The Biden administration announced yesterday that it would impose tariffs on $18 billion worth of Chinese imports. Among them, the tariff rate on electric vehicles will be increased from 25% to 100% this year; the tax rate on solar cells increased from 25% to 50%; The tax rate on some steel and aluminium has been increased from 7.5% to 25%.
1 Biden "surpasses" Trump?
At first glance, hearing this announcement by the U.S. government makes people feel like they are out of place.
Wasn't the trick of imposing tariffs launched by former US President Trump against China in 2018? The U.S. and Chinese governments also talked and talked about this for nearly two years, and finally signed the first phase of the trade agreement between the two countries on January 15, 2020.
To this end, the two countries have also agreed that they will not continue to impose new tariffs on each other. In other words, although the old tariffs have not been lifted, each side will not impose new tariffs on the other.
Sure enough, the U.S. government is still the same U.S. government that can completely ignore the previous agreement and unilaterally impose new tariffs on its adversaries once again without new consultations.
See what the Biden administration has to say this time? What about the breakdown?
First, lithium batteries for electric vehicles, the tariff rate will be raised from 7.5% to 25% this year.
Second, lithium batteries for non-electric vehicles will increase the tax rate from 7.5% to 25% in 2026.
Third, the tariff rate for battery "components" will be raised from 7.5% to 25% this year.
Fourth, the tariff rate on semiconductors will be increased from 25% to 50% by 2025.
In the United States, this is from electric vehicles, electric vehicle batteries, non-electric vehicle batteries, solar cells, and a semiconductor.
Is there a mistake, didn't the United States restrict chip sales to Huawei as early as 2020? Since then, it has continued to increase and upgrade, adding hundreds of Chinese enterprises and entities to the Entity List.
Hasn't the United States already restricted chip sales to China? According to the logic of the United States at the beginning, as well as the statements of those anti-China and anti-China people, China's chip industry should fall, right?
Why is it that now they are afraid of China's chip products again, and they have started the trick of imposing tariffs, and they have exceeded the tariff rate of the Trump era, from 25% to 50%.
In the fall of 2018, Mr. Trump went into a rage, threatening to raise tariff rates to 40 percent or even 50 percent if China did not give in. Sure enough, what could not be done during the Trump era, there was no opportunity to do it, Biden got it done, not only increased it to 50%, but also raised the tariff rate on electric vehicles from 25% to 100% this year.
Not to mention that the Biden administration's move may be for electoral reasons, simply raising tariffs to 100% is a "first". Sure enough, what Trump can do, I (Biden) can do, and I can do more than him, more thoroughly than him.
2 "Subsidies" + "Restrictions" are not valid
Still, there is a question about the Biden administration's tariff hikes. Didn't the U.S. pass the Inflation Reduction Act in August 2022? There are two main points in this bill,
One is subsidies for electric vehicle and battery manufacturers with factories in the United States, and the other is exclusive restrictions on foreign car brands and battery minerals.
With less than two years to go before this bill was implemented, could it be that the Biden administration has capitulated and can't beat China's electric vehicles and electric vehicle battery industry?
What a surprise! Biden also announced in February 2022 that TSMC was back in the United States when it held a relocation ceremony in Phoenix, Arizona, USA.
There is another question, as mentioned earlier, the United States has blocked chips from China, according to the plan of the Department of Commerce of the two US administrations, China's chip industry should be suffocated, at least the development of China's chip industry has been greatly restricted, why is it now necessary to impose tariffs on Chinese chip products?
For these two questions, it doesn't make sense!
During the Biden administration, two major bills were formulated, the "Inflation Reduction Act" and the "Chips and Science Program", which can be called Biden's proud work, and the formulation of these two sets of magic weapons for the United States is beyond the "achievement" of the Trump era!
However, it is all the same, and it has been less than two years. The Biden administration's two major bills support domestic industries in the United States through subsidies, and at the same time impose stricter restrictions on related industries in China, but they are ineffective against China.
