The U.S. announced tariffs on Chinese electric vehicles and other products, experts: It is intended to show toughness to win over key voters

The Paper

2024-05-15 07:12Posted on the official account of Shanghai The Paper

At a time when U.S. election tensions are heating up, President Joe Biden is risking a deterioration in relations with China to play the "tariff card".

On May 14, according to a statement from the White House, the Biden administration will continue to maintain the tariff policy implemented by its predecessor Trump administration and impose tariffs on other Chinese goods. The tariffs will affect $18 billion worth of Chinese imports, including electric vehicles, steel and aluminum, medical supplies, semiconductors, batteries, critical minerals, solar cells and cranes, the statement said. Among them, the tariffs on electric vehicles in China will be increased from the current 25% to 100%.

"China has always opposed the unilateral imposition of tariffs in violation of WTO rules, and will take all necessary measures to safeguard its legitimate rights and interests." Foreign Ministry spokesman Wang Wenbin responded that afternoon.

Wu Xinbo, dean of the Institute of International Studies at Fudan University and director of the Center for American Studies, said in an interview with The Paper (www.thepaper.cn) that the Biden administration's current round of "tariff war" against China is mainly due to the needs of domestic electoral politics, and has shown a tough stance on China on economic issues that voters in the "Rust Belt" (editor's note: refers to areas with declining industry and concentration of blue-collar workers, including Pennsylvania, Michigan, and Wisconsin). The aim is to enlist the support of these key voters.

Bloomberg analysis said that Biden's new tariffs on China are more "symbolic" considering that the aforementioned targeted Chinese goods do not rely on American consumers. However, in the long run, Wu Xinbo believes that this move basically excludes the possibility of Chinese new energy vehicles entering the US market in the future. On the other hand, it will also have a bad demonstration effect on countries such as the European Union that are investigating Chinese new energy vehicles.

In fact, since the beginning of this year, China-US relations have shown a trend of stopping decline and stabilizing, with frequent high-level interactions, and the two sides have made some progress in specific areas such as anti-narcotics, law enforcement, artificial intelligence, agriculture, health, and climate change. However, it should be noted that the United States continues to pursue a policy of containment and suppression against China in the fields of economy, trade, science and technology.

"Some of the recent actions of the United States, including the U.S. Commerce Department's blacklisting of 37 Chinese entities and the introduction of new tariffs, mean that the previous phase of 'fragile stability' between China and the United States has been broken, and the next side of the struggle against the United States will be more prominent." Wu Xinbo analyzed.

An election year is playing the "tariff card" against China to win over voters in swing states

In recent years, the "sudden rise" of China's electric vehicles in the international arena has caused Washington officials to worry about the development of the country's clean energy industry, especially in the context of the US election year, the Biden administration decided to sacrifice this "tariff card" to win the support of voters in key swing states. This move has been in the works for a long time, as early as the end of December last year, the Wall Street Journal revealed that the Biden administration was discussing raising tariffs on Chinese goods such as electric vehicles.

Judging from the data, China's auto exports surpassed Japan for the first time last year to rank first in the world. NEV exports totaled 1.203 million units, reflecting a 77.6% y/y increase. In terms of price, Chinese-made electric vehicles are also more competitive. According to the International Energy Agency, many models are priced for less than 100,000 yuan ($15,000). By comparison, the cheapest electric cars in the United States, such as the Chevrolet Bolt, cost about 210,000 yuan ($30,000), twice as much as Chinese electric cars.

However, according to statistics from the General Administration of Customs, China exported more than 10,000 electric vehicles to the United States last year, accounting for less than 1% of total exports. The Wall Street Journal also reported that the previous 25% tariff rate has played a role in discouraging Chinese electric vehicle companies from the U.S. market. And because "the penetration rate of Chinese electric vehicles in the U.S. market is extremely low", analysts at investment firm Evercore ISI believe that the "short-term economic impact" of the tariff hike will be "minimal".

According to the results of the General Administration of Customs, from January to December last year, China exported to the United States the number of "motor vehicles mainly used to carry people, which are only equipped with drive motors".

Even so, many U.S. officials are still playing up the "threat" of Chinese electric vehicles, and Democrats, including Ohio Senator Brown, have urged Biden to take tougher measures to protect the U.S. auto industry, "Tariffs are not enough, we need to ban Chinese electric vehicles from entering the United States." In fact, Biden's economic advisers have been divided over the years on whether to adjust the taxes imposed on China during the Trump administration, with trade officials advocating higher tariffs and Treasury Secretary Janet Yellen and others calling for lower tariffs on consumer goods. However, with the expansion of China's clean energy exports, it has gradually become a bipartisan consensus in the United States to protect the country's clean energy industry and suppress China's electric vehicles.

More critically, Biden's new round of tariffs on China comes at a time when he is engaged in a fierce election campaign with former President Donald Trump. As November's presidential election approaches, candidates from both parties are vying to flex their stance against China in an attempt to gain more support from voters in swing states. Back in March, Republican presidential candidate Donald Trump called for 100% tariffs on Chinese cars. In a recent speech, he also hinted at a 200 percent tariff on cars made by Chinese companies at their Mexican plants.

