The new tariffs on Chinese electric vehicles, semiconductors and medical supplies announced by the Biden administration on Tuesday raised questions for U.S. consumers and prompted a call from China for the U.S. to “immediately” cancel the steps.
The Biden administration said the new tariffs “will make sure that historic investments in jobs spurred by President Biden's actions are not undercut by a flood of unfairly underpriced exports from China in areas like EVs, batteries, vital medical equipment, steel and aluminum, semiconductors, and solar.”
The timing of the increases range from this year to 2026. Tariffs on imported Chinese electric vehicles will quadruple from 25% to 100%. Some tariffs on Chinese steel and aluminum will jump from 7.5% to 25%. Imported Chinese semiconductor tariffs will increase from 25% to 50%.
“China heavily subsidized all these products, pushing Chinese companies to produce far more than the rest of the world can absorb. And then dumping the excess products onto the market at unfairly low prices, driving other manufacturers around the world out of business,” President Joe Biden said in the White House Rose Garden on Tuesday.
Policy or Political Points?
The overarching context for the decision is that Election Day is less than six months away. Of course, global trade is a major driver of the decision. But politics aren’t far behind.
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A group of Democratic senators recently called on Biden to keep current tariffs on China and increase them “where necessary” to maintain a “critical piece of a pro-worker trade agenda.”
Biden showed in his announcement on Tuesday that he’s been listening, giving a nod to lawmakers from Michigan and workers in Pennsylvania and Wisconsin – all battleground states.
“It’s an opportunity to score some political points,” says George Calhoun, the quantitative finance program director at Stevens Institute of Technology.
China, for its part, promised a response to the tariffs and called on the U.S. to cancel them.
“China will take resolute measures to safeguard its own rights and interests,” the country’s Ministry of Commerce said in a statement. “The U.S. should immediately correct its wrong actions and cancel the additional tariff measures against China.”
What Do the New Tariffs Mean for Americans?
Maybe something, maybe nothing – depends who you ask.
A senior administration official told reporters on a Monday call that the new steps have “no inflationary impact.”
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“They're mainly targeting strategic sectors where we are ramping up domestic investment,” the Biden administration official said. “I think what would be inflationary is more, you know, across-the-board, 10% type of tariff that would pose a real risk to consumers, which we're not doing here. There are a very targeted set of tariffs on specific sectors.”
But experts say there are standard concerns that always come with implementing tariffs.
“Tariffs do create deadweight loss, so we can expect them to exact some costs on the US economy,” Sarah Bauerle Danzman of the Atlantic Council said in a statement. “The Biden administration has insisted that this approach to tariffs is more targeted and less inflationary than the across-the-board tariffs that former President Donald Trump has proposed. The tariffs have a couple of years to set in, which may help with adjustment.”
Calhoun says the Biden administration is involved in a “complicated chess board” when it comes to inflation but notes that on its face, the decision “runs against the desire of the Biden administration to show real progress on the inflation front.”
“On a pure mechanical basis, if you add a tariff to imported goods, and people are trying to buy those imported goods, it’s going to raise the price,” Calhoun says. “So it definitely has, conceptually, a potential inflationary impact. They want to tiptoe around that and make the argument that they’re trying to be very surgical and it won’t have a significant inflationary impact.”
But Calhoun adds that the Biden administration’s assessment is “probably right” for the time being given the limited scope of the tariffs.
Companies, Trump React to New China Tariffs
The U.S.-China Business Council, a group of 270 American companies that do business in China, said the were disappointed in the Biden administration’s decision, adding that the tariffs would “ultimately make it harder for American companies to compete in the US and abroad, cost American jobs, and increase prices for US manufacturers and consumers during a time of ongoing inflation.”
“USCBC understands that [the Office of the United States Trade Representative] is seeking to be more strategic with the new tariffs, but given that the prior tariffs have not sufficiently addressed US government and USCBC concerns about China’s unfair market practices, it is unclear how continuing those and piling more tariffs on will be any more effective,” USCBC President Craig Allen said in a statement.
The Biden administration in a report acknowledged that China “has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce.” But it said that actions have encouraged China to eliminate “some” of those acts.
Trump, however, said the tariffs don’t go far enough.
"They've also got to do it on other vehicles and they have to do it on a lot of other products," he told reporters as he entered court for his hush money trial in New York. "Because China's eating our lunch right now. ... They have to do it on much more than electric vehicles."
Biden on Tuesday responded to the quip: “He’s been feeding them a long time.”
