USA ramps up tariffs on Chinese critical materials and energy transition tech

News Analysis




USA ramps up tariffs on Chinese critical materials and energy transition tech

US president, Joe Biden, has announced a string of tariffs on Chinese imports as part of a package of measures designed to protect US manufacturers from cheap imports.

The White House announced that it is imposing more stringent curbs on Chinese goods worth US$18Bn. The move follows a statutory four-year USTR review and is designed to protect the USA’s green energy sector from cheaper Chinese imports.

The tariff increases announced include 25% to 100% on EVs (2024), 7.5% to 25% on lithium-ion batteries (2024 for EV batteries and 2026 for non-EV batteries), 25% to 50% on solar cells, and 25% to 50% on semiconductors.

Meanwhile, tariffs on graphite and other critical materials will rise to 25% in 2026 as will tariffs on permanent magnets. Steel and aluminium tariffs will rise to 25% this year. The new tariffs will kick in after 90 days.

The move comes in the context of an upcoming US Presidential election where President Biden is set to face off against former President Donald Trump. The latter imposed sweeping tariffs on China during his presidency, covering over US$350Bn worth of imports from China, mostly at the 25% rate. President Biden’s measures are more targeted according to the White House – but while the level (US$18Bn) is smaller some of the rates are much more severe and symbolic.

On EVs (100% tariff) the move is certainly more symbolic than substantial: there are not many Chinese EVs on the roads in the USA and this will (now surely) remain the case.  There will nonetheless be an inflationary impact on the American consumer. In the short-to-medium term, higher rates on certain EV components will push prices higher, while in the longer term, US manufacturers may not feel the need to remain as competitive if they feel protected from international competition.

Former President Trump has criticized President Biden for not doing more on Chinese exports sooner while touting tariffs of 60% or higher on all Chinese goods and 10% across-the-board tariffs on goods from all points of origin. Expect tariffs to remain a key feature of the campaign trail while all eyes are now on China to see if there is any direct response.