Wu Xinbo analyzed that the introduction of tariffs is mainly to serve the needs of electoral politics, and the clean energy products targeted this time are the concerns of voters in Pennsylvania, Michigan, and Wisconsin, and the votes of these swing states are very important to Biden.

The Biden administration has long tried to revive manufacturing in the U.S. "Rust Belt" through the transition to electric vehicles, which can protect the development of the domestic U.S. auto industry by keeping more market-competitive Chinese electric vehicles out of the market with high tariffs. In a similar vein, Biden promised voters last month that Pittsburgh, Pennsylvania's "steel capital," would more than triple the current tariffs on steel and aluminum to protect local industries and workers.

Currently, according to a Wall Street Journal poll, Trump is ahead of Biden in six of the seven swing states with the most competitive elections in the 2024 election, due to widespread dissatisfaction with the national economy among voters and deep doubts about Biden's ability and job performance. (Editor's note: In this year's election, there are seven main swing states, and there are three main categories according to the region: the first is Pennsylvania, Michigan, and Wisconsin, which are "rust belts"; the second is Arizona and Nevada on the southwestern border; The third category is North Carolina and Georgia in the southeast. ）

The stability of China-US relations has been undermined, and the atmosphere of cooperation has been affected

"Stopping the decline and stabilizing" is often used to define the trend of China-US relations since the beginning of this year. Now that the United States has introduced a new round of tariff measures, experts analyze that this marks the escalation of the confrontation between China and the United States in the field of trade, and the previous relatively stable state may come to an end. As the U.S. election tension intensifies, candidates from both parties may step up their efforts to play the "China card", which also indicates that the bilateral relationship may see more volatility.

U.S. Secretary of State Antony Blinken previously told The Paper in response to questions related to the U.S. election and China-U.S. relations, as President Biden said, China and the United States will continue to communicate clearly on the differences between us and minimize miscalculations and misunderstandings, which I will continue to do during my trip and in the future. This in itself has nothing to do with the election cycle.

Wu Xinbo pointed out in his analysis that as the US election heats up, both the US Government and Congress may "make moves" on the China issue according to the needs of the election. This would effectively undermine the "fragile stability" of the US-China relationship for some time now. Not only in the economic and trade fields, but also in the financial, technological, diplomatic and other fields of instability between the two sides will rise significantly.

It is worth noting that many Western media have also analyzed from the perspective of economic and energy transition that the imposition of tariffs on China is actually "harmful to others and not beneficial to themselves". According to CNN, some economists have warned that the increase in tariffs risks rekindling a "trade war" with China and hurting the U.S. economy itself in the process. Because tariffs are essentially taxes on U.S. businesses and consumers, increasing the cost of imported goods. As a result, this can lead to inflation, hurting job growth.

U.S. Customs and Border Protection data released on May 3 showed that U.S. consumers have paid more than $230 billion in tariffs on Chinese imports such as solar panels and steel and aluminum since the Trump administration imposed tariffs on Chinese imports.

The Wall Street Journal believes that seeking to keep the most affordable Chinese electric vehicles out of the U.S. market will drag down the Biden administration's goals of reducing carbon emissions and mitigating climate change. The United States is currently investing hundreds of billions of dollars in its clean energy industry, but the Biden administration is trying to distance itself from China, a leader in clean energy manufacturing, in achieving this goal.

On the other hand, the EU's countervailing investigation into Chinese electric vehicles is advancing, and according to an analysis by the American political news website Politico, it is expected that the European side will soon impose temporary tariffs on the import of Chinese electric vehicles. "European officials advocating tariffs on China will certainly be encouraged by the U.S. action." However, Wu Xinbo analyzed that some European countries are also concerned about imposing tariffs, such as Germany, which relies on the Chinese market, will worry that its car companies in China will be countered by China.

On May 14, in response to the US further increase in tariffs on electric vehicles, lithium batteries, photovoltaic cells, critical minerals and other products imported from China on the basis of the original Section 301 tariffs on China, a spokesperson of the Ministry of Commerce of China said that China firmly opposes it and makes solemn representations. Out of domestic political considerations, the US has abused the Section 301 tariff review procedure to further increase the Section 301 tariffs imposed on some Chinese products, politicizing and instrumentalizing economic and trade issues, which is a typical political manipulation, and China strongly disagrees with this. The WTO has long ruled that Section 301 tariffs violate WTO rules. Instead of correcting them, the US side has insisted on going its own way and making mistakes again and again.

The spokesperson said that the US side raised Section 301 tariffs in violation of President Biden's commitment to "not seek to suppress and contain China's development" and "not seek to decouple and break the chain with China", and is also not in line with the spirit of the consensus reached by the two heads of state, which will seriously affect the atmosphere of bilateral cooperation. The US should immediately correct its wrong approach and lift the additional tariffs imposed on China. China will take resolute measures to defend its rights and interests.

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