US to raise tariffs on $18 bn of China imports including chips

WASHINGTON

The United States is hiking tariffs on $18 billion worth of imports from China, targeting strategic sectors like electric vehicles, batteries, steel and critical minerals, the White House said Tuesday.

The decision comes as U.S. President Joe Biden gears up for a re-run of his 2020 contest with Republican rival Donald Trump in November's election, with officials criticizing Trump's record on trade as they made the announcement.

The tariff rate on EVs is set to quadruple to 100 percent this year while the one for semiconductors will surge from 25 percent to 50 percent by next year, said the White House.

The action is aimed at encouraging China to "eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation," it added in a statement.

This follows a review of tariffs imposed during a trade war between Washington and Beijing, during which then president Trump introduced levies on some $300 billion in goods from China.

The so-called Section 301 investigation was the primary tool the Trump administration used to justify tariffs, and the U.S. Trade Representative is required to look into the impact of the levies after four years.

Tuesday's actions were also taken under Section 301 of the Trade Act.

Beyond EVs and semiconductors, Washington is roughly tripling tariffs on some steel and aluminum products, and on lithium-ion EV batteries and battery parts.

The tariff rate on natural graphite and some other critical minerals will surge from zero to 25 percent, and that on solar cells doubles as well from 25 percent to 50 percent.

But some tariff hikes, such as on non-EV lithium-ion batteries, take effect later to allow for a transitional period as the country builds up its domestic battery production, a senior U.S. official said on condition of anonymity.

Beijing's foreign ministry said it "opposes unilateral tariff hikes in violation of WTO rules" when asked about reports of the new measures.

China "will take all necessary measures to safeguard its legitimate rights and interests", spokesperson Wang Wenbin said on Tuesday.

- Excess capacity -

The latest moves impact both products already targeted by Trump tariffs, alongside additional ones.

The levies will ensure that investments in jobs, spurred by Biden's policies, are not undercut by "underpriced exports from China," National Economic Advisor Lael Brainard said.

The Biden administration has pumped massive funding into areas like semiconductor manufacturing and research, alongside efforts to boost green investments.

But Brainard accused Beijing of powering its growth "at the expense of others."

"As a result of unfair practices, China's anticipated manufacturing capacity in solar is more than double the forecasts of near term global demand," she said.

Brainard also took aim at the Trump administration, saying it "failed to follow through" with investments, and to ensure China complied with a deal marking a truce in the trade war.

The so-called Phase One agreement "did not deliver on its promises to increase exports to China from the U.S., to create manufacturing jobs here in America, or to end China's unfair practices," she said.

- 'Pre-emptive strike'-

Hiking tariffs on Chinese EVs would be "a pre-emptive strike" given that few such cars are imported, said Paul Triolo, partner for China at Albright Stonebridge Group.

The impact from EV tariffs alone is expected to be minimal.

"It is really a signal to U.S. automakers that the Biden administration is protecting the industry from Chinese EVs," he told AFP.

But tariffs covering EV batteries and supply chains would be "a much bigger issue, because of the dominance of Chinese companies in the finished battery space and for critical mineral across the battery supply space," he said.

Beijing is likely to retaliate with tariff increases of its own, Triolo said.

But he does not expect U.S. levies alone to upset current stability in U.S.-China ties.

Beijing is likelier to retaliate strongly if Washington takes measures seen as suppressing Chinese companies, like imposing more trade restrictions on semiconductor firms.

Treasury Secretary Janet Yellen told reporters Monday, when asked about possible tariffs: "I'm hopeful that they will see that the actions that we're taking are targeted."

She added in a statement that issues like overcapacity "will not be solved in a day," and that she would continue to directly address concerns with Chinese counterparts.