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With six months to go until the presidential election, Joe Biden showed this week that he is willing to further risk America’s long-standing championship of free trade to prevent Donald Trump from returning to the White House. On Tuesday, his administration launched a series of protectionist measures aimed at courting workers and nurturing America’s industrial base. This included a quadrupling of the tariff on imports of Chinese electric vehicles, a doubling of the tariff on solar cells and a more than tripling of the fee on Chinese lithium-ion EV batteries. At this stage, any political benefits are unclear. But for America and the world, it will likely do more harm than good.
Biden’s additional $18 billion in trade tariffs on Chinese goods builds on the $300 billion imposed under Trump. The new 100 percent tax on electric vehicles is more bark than bite, as the US only imports 2 percent from China. But the tariffs will increase costs for battery makers, which are already struggling with costs. Other manufacturers will be pinched by higher input costs. In the long run, tariff policies insulate U.S. industry from competition, stifling innovation and raising costs for consumers. That’s before considering any retaliation from China, which dominates supply chains essential to the U.S. economy.
The administration is said to argue that heavily subsidized Chinese exports threaten its efforts to promote US-made green and strategic technologies under the Inflation Reduction Act and Chips Act. There is a certain logic to this, but lumping rates together is not the solution.
First, investments under the IRA and Biden’s Chip Act, which aim to boost U.S. semiconductor manufacturing, are also being held back by skills shortages, lengthy licensing processes and political uncertainty. Second, global supply chains are notoriously agile. After previous U.S. attempts to block cheap solar panels, some Chinese companies have begun diverting solar panels through Southeast Asia. This raises the question of how well America is enforcing regulations on transhipped and lightly processed Chinese goods from third countries.
Unfortunately, political logic may also push Washington toward even more tariffs: Trump has already said he would impose a 200 percent tariff on Chinese cars produced in Mexico. Biden’s move puts pressure on Europe to also follow suit, to avoid facing a flood of diverted Chinese products. This threatens to spread the ills of tariffs further and wider.
The measures are a blow to the green transition at home and possibly abroad. With households already under pressure from the high cost of living, lower prices for electric vehicles and solar panels now seem like a missed opportunity.
As for concerns about unfair trade and possible national security risks, Biden could have imposed conditions on his actions. Beijing has introduced a cocktail of protectionist measures to tilt trade in its favor. But it does not appear that China has had to do anything to comply that would lead to a reduction in tariffs. Biden’s all-encompassing approach threatens to turn a pragmatic policy of risk reduction into a dangerous policy of decoupling.
But this is mainly about optics. Biden’s approval ratings, and especially confidence in his handling of the economy, have been declining. The tariffs are aimed at appeasing voters in industrial heartlands, including Pennsylvania and Michigan – both swing states. The measures threaten to turn the election campaign into a bidding war against China’s hawkishness, which Trump has internalized. Biden’s wave of support for manufacturing, however, could win the support of undecided voters and help him secure a second Trump presidency that some say could be more erratic than the first. Yet it is unfortunate that global growth and progress on climate change have to be held hostage.
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