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May 15, 2024

Breakingviews: Biden’s China policy is backed into a corner

by Breakingviews.

hat do you do when putting the pedal to the metal isn’t enough? For U.S. President Joe Biden’s administration, the answer is to lay down roadblocks for rivals. The White House on Tuesday unveiled a host of bumped-up tariffs on Chinese products, including a quadrupling of the charge on electric vehicles to 100%. A muddled U.S. policy push could end up backfiring.

Tuesday’s announcement from Biden also targets steel, batteries and more. It builds on an investigation conducted under former President Donald Trump that claimed China forces the transfer of, or outright steals, technologies from U.S. firms, pours money into resulting industry booms, and floods the global market. Bumped-up tariffs, in the White House’s telling, re-level the playing field.

Allies have looked askance at the United States’ own protective regime of tariffs and subsidies for domestic electric-vehicle production. But bolstering a domestic market via government support mirrors the People’s Republic’s strategy, which spent around $130 billion nurturing its industry through 2021, according to the Center for Strategic and International Studies.

China’s own investment helped it build a formidable lead in areas that cannot quickly be rolled back. It’s not just China’s $8 billion in electric-car exports in 2024’s first quarter, or its control of 60% to 90% of refining for crucial battery ingredients. The country is moving ahead technologically, dominating new patents for batteries and pushing into novel chemistries like sodium-ion.

Meanwhile, U.S. efforts are faltering. Ford Motor and General Motors trimmed electric targets; their battery-powered sales have flatlined since mid-2022. Global leader Tesla’s growth is slowing dramatically; worse, U.S. infrastructure depends on the company run by Elon Musk, which operates nearly two-thirds of all fast chargers. That makes the unpredictable boss– who recently fired Tesla’s charging staff – a creaking pillar of Biden’s entire effort.

Righting the ship is far from a harmonious effort. Senators from Biden’s Democratic party want to nix rules on battery subsidies or emissions standards to try to push forward sales of cleaner cars. At the same time, to favor state-side steel unions, the administration intervened in a deal for a major automotive steel manufacturer that could lead to a disastrous outcome for carmakers.

To boot, the risk remains that Chinese firms might import into the U.S. from Mexico to escape onerous tariffs. Other efforts, like a national security investigation into connected cars, could outright restrict, say, Chinese autos sporting sensors for self-driving features. But divorcing from China’s supply chain is a different, harder task, and risks passing on costs to Americans in an election year. Without access to cheap, advanced Chinese tech, U.S. electric vehicles remain expensive, niche products. As challenges mount, Biden’s China policy looks backed into a corner.

Context News

 

The administration of U.S. President Joe Biden on May 14 said that it would increase tariffs under Section 301 of the Trade Act of 1974 on various Chinese products amounting to $18 billion of affected imports. In a press release, the White House portrayed the tariffs as supporting the efforts of a host of subsidies introduced under various laws passed during Biden’s presidency to foster domestic industry. Tariffs on steel, aluminum, batteries and battery components, as well as ship-to-shore cranes increase to 25%. Tariffs on semiconductors and solar cells rise to 50% from 25% previously, while those on electric vehicles rise to 100%.

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