential future increases, said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, or CNAS.
The tariffs hit sectors where the administration has been investing with industrial policy tools, including the Inflation Reduction Act and the CHIPS and Science Act, Ziemba told VOA, referring to Biden's climate and energy legislation, and legislation to boost domestic semiconductor research and manufacturing.
"In a sense, these tariffs are part of a policy initiative to make sure that Chinese companies can't benefit from that U.S. government subsidy," he said.
The move is likely to increase friction between the world's two largest economies and is not likely to change Beijing's behavior.
"China opposes unilateral tariffs that violate WTO rules and will take all measures necessary to defend our legitimate rights and interests," Foreign Ministry spokesperson Wang said.
Biden reiterated he wants "fair competition with China, not conflict." He said the U.S. is in a stronger position to win because of the investments his administration has made to revive domestic manufacturing.
According to a 2022 report by the Center for Strategic and International Studies, China spent more on industrial policy ($248 billion) than it did on its defense spending ($240 billion) in 2019.
China spends far more supporting its industries than any other economy in the CSIS study, and more than twice as much as the U.S.
Circumventing through Mexico
On the same day Biden announced the new tariffs, Chinese automaker BYD, the world's largest electric vehicle producer, unveiled the Shark, a midsize hybrid-electric pickup truck, in Mexico. In February, BYD said it was looking for a location in Mexico for its factory.
A Mexico-made EV with sufficient North America-sourced parts could qualify for tariff-free entry into the U.S. market under the 2020 United States-Mexico-Canada Agreement, or USMCA.
The administration said Beijing's move to circumvent tariffs via a U.S. free trade partner is "a pattern" of "serious concern" that it's investigating.
With Chinese EV production moving out of China, taking action against Chinese EVs in third country markets is something that the administration should deeply explore, said Wendy Cutler, a former U.S. trade negotiator who is now vice president of the Asia Society Policy Institute.
Blocking Beijing's circumvention effort can be done by amending the USMCA or through supplemental agreements, or an investment screening mechanism separate from the USMCA, she told VOA. "I'm sure there are other alternatives as well that are being explored."
Tai would only reveal that addressing the issue will "require a separate pathway," without providing details. "I would just ask you to stay tuned," she said.
Anita Powell contributed to this report.