"Subsidies" + "restrictions" are ineffective, what else can the United States do? This is the third doubt.
There is a fourth question. At the beginning of Biden's tenure, in addition to sending the USS Reagan aircraft carrier to the South China Sea to engage in a military confrontation with China, he also said that he would send climate envoy John Kerry to visit China. It is working with China on climate issues, which is pretty much the only place where the Biden administration works with China.
Biden also attended the United Nations Climate Change Conference that year, in which he vowed to put forward the U.S. climate plan, promote the application of new energy, and take the lead in reducing carbon emissions.
In just two years, Biden has postponed the target of vehicle emissions in the United States, and on the other hand, he has sharply raised tariffs on China's electric vehicle and battery industries.
Isn't Biden's tariffs and postponing carbon emissions a message to the world that Biden's climate policy is a fake? Or is Biden admitting defeat and not being able to compete with China in new energy, green energy, and reducing carbon emissions?
You must know that green energy has been the traditional policy of the US Democratic Party for decades, and the United States has always regarded itself as a global leader in the new energy industry.
3 The U.S. side cited China's overcapacity as an argument
What is even more surprising is that the Biden administration's tariffs are based on China's overcapacity, and its appeal is that "China produces products that far exceed reasonable estimates of global market demand, leading to oversupply and weakening the ability of the United States to build domestic productivity." ”
The Biden administration also said that "if Chinese companies are unable to sell their overproduced goods domestically, they may end up being dumped into the global market."
During the Trump era, the United States imposed tariffs on Chinese goods on the grounds of its huge trade deficit with China. The "trade deficit" has been the main justification for trade wars in the event of trade conflicts between countries for decades. The Biden administration has found an "innovative" argument that subverts traditional economics, saying that China has overcapacity.
That's why before Yellen's visit to China a while ago, Yang Feng put forward such a speculation that Yellen's overcapacity in China will not just be said, as a bargaining chip to pressure China, Yellen will definitely have follow-up actions after returning to the United States, and the next step is to persuade Europe to agree with the United States' statement of China's overcapacity and act together against China.
However, it was not expected at the time that the United States could raise tariffs on electric vehicles to China to 100%. Of course, the purpose of the Biden administration's move is to warn Europe that China's overcapacity problem is really "serious", and the United States will only need to raise tariffs to 100%.
However, this further reveals the fact that electric vehicles produced in the United States can cost or sell twice as much as Chinese electric vehicles.
According to a Bloomberg analysis, the average price of an electric car in China is only $30,000, half that of the United States, and some models cost less than $10,000. ”
So you say, can the Biden administration not raise the tariffs on Chinese electric vehicles to 100%? Moreover, this is still such a high cost structure after the United States has given a large amount of subsidies through the "Inflation Reduction Act".
I would say that the official U.S. rhetoric about the tariffs is an appeal to China's overcapacity, with little mention of subsidies.
Because the United States itself is heavily subsidized. Moreover, subsidies for electric vehicles and solar panel batteries in the United States predate the implementation of the Inflation Reduction Act. In addition to the federal government subsidy, some state governments issue additional subsidies to residents of the state.
From this point of view, the Lao and American industries really can't compare with China, and their competitiveness is far from comparable, even if the U.S. government subsidizes them and uses some methods to impose restrictions on Chinese goods, they still can't compare. The electric vehicle and EV battery industry is a testament to this. Tariffs on solar cells will also be raised to 50%.
This shows that the cost gap between China and the United States in these industries is so huge that the United States has no way to compete, and has to resort directly to the old method of imposing high tariffs.
4 Trend acceleration
Earlier, we talked about the impact of China's electric vehicle industry on the United States and the West, which is tantamount to turning over the "roots" of the United States and the West. The automobile industry is the foundation of the industry of the United States and the West, and it is a high-end industry, and all the old industrial powers have a certain degree of automobile industry, and all seven major industrial countries have an automobile industry, including Canada. Automobiles are Canada's second-largest goods exporter.
