June 13, 2024
World Economy

US to quadruple tariffs on Chinese electric vehicles

The Biden administration is set to quadruple tariffs on imports of Chinese electric vehicles (EVs) from 25 percent to 100 percent in a major escalation of the economic war being waged over the development of computers chips and green technology products.

Chinese smartphone maker Xiaomi displays its Xiaomi SU7 electric car in Beijing, Tuesday, March 26, 2024. [AP Photo/Ng Han Guan]

The proposed hike in EV tariffs, under Section 301 of the 1974 Trade Act, has been reported by the Wall Street Journal, Bloomberg and the Financial Times (FT) in recent days and could be invoked as early as today.

While Chinese EV exports to the US are not of major size at this stage—as its producers have focused more on the European market—the mooted tariff hike is a preemptive strike aimed at blocking access to the American market in the future.

Outlining the driving forces of the move, former US trade official, now vice-president of the Asia Society Policy Institute, Wendy Cutler, told the FT the Biden administration was “trying to get ahead of the curve and ensure that the US car industry does not suffer the same fate as the US solar industry, which was virtually decimated by unfairly traded Chinese imports.”

Cutler said Chinese producers had been prepared to swallow the cost of existing tariffs to “cripple” their US rivals, but the escalation of the tariff would make that much harder.

“A quadrupling of the tariff rate, however, would more effectively shield US auto manufacturers from unfairly traded Chinese vehicles before they can gain a foothold in the US market,” she said.

The US claims these “unfair” practices result from state subsides given to Chinese high-tech manufacturers by Beijing. The accusation is completely hypocritical given the billions of dollars provided by the US state to high-tech corporations under the Inflation Reduction Act and the so-called Chips Act either in the form of direct subsidies or via lucrative tax breaks.

Only last month US officials announced a plan for $6.1 billion in grants to Micron Technology, the largest American maker of computer chips, part of the $33 billion that has been handed out to high-tech companies.

If Chinese companies are being provided with state subsidies, part of president Xi Jinping’s push to develop “new productive forces,” as they undoubtedly are, then Beijing is doing nothing different from what is being carried out in the US and other major economies.

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