(Bloomberg) — President Joe Biden’s administration is set to unveil a sweeping decision next week on Chinese tariffs, a move that is expected to target key strategic sectors while rejecting across-the-board increases requested by Donald Trump, officials said. learned from sources close to the matter. the matter has been said.
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The move is the culmination of a review of Section 301 tariffs implemented under Trump starting in 2018. The new tariffs will focus on sectors such as electric vehicles, batteries and solar cells, existing levies being largely maintained. An announcement is expected Tuesday, two of the sources said.
While a decision could be delayed, it nonetheless represents one of Biden’s most important moves in the economic race with China. It builds on his call last month to raise tariffs on Chinese steel and aluminum, and the formal launch of a new investigation into China’s shipbuilding industry.
The yuan weakened on the news, while the CSI 300 index of Chinese stocks fell as much as 0.6% in early trading before rebounding.
“This will definitely cause investors to take pause on potentially exposed stocks,” said Xin-Yao Ng, chief investment officer at abrdn, adding that many green technology brands such as battery giant Contemporary Amperex Technology Co. Ltd . Exhibition in the United States. “Everyone knows it’s a risk.”
Read more: Chinese investors brace for impact of US tariff plan
China’s Foreign Ministry said tariffs imposed by the previous US administration had “seriously disrupted” economic and trade exchanges between the two countries. He called on Washington to roll back the restrictions and added that China would take measures to defend its rights and interests.
“Instead of correcting its bad practices, the United States has continued to politicize economic and trade issues,” Lin Jian, a ministry spokesperson, said at a regular press briefing on Friday. “To further increase customs duties is to add insult to injury. »
President Xi Jinping’s strategy of ramping up manufacturing to stem the country’s economic slowdown has sparked alarm abroad. Leaders of the United States and European Union have criticized Beijing for state support that they say has fueled a deluge of cheap exports that threaten jobs in their markets. The EU launched an investigation into electric vehicle subsidies in October, which could lead to additional tariffs by July.
The United States opposes China’s “unfair economic practices and industrial overcapacity,” Biden said last month. “I’m not looking for a fight with China. I look for competition, but fair competition.
The tariffs would likely have little immediate impact on Chinese companies, as world-leading electric vehicle makers have avoided the U.S. market due to the tariffs. Its solar companies mainly export to the United States from third countries to avoid restrictions, with American companies also seeking to impose higher tariffs on that trade.
Biden and Trump are battling to be seen as equally tough on China as they head toward an election rematch in November. Biden signed a bill into law last month that started a countdown for video-sharing platform TikTok to divest from its Chinese parent company ByteDance Ltd., or leave the U.S. market.
Trump has promised to raise tariffs on China across the board if he is re-elected, promising a 60% tax on all Chinese imports. Many Democrats have rejected that approach, in part because it would lead to higher prices for U.S. consumers struggling with inflation.
Under the last Trump administration, Washington and Beijing found themselves embroiled in a trade war in which China retaliated with measures aimed at hurting America’s heartland by targeting agricultural exports.
US Senator Chuck Grassley, Republican of Iowa, expects Beijing to respond again. “We know how China reacted when Trump imposed tariffs,” he said. “They hit agriculture with this. I can’t be sure China will hit agriculture the same way Trump did, but they will hit back.”
Strategic pricing
Biden’s announcement would be officially signed into law by the office of U.S. Trade Representative Katherine Tai, who said last month that she expected the conclusion of a review that began in 2022 to conclude soon . The administration was looking for ways to make the tariffs more strategic and effective, she added.
The move comes after Biden last month proposed new 25% tariffs on Chinese steel and aluminum as part of a series of measures aimed at shoring up the US steel sector and wooing its workers over of an election year. The vow was seen as largely symbolic, as China currently exports few of these two metals to the United States.
Beijing has responded with restraint to the threat of metal restrictions, imposing tariffs on U.S. propionic acid, an export market worth $7 million to America last year, according to the customs data. Still, raising tariffs on a wider range of industries could prompt a tougher response from Chinese authorities.
The full range of existing tariffs extends from imports from industrial inputs, such as microchips and chemicals, to consumer goods, including clothing and furniture. Trump imposed the first tariffs in 2018, citing Section 301 of the Trade Act of 1974.
For years, internal divisions have prevented Biden’s team from reaching consensus on how to move forward on tariffs. Some officials, including Treasury Secretary Janet Yellen, have argued that reducing restrictions on household items could help ease U.S. inflation.
While the Biden administration had considered the policy implications of the tariff changes, USTR began a legally required formal review of their impact in late 2022. In the absence of such an assessment, the restrictions would have started to expire automatically in mid-2022.
Under Trump, Washington and Beijing reached a so-called phase one deal in early 2020. This reduced some tariffs in exchange for China’s commitment to combat intellectual property theft and increase its purchases of energy, agricultural and manufactured products, as well as services, in 200 billion dollars over two years until the end of 2021. China has failed to keep its promises by more than a third.
Biden’s tariff decision comes after his country’s turbulent relations with China stabilized in recent months amid a flurry of diplomatic engagements. After the US president met his Chinese counterpart in California last November, Biden said they had made “real progress”.
–With assistance from Dan Murtaugh, Zhu Lin, Sangmi Cha, Yujing Liu, James Mayger, Qizi Sun, Jennifer A. Dlouhy, Philip Glamann, Shikhar Balwani, and Qianwei Zhang.
(Updated with comments from the Chinese Ministry of Foreign Affairs from the sixth paragraph)
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