US hikes tariffs on $18bn worth of China imports, including EVs

SINGAPORE (ICIS)–US President Joe Biden is ramping up tariffs on $18 billion worth of imports from China, including electric vehicles (EVs), semiconductors, batteries and other goods, in a move that the White House said was a response to unfair trade practices and intended to protect US jobs.

• US tariffs on Chinese EVs to quadruple to 100%
• Targeted China products account for 4.2% of total US imports
• Near-term impact on China’s EV exports likely limited

“Following an in-depth review by the United States Trade Representative, President Biden is taking action to protect American workers and American companies from China’s unfair trade practices,” the White House said in a statement on 14 May.

In response, China’s Ministry of Commerce said that it “will take resolute measures to safeguards its own right and interests”.

“The US should immediately correct its wrong actions and cancel the additional tariff measures against China,” the ministry said in a statement.

There is growing concern over a potential “vicious cycle of tit-for-tat retaliatory actions” between the world’s two biggest economies ahead of the US presidential elections on 5 November, Japan’s Nomura Global Markets Research said in a note.

EVs and associated battery markets are an important growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for the environment-friendly vehicles.

“With extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of electric vehicles (EVs) grew by 70% from 2022 to 2023—jeopardizing productive investments elsewhere,” the US said.

“A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices,” it added. The new rate represented a quadruple increase from 25% previously.

However, the impact on China’s EV exports may be limited in the near term, as the US constitutes a small portion of the Asian giant’s total EV shipments.

According to Nomura, the US imported in 2023 $400m worth of Chinese EVs, accounting for 1% of China’s total shipments to the world’s biggest economy.

“We expect limited near-term impact, as the targeted $18bn worth of products account for only 4.2% of total US imports from China and less than 1% of China’s total exports,” the Japanese brokerage said.

US-CHINA TRADE WAR ADDS TO GLOBAL JITTERS
The US and China have been embroiled in a trade war since 2018, when then US President Donald Trump imposed tariffs on around two-thirds of goods imported from China valued at an estimated $360 billion at the time.

China has recently faced criticism from major trade partners for operating at “overcapacity,” dumping cheap products, and deepening trade relations with Russia, Nomura said.

This leads to growing concerns that China may face similar trade-restrictive measures from other regions.

With the EU and UK accounting for about 40% of China’s EV exports in 2023, the EV sector could face increased pressure if Europe follows the US’ lead.

Although China’s export growth has been strong this year due to the global tech upswing, resilient external demand, and competitive prices, rising trade tensions may hinder the export sector and prompt more supply chain relocations away from China in the long term.

Late last year, the European Commission initiated an anti-subsidy investigation into China’s EVs.

Europe’s open approach and ambitious decarbonization goals have made it the main target market for Chinese-made EVs in 2023.

The EU accounted for 30% of China’s total EV export volumes last year, down from 36% in 2022, while the UK accounted for 8%, down from 10% in 2022, according to Nomura.

Focus article by Nurluqman Suratman

Thumbnail image: Aerial photo shows over 2,000 BYD Song Plus new energy vehicles to be exported at Lianyungang Port in east China’s Jiangsu Province, 25 April 2024. (Shutterstock)