Kate Mackenzie and Tim Sahay in Polycrisis: Biden’s announcement this week to sharply raise tariffs on Chinese imports is an escalation in the yearslong tariff war on China. The new tariffs specifically target green goods, most notably electric vehicles, duties on which have now quadrupled to 100 percent. Tariffs on lithium-ion batteries, critical minerals, and solar cells will also be substantially increased. The measures are set to take effect in 2024 (with the exception of graphite, where Chinese dominance is most stark and tariffs begin 2026).
Why now? There is no doubt that the announcement of these tariffs are performative. With Trump leading the polls in several swing states, Biden’s decision to fly the protectionist flag is intended to win over voters.
The performative aspect is also to reassure investors in domestic manufacturing, who despite the IRA’s generous manufacturer and consumer subsidies, are worried about the flood of cheaper Chinese imports outcompeting domestically made green goods. The combination of new protective tariffs plus IRA subsidies is meant to buy time for US-based firms to catch up in green technologies.
Biden’s tariffs are more targeted than those on over $300 billion of Chinese imports introduced by Trump in 2018. But the signal they send is that tariffs on China are bipartisan; given this broad anti-China sentiment in Congress, they will be almost impossible to unwind.
Tariffs on EVs are already at 27.5 percent (Trump slapped an extra 25 on top of the standard 2.5 percent US tariff). That combined with the IRA’s anti-China tax credit design has meant that only Polestar (owned by China’s Geely) has been exporting Chinese EVs to the US. Chinese batteries, on the other hand, are still being imported but the IRA’s “foreign entity of concern” rules aim to bar the $3,750 tax subsidy from going to EVs containing battery metals processed in China, whether by foreign or Chinese firms.
US risks becoming a technological backwater
China is the world leader in EV production and innovation. The Cambrian explosion of Chinese EV firms over the last five years—there are now over 200 EV manufacturers in a darwinian competition for margins and market share—has meant that Chinese EVs are now better and cheaper than their Western counterparts, resembling smartphones on wheels.
Biden’s intention is to stave off the Chinese and stimulate a domestic and friendshored buildout of the EV supply chain, stretching from mines to the factory floor. Side deals with friendly governments have been made; Canada and Australia have both been deemed eligible for Defense Production Act support for their battery metals. After their howls of outrage, Europeans, Japanese, and Koreans received a leased vehicle exemption meaning that the “made in America” rules don’t apply to them, and their firms’ vehicles could still qualify for subsidies if they were leased rather than bought. Since the exemption was finalized in December 2022, EV imports from Korea, Japan, and Germany have surged.
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