Recently, "U.S. tariffs on China" have become a hot topic around the world.
In the early morning of May 14, local time, the Biden administration of the United States released the results of the four-year review of the 301 tariffs imposed on the mainland, saying that tariffs will be imposed on key minerals, semiconductors and other products under the 301 investigation, including new energy products such as electric vehicles, lithium batteries, and photovoltaic cells, which are known as the "new three" exported by the mainland.
Just two days later, on May 16, the White House issued a statement saying that it would further strengthen the control of imported photovoltaic cells, cancel the previous tariff exemption for solar bifacial modules, and resume tariffs on imported photovoltaic products from four Southeast Asian countries (Cambodia, Malaysia, Thailand, Vietnam) after June 6 this year, and require relevant imported products to be installed within 6 months to avoid hoarding.
Campaign goals > economic considerations?
The Office of the United States Trade Representative (USTR) detailed the causes and consequences of the Section 301 Tariff Investigation in its Quadrennial Review Report. On August 18, 2017, during the Trump administration, the USTR launched a Section 301 investigation to "determine whether the Chinese government's policies and measures related to technology transfer, intellectual property and innovation are unreasonable or discriminatory, and whether they are burdensome or infringing on U.S. business." On March 22, 2018, the Trade Representative determined that the mainland had adopted "a series of unreasonable or discriminatory acts, policies, or practical practices related to technology transfer that impose burdens or restrictions on U.S. commerce" and said it could file a lawsuit under the law. Between April and June of that year, the U.S. issued tariff items, most of which went into effect on July 6 of that year, and since then, the list has continued to grow, with individual products exempted (such as the exclusion of certain health care products related to the U.S. response to the coronavirus response from Tariff 301 in 2020), with a cumulative amount of hundreds of billions of dollars. On May 5, 2022, the U.S. Trade Representative (USTR) began a statutory review of the previous list of tariffs, stating that the revised measures could be terminated at the end of the four-year period. In 2023 and early 2024, the Office of the U.S. Trade Representative, the Section 301 Committee, and relevant experts held several meetings on statutory review to discuss the relevant policies of the Chinese government and the impact of the Section 301 tariffs on the U.S. economy, and focused on the possibility and direction of modifications to relevant measures (such as further tariffs), and how these plans will affect the U.S. economy.
By May 14 this year, the USTR released the above-mentioned review report, saying that "additional tariffs should be levied on products in the 301 tariff list", specifically, the main products of this round of tariffs include steel and aluminum, critical minerals, semiconductors, port cranes, medical and personal protective equipment, and the "new three" new energy products that have attracted much attention, with a total value of about 18 billion US dollars. In terms of the "new three", electric vehicles have the largest tax increase, and their tariffs have been directly increased from 25% to 100%; Tariffs on all types of lithium batteries have been increased from 7.5% to 25%, but the tariffs on lithium-ion electric vehicle batteries will be implemented in 2024, and the tariffs on lithium-ion non-electric vehicle batteries will not be implemented until 2026; The tariff rate on photovoltaic cells and modules has been further increased from 25% to 50%.
In the wake of the tariffs, the U.S. intent and purpose have come into focus. The White House announcement said the move was to "protect American workers and businesses"; The Ministry of Commerce of the mainland issued a document on its official website, saying that China firmly opposes it and makes solemn representations, and pointed out that the United States abused the Section 301 tariff review procedure "out of domestic political considerations", which is a politicization and instrumentalization of economic and trade issues, and is a "typical political manipulation".
