Perhaps it’s just because the election is only a few months away, or perhaps it’s because President Trump’s trade and economic policies toward China were always the right approach for the USA. Whatever the reasoning, the Biden administration is now proposing to use tariffs against China just like President Trump.
There’s a hidden dimension to the Chinese EV angle that makes this claim a little dubious, I will explain after the topline big story.
Overall, the New York Times is reporting [SEE HERE] that Joe Biden and USTR Katherine Tai are likely to trigger massive tariffs against imported Electric Vehicles (EVs) from China, perhaps as much as 100% due to the low cost of Chinese production. Additionally, the Biden administration is considering increasing the tariff regime against imports of Chinese steel and aluminum in a bid to protect the American industry.
On the EV issue, this tariff approach is politically duplicitous by Biden against the backdrop of massive investment in Mexico by the three largest Chinese EV automakers. Last December the three Chinese auto manufacturers, MG, BYD, and Chery, announced they were going to spend billions building new EV manufacturing plants in Mexico. Each Chinese auto manufacturer was going to spend between $1.5 to $2.0 billion.
Those Mexican built Chinese EV’s would pass into the USA market under current USMCA trade rules and regulations, as long as they technically meet the material origination rules. This can make tariffs against the Chinese imported EVs a moot point, because China will be making them in Mexico (North American trade agreement).
One of the reasons President Trump said the U.S. auto industry would suffer a “bloodbath,” is specifically because the current Chinese auto companies are targeting these EV’s in the $10,000 or less range. If you want to see what it looks like when cheap Chinese EV’s start to flood a consumer market, visit Russia – the western sanctions have only increased this flow. I can see it clear as day.
China plans to pump out thousands of cheap, what I would consider semi-disposable, electric cars into