U.S. finalises steep tariff hikes on Chinese imports

The Biden administration has officially confirmed a series of substantial tariff increases on Chinese imports, marking a significant escalation in the ongoing trade tensions between the United States and China. The U.S. Trade Representative's office announced on Friday that many of these tariffs, including a striking 100% duty on Chinese electric vehicles (EVs), will take effect on September 27, 2023.

This decision, which concludes a comprehensive two-year review of tariffs initially imposed during the Trump administration, largely maintains the increases proposed by President Joe Biden in May. The new tariff structure includes a 50% duty on solar cells and a 25% tariff on steel, aluminium, EV batteries, and key minerals. Additionally, a 50% duty on Chinese semiconductors, now expanded to include silicon wafers and polysilicon used in solar panels, is scheduled to begin in 2025.

The administration has also retained the tariffs implemented by former President Donald Trump on over USD 300 billion worth of Chinese goods. These existing tariffs, ranging from 7.5% to 25%, cover a wide array of products including toys, textiles, internet routers, and industrial machinery.

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Lael Brainard, the top White House economic adviser, defended the decision in an interview, emphasising the need to counter China's state-driven subsidies and technology transfer policies. Brainard stated, "The 100% tariff on electric vehicles here does reflect the very significant unfair cost advantage that Chinese electric vehicles in particular are using to dominate car markets at a breathtaking pace in other parts of the world."

The move has drawn criticism from various industry sectors, with concerns raised about potential supply chain disruptions and the effectiveness of tariffs in addressing China's industrial practices. Jason Oxman, President of the Information Technology Industries Council, expressed disappointment, noting that previous tariffs have cost American businesses and consumers USD 221 billion without significantly altering Chinese trade policies.

Automakers' pleas for lower tariffs on critical minerals and graphite used in EV battery production were largely disregarded, reflecting the administration's determination to reduce dependence on Chinese supplies in strategic industries. This stance aligns with broader U.S. efforts to invest heavily in domestic EV, solar, and semiconductor sectors through tax subsidies.

The tariff decision comes at a politically sensitive time, with both Vice President Kamala Harris and former President Donald Trump courting voters in auto and steel-producing states ahead of the November presidential election. Trump has gone further, vowing to impose 60% tariffs on all Chinese imports if re-elected.

Internationally, the U.S. move mirrors similar actions by the European Union and Canada, with the latter matching the 100% duties on Chinese EVs.

The final tariff structure does include some concessions and temporary relief measures. U.S. port operators facing a new 25% tariff on large ship-to-shore cranes will be granted exclusions for orders placed before May 14, 2023, as long as they are delivered by May 14, 2026. This provision aims to mitigate the immediate impact on an industry where China is the dominant supplier with no U.S. producers.

In the medical sector, tariffs on face masks and surgical gloves have been increased to 50% from the initially proposed 25%, but with a delayed start to allow for a transition to non-Chinese suppliers. Notably, the duty on Chinese syringes will immediately rise to 100%, with a temporary one-year exclusion for enteral syringes used in infant feeding.

The USTR has also indicated it will consider requests for tariff exclusions in five Chinese industrial machinery categories, including equipment for purifying or filtering liquids, industrial robots, and printing machinery.

China's response to these tariff hikes has been swift and critical. A spokesperson for the Chinese embassy in Washington warned that the tariffs would "backfire" and fail to suppress China or resolve U.S. industrial problems. The spokesperson stated, "The 301 tariff is the product of unilateralism and protectionism, and it reflects the hegemonic nature of U.S. power politics," adding that China would take all necessary measures to protect its interests.