May 17, 2024 | The Biden Tariffs Against China Imports are a Mistake

The Biden administration has announced increased tariffs on goods imported from China in several categories, including electric cars, batteries and solar panels.

The announcement cites “China’s unfair trade practices” especially in technology transfer, intellectual property and innovation.

Will these tariffs achieve Biden’s goals?

The tariffs are designed to protect American workers and businesses from China’s unfair trade practices. Read the announcement here.

The tariff on solar cells will be 50 percent, up from 25 percent.

The tariff on lithium-ion batteries from China will increase from to 25 percent.

And the big one — the tariff on electric vehicles will increase to 100 percent.

But higher tariffs are likely to raise prices on materials needed for the transition away from fossil fuels. China’s lead in all things electric, such as photovoltaic panels, electric vehicles, batteries, lithium processing, natural graphite and permanent magnets, to mention just a few, is so large that the tariffs are likely to just push inflation higher and reduce innovation in this booming sector.

A wave of new Chinese electric vehicles are now available for export at cheaper prices than anything Detroit or Tesla can handle. Tesla is cutting costs to be competitive, but the others like Ford and GM seem to prefer to lobby Washington for protection. This will only lead to most American manufacturers falling even further behind China. In just a decade or two all new small-and-medium-size transport will be electrified and many companies in Detroit, Japan and Germany could be destroyed by the transition if they will not match China’s prices.

Of course, Biden knows that the announcement will be popular in the few months remaining until the election. And his likely opponent Donald Trump has announced even more tariffs suggesting that all China imports will be hit with a 60 percent tariff.

Reports by Bloomberg and others state that all trade between the U.S. and China would stop if Trump’s proposed tariffs are imposed. On the other hand, Biden’s tariff increases may be political driven and symbolic but will still hurt.

Most Americans have become accustomed to buying goods from China that are now higher quality and cheaper than anything available elsewhere.

Blocking the fierce competition that China practices will only allow American manufacturers to become complacent. And it is unlikely that the higher prices of imports under a higher tariff regime will be popular in the long run, even if it sounds good in the short run.

Just as many are wondering if they should buy a BEV next, this tariff increase will only restrict availability and increase prices.

And if Biden’s aim is to punish China, he will be disappointed. Bloomberg estimates that these tariffs will have only a small effect on China’s GDP.

If China’s products really are better and cheaper, American consumers will be the ones who suffer the most under the new Biden tariffs.

Hilliard MacBeth

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Hilliard MacBeth May 17th, 2024

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