When China's electric vehicle industry swept the United States and the West, it also overturned the foundation of the American and Western industries. The competitive advantage of Chinese and Western industries has since been reversed, and we mean mid-to-high-end industries.
This has caused a huge impact on the US and Western industries. Moreover, such shocks have a tendency to accelerate.
In the second half of 2023, the EU will only start to launch a countervailing investigation into China's electric vehicle industry, and at that time, the United States was not so worried because of the subsidies of the Inflation Reduction Act and restrictions on China's electric vehicle industry.
However, in just half a year, the United States has restarted the old path of imposing tariffs on Chinese industries, which shows that the United States has tried various methods, but it is becoming more and more untenable.
Of course, this move by the US side is also intended to induce Europe to follow in the footsteps of the United States and also impose tariffs or sanctions on China.
However, neither the United States nor Europe can reverse this trend. Whether it is cost price or product performance, the United States and the West are gradually disadvantaged. This is due to the gap in competitiveness between the two sides, and cannot be easily bridged by high tariffs.
5 The United States does not seek a path to radical improvement
Moreover, once the United States and the West adopt tariffs or other restrictive measures, it is doomed to "never recover". If you think about it, if the United States and the West do not seek to improve the essence of competitiveness, their competitiveness will only get worse and worse.
Biden has been in office for more than three years, has he done anything to improve the competitiveness of the US industry? When inflation is high in the United States, Biden shirks the supply chain problem, the transportation problem.
Trump has accused China of exchanging markets for technology, and Biden has gone even further since taking office.
The U.S. Department of Commerce first used the U.S. market to coerce major semiconductor manufacturers in Japan, South Korea, and Taiwan to hand over confidential trade data, and then used the market and subsidies as an inducement to let Japan, South Korea, and Taiwan's major semiconductor manufacturers invest and set up factories in the United States.
The only way for the United States to improve its competition system is to learn from China. Last year, White House National Security Adviser Jake Sullivan issued a tirade proposing a new Washington consensus to revise the free-market economic arguments that the United States has upheld over the past few decades.
Note that the free market economy is only the argument of the United States, and the United States does not actually implement the free market economy, and from time to time it sacrifices the 301 stick, trade protection.
However, the Biden administration has not really sought ways to improve issues such as union problems, infrastructure, and workers' technical training.
If the United States and Europe continue like this, of course, they will not be able to compete with China.
6 Impact
Now on to the impact.
At the beginning of this year, Yang Feng put forward a concept to everyone, and 2024 is a year of reversal of the game situation between China and the United States. The so-called reversal of the situation can cover several levels, including technological competition and industrial competition.
In terms of high-end industrial competitiveness, the situation between China and the United States has flipped even faster than I expected. Don't think that this is only for electric vehicles and electric vehicle batteries, which have already impacted the competition in the field of new energy.
According to David Yatto, an economist at the Massachusetts Institute of Technology (MIT) in the United States, "Nothing in the United States can accelerate decarbonization like a $20,000 electric car." ”
The Biden administration's imposition of such high tariffs on China's electric vehicles and batteries is tantamount to self-harm and self-termination. With such a huge gap between China and the United States in the electric vehicle industry, it is impossible for the U.S. and European electric vehicle manufacturers to compete with Chinese manufacturers unless they cooperate with Chinese manufacturers.
Moreover, under the protection of the government, the gap between American and European automakers and Chinese players will only widen.
In addition, it will be expanded from the field of new energy vehicles to the entire field of new energy. It is now foreseeable that both the United States and Europe will lose out to China on climate issues and in the field of new energy.
In particular, the United States and the West do not examine the issue of their own competitiveness, but only resort to tariffs or anti-dumping investigations, which will not be able to reverse the backward trend.
As for the semiconductor industry, the United States will raise tariffs from 25% to 50% by 2025, which also indirectly confirms the increasing implementation of the localization of China's chip industry. Let's wait until 2025 to see the results!
That's all for today's analysis and reasoning, we'll see you next time!
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