News & Current Events

Taking a page out of the Trump playbook again.

President Joe Biden is following in his predecessor’s footsteps. On May 14, the White House announced that the US government will impose new tariffs on China that officials say will not contribute to inflationary pressures because of their structure. Despite the incumbent slamming former President Donald Trump over tariffs, the current administration is emulating the presumptive Republican nominee’s trade policies.

Inside Biden’s Tariffs

The White House unveiled a plethora of sizable tariff hikes on $18 billion worth of Chinese imports that will take effect in 2024 and be phased in over three years. US officials say these levies are imperative to shield US industries from what they view as unfair competition. The most notable trade announcement is the quadrupling of tariffs on imported Chinese electric automobiles. The import tax will rise from 25% to 100%. Despite very few Chinese EVs driving on American roads, trade officials say they want to avoid the situation before Beijing dumps their cheap subsidized cars into the US market.

In addition, Washington will double the tariffs on Chinese solar cells from 25% to 50%. Levies on aluminum and steel imports will climb from 7.5% to 25%. Next year, import taxes on Chinese semiconductors will rocket from 25% to 50%.

Joe Biden (Photo by Pete Marovich/Getty Images)

“China is producing at a rate and with a trajectory that’s far in excess of any plausible estimate of global demand,” a senior administration official told reporters. “That is going to flood the global market with supply that undercuts our ability to build productive capacity at home and leaves all of us across the world more vulnerable to economic coercion.”

The latest moves also will target medical equipment. For the first time, 50% tariffs will be installed on medical needles and syringes. Medical gloves, face masks, and respirators manufactured in China will face higher levy rates, amounting to as high as 25%.

A recent Oxford Economic analysis estimates the new trade measures will lift inflation by 0.01%. But while experts and the administration insist that these planned tariff increases are not inflationary, a chorus of economists calls it bad economic policy.

“The Biden administration has two competing goals,” said Alex Durante, an economist for the Washington-based Tax Foundation think tank. “Tariffs, in general, are bad economic policy. I think the administration should be moving away from them.”

China Is Unhappy

Ahead of the official policy announcement, Treasury Secretary Janet Yellen told the press that the United States is not seeking “global domination of manufacturing.” Instead, she noted, these mechanisms are designed to establish a level playing field and bolster US supply chains.

“I have been very clear in my engagement with the Chinese that we believe there needs to be a level playing field for competition and that we have particular concern about clean energy, semiconductors, and areas where China has, through its policies, encouraged so much investment that it’s led to overcapacity,” she said.

As for China’s response, Yellen stated that she does not anticipate anything “significant.” However, she might have spoken too soon as Beijing has already planned to retaliate and accused the Biden administration of continuing the “politicization and weaponization” of trade. “China strongly expresses its dissatisfaction. It will seriously impact the bilateral relations. The U.S. should immediately correct its wrong practices and cancel the tariff measures imposed on China. China will take resolute measures to defend its own rights and interests,” the Ministry of Commerce said in a statement.

Moreover, Chinese leadership argued that the Biden administration is violating international trade rules that the United States helped create at the World Trade Organization (WTO). Officials also rejected “groundless” claims that Beijing has supported factory overcapacity to control the global green energy industry.

The Economics of Tariffs

A chorus of economists opposes protectionist trade policies. Politicians of all stripes allude to America’s trade deficits, but they are neither good nor bad. Tariffs are political tools rather than ones grounded in economics, as they are designed to garner electoral support from industries that benefit from these protectionist endeavors. And, once they are implemented, levies are hard to eradicate since companies become accustomed to the state-sponsored crutch.