In fact, many media reports and public discussions have also focused on the "political intentions" of the United States, and one of them has received particular attention, that is, the Biden administration's move is intended to "pull votes" for this year's election. Wu Xinbo, dean of the Institute of International Studies at Fudan University, once analyzed that Biden's tariffs are more to show his tough stance on China's economic issues, so as to win the support of voters in swing states (especially in the "Rust Belt" where industry, manufacturing and workers are concentrated). Golin, a podcaster who has long followed the U.S. election and produced related programs, also expressed similar views on the titanium media app, adding that in the 2020 election, Biden and the current Treasury Secretary Yellen both criticized Trump's tariff investigation measures, saying that the relevant measures made American consumers bear higher costs, and said that after taking office, they would cut some tariffs to reduce the public burden. But this year, Biden's campaign strategy has changed significantly, and in April in a campaign event in Pittsburgh, Pennsylvania, a key swing state, he said that if unfair trade competition was found in China-related industrial products, he would urge U.S. Trade Representative Katherine Tai to sharply raise Section 301 tariffs, which was once known as the "steel capital of the world" and is home to the United Steelworkers Union (UWS), the largest trade union in North America. Titanium media APP also noticed that when Biden announced the decision to impose tariffs, he was surrounded by the heads of major labor unions and industrial workers in the United States, and related to the promotion of "manufacturing reshoring" during his tenure, the "Inflation Act" (IRA) and other efforts to provide "middle-income jobs" for industry and manufacturing, as well as the so-called "overcapacity" controversy that has recently aroused heated discussions, we can also see a series of propositions and measures of this US administration in the context of "for workers". In fact, on the issue of "election tariff card", not only several domestic central media have mentioned it in their reports and comments, but also Reuters, Financial Times, Bloomberg and other foreign media have also taken it as an important reporting direction. A Financial Times report said that "tariffs on Chinese goods put trade, protectionism and blue-collar workers at the heart of this year's presidential election" and compared the claims of Biden and Donald Trump (who had already called for 100% tariffs on Chinese cars on the campaign trail, and even said that Chinese automakers would import American cars through Mexican factories with 200% tariffs) on trade measures against China, arguing that the two candidates are competing to see who is "tougher" on China.
However, it is unrealistic to separate political elections from economic and trade measures, and blindly emphasizing "election show" may also ignore the real issues that need to be discussed and considered behind the tax hike, and the reason why the view highlighting Biden's election considerations is so prevalent is not only that the election showdown is getting closer, but also related to the question of "whether the U.S. tariffs can really play a practical role".
Tariffs = a major blow?
As an important export destination, in the past, measures such as trade investigations and tariffs imposed by Europe and the United States were often prone to cause anxiety and even panic in related domestic industries. Although the discussion of the tariffs is still very high, there is no longer a "rumor". Moreover, at least as far as the "new three" that has attracted much attention this time is concerned, the industry generally believes that it will not form a so-called "major blow" at all, and even have little impact on some products.
Taking electric vehicles that seem to have the largest tax hike as an example, Barron's published an article saying that "Biden's tariffs on Chinese electric vehicles are more symbolic than substantial." Titanium media APP also learned from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products that although the mainland's electric vehicles are a "new force" in exports, they rarely flow to the United States, and last year's exports to the United States were less than 1% of the total exports. An industry observer also said that as far as the export of electric vehicles is concerned, Chinese companies cannot talk about large-scale operation in the United States, and the 100% tariff on electric vehicles seems "scary", but in fact it has little impact, but the announcement of the tax increase on natural graphite, permanent magnets and other electric vehicle materials will have a real impact. In the list of tariffs imposed by the United States, the tariff rate of natural graphite and permanent magnets has been increased from 0% to 25%, but it will not take effect until 2026.
Similar differences also exist in lithium battery products (from 7.5% to 25%), with the tax increase on lithium batteries for electric vehicles being implemented from 2024 and lithium batteries for non-electric vehicles, mainly energy storage batteries, being implemented in 2026. After the "official announcement" of the United States, the new team of Tianfeng Securities issued a short comment, saying that "the tariffs imposed on the new energy sector are far better than market expectations, and the best thing is energy storage, which is directly exempted for two years." Tianfeng Power also said that "all kinds of circumstances show that the tariffs are indeed for the sake of votes, and the real supply bottleneck (graphite) and the policies that affect downstream demand (energy storage) are particularly beyond expectations." The Beijing News Shell Finance also mentioned in the report that insiders of lithium battery companies generally said that the tariffs would have little impact on enterprises. EVE Lithium Energy (300014. SZ) recently said in response to investors' questions that the company currently does not directly export power battery products to the United States, and the new tariff policy has no impact on the company; As for the non-power battery part that will be subject to tariffs from 2026, the company has laid out the Malaysian factory in advance and planned the production capacity of consumer batteries and energy storage batteries, which is expected to support the delivery of local customers in the United States in 2026. After trade restrictions have become more stringent in recent years, many new energy Chinese companies have participated in the U.S. market through overseas production capacity, but in the future, it is also necessary to pay attention to the long-term impact of tariff policies on the cost and competitiveness of U.S. domestic products. InfoLink, a renewable energy and technology research and consulting company, said that although the energy storage tariffs cannot have an impact on the energy storage demand in the United States in the short term, however, as the exemption period approaches, if the situation does not change, then the demand for energy storage in the United States will increase in volume from the second half of 2025, and it is expected that the cost of battery cells manufactured in the United States will be the same as the cost of Chinese batteries exported to the United States in 2027, and then it may further form a cost advantage.
Let's take a look at another major category in the "new three": photovoltaic products. As the earliest "target" of the U.S. "anti-dumping" investigation and trade restriction measures in the field of new energy, mainland photovoltaic products generally faced many restrictions such as the 201 tariff, the WRO withholding order, and the UFLPA Xinjiang-related bill before the 301 tariff was raised from 25% to 50%. From this point of view, the additional tariffs have no direct impact, and LONGi Green Energy (601012. SH), JinkoSolar (688223. SH) and other module leaders also publicly expressed this view, and an insider of the top 10 photovoltaic module shipment companies told Titanium Media APP that the company did not pay much attention to the so-called tariffs, but photovoltaic companies have formed a complete industrial chain in Southeast Asia, but the expiration of the United States' photovoltaic tariff exemption for the four Southeast Asian countries will have a greater impact, and it is also the real focus of the industry. As mentioned above, on May 16, the White House announced that it would remove import duty exemptions for photovoltaic modules from four Southeast Asian countries. In addition, on April 24 this year, the U.S. Solar Manufacturing Trade Commission submitted an application for a "double reversal" investigation of photovoltaic cells and modules imported from four Southeast Asian countries, and the U.S. Department of Commerce also announced on May 15 that it would officially launch an investigation, which is expected to be ruled in the fourth quarter of this year. In the report "The Evolution of Photovoltaic Going Overseas", Titanium Media APP mentioned that the cell and module production capacity of mainland enterprises in Southeast Asia exceeds 50GW (most of the battery production lines in the region are built by Chinese enterprises, and nearly 6% of the modules are built by Chinese enterprises), LONGi Green Energy and Trina Solar (688599. SH), JinkoSolar, JA Solar (002459. SZ) and other leading enterprises of main materials have more than one production base in Southeast Asia. Its module products are mainly sold to the more profitable US market, and many companies have also warned in their 2023 annual reports about the risk of Southeast Asian tariff exemptions expirating.
In fact, the stock price performance of listed companies can also see the clues of the influence of relevant policies. From the news of the tax hike in early May to the official announcement of the White House, most of the stock prices of listed companies in the new energy vehicles, photovoltaic and energy storage sectors of A-shares, Hong Kong stocks and U.S. stocks have not been significantly affected. In 2023, the "Big Five" of Chinese PV modules (Jinko, LONGi, Trina, JA Solar, and Canadian Solar) will all build factories in the United States (Jinko is an expansion), of which LONGi's 5GW PV module production line in Ohio, Jinko's 1GW expansion of N-type module capacity in Florida has been officially put into operation in the first quarter of this year, and these companies have also expressed a relatively optimistic attitude towards the US business in their recent annual reports and earnings briefings.
In addition, just as Biden accused Trump of harming the interests of the American people during the 2020 election campaign, the impact of the ongoing trade dispute on the United States has also become one of the hot topics recently. For now, there is still a lot of argument that the tariffs will make the average consumer more of a living cost, for example, Colorado Governor Jared Polis publicly expressed his displeasure on social media X, saying that the move "will hit every family". In addition, some downstream companies and industry organizations in the industry (such as photovoltaic power plant operators, the American Solar Energy Industry Association, etc.) are also worried that the ongoing trade dispute will make them have to buy products made in the United States at higher prices, which is not conducive to the return on investment. Another group of critics is concerned about the negative impact of these trade barriers on countries' cooperation to tackle the climate crisis and promote clean energy development, with Xinhua News Agency, People's Daily and other central media saying that the US tariffs "will damage the green transformation of the world economy and undermine global efforts to combat climate change". At the same time, the possibility of further escalation of relevant trade restrictions, the possibility of the European Union and other countries following suit, and even the possibility of increased friction affecting the global economic and trade recovery has also raised concerns.
The United States takes the lead + the EU follows up?
Just like the lifting of Southeast Asian exemptions and the launch of the "anti-dumping" investigation immediately after the tariffs, the U.S. trade restrictions should not stop there, and Tai Qi said at a press conference on May 14 that it is studying whether to impose tariffs on Chinese companies importing U.S. products (such as electric vehicles) through Mexican factories. And the current mainstream view is also generally that if Trump wins the election, I am afraid that trade restrictions on China will be further increased.
In addition, China's countermeasures have also attracted much attention, with a spokesperson for the Ministry of Commerce saying that "the US side should immediately correct its wrong practices and cancel the additional tariffs imposed on China." China will take resolute measures to defend its rights and interests. Wu Xinbo analyzed in an interview with the media that China may retaliate by imposing tariffs on some U.S. goods, but considering that the White House tax hike is more for election momentum, the actual impact is limited, and the extent of China's tax hike may be relatively limited, and the situation will not be easily escalated.
In addition to the United States, the European Union has recently become more and more stringent in restricting China's new energy industry. Among them, the most typical is the Foreign Subsidies Regulation (FSR) to intervene in the bidding and operation of mainland new energy enterprises in EU countries. Titanium Media APP has previously published a number of articles to sort out (the EU launched a countervailing investigation against mainland PV, involving LONGi Green Energy and Shanghai Electric; The "double anti-dumping" turmoil in Europe and the United States has recurred, the means have been upgraded, and new energy manufacturing may fall into a tug-of-war; So far, the four investigations under the new regulations have all been aimed at mainland new energy companies, and the "recruited" are electric trains, photovoltaic products, and wind power products, all of which have been "unfairly advantaged" through "subsidies from the Chinese government", and the EU also updated the so-called "Report on state-induced" in April distortions in China's economy), saying that the mainland's photovoltaic cells, wind power modules, electric vehicles and other new energy industries have a high proportion of state-owned enterprises and more government intervention, and therefore form "market distortions". As of mid-May, CRRC (601766. SH), LONGi Green Energy, Shanghai Electric (601727. SH) will allegedly withdraw from the bid.
Against this backdrop, it is only natural that there will be discussions about whether the EU will follow the US tariffs. However, at least for now, there is no direct push for large-scale tariffs in the EU, and the Commission's official response on May 14 only said that it took note of the situation and would assess its impact on the EU. Josep Borrell, the EU's high representative for foreign affairs and security policy, said in an interview with the US Foreign Affairs magazine that the EU and the United States disagree on some China-related issues, and the US has not coordinated with the EU in advance to raise tariffs. German Chancellor Olaf Scholz even directly stated that he could not follow the example of the United States in imposing tariffs, and Swedish Prime Minister Kristersson also openly expressed opposition to the tax increase. From an economic and trade point of view, in the field of new energy, Europe's dependence on Chinese products is much higher than that of the United States, and many views believe that most European countries cannot afford the risk of "decoupling" from Chinese products under the premise that it is still necessary to promote the net-zero goal through photovoltaics and lithium batteries. However, it is not yet possible to speculate on the overall situation of the EU, or at least within the EU, there are a variety of different propositions in the game, such as in terms of electric vehicles, Hong Kong's South China Morning Post recently reported that the EU is likely to make a decision in early June on whether to impose temporary tariffs on Chinese imports of electric vehicles, and there is no shortage of views in favor of the tax. According to a Reuters report, the G7 meeting in Italy in late May will focus on the "risk of global trade fragmentation" triggered by "U.S. tariffs on China."
In fact, compared with the "simple and crude" tariffs, the emergence of new restrictions or trade barriers such as anti-circumvention investigations, FSR regulations, carbon tariffs, and carbon footprint investigations is more worrying. Lin Xueping, a visiting researcher at the China Institute of Quality Development at Shanghai Jiao Tong University and the author of the book "Supply Chain Offensive and Defensive Warfare", once said that a country's design strength in the supply chain is very important, and the strategic planning of Europe and the United States in the new energy supply chain game is becoming more and more perfect, and there are many professional institutions, think tanks, industry, academia and research institutes to assist decision-making, and Chinese enterprises often lack effective means to directly respond to these new restrictions. It may be a time to be more vigilant when the major importing countries take out of their toolboxes not ordinary "stones", but a series of "precision strike weapons". (This article was first published on Titanium Media APP, author|Hu Jiameng, editor|Liu Yangxue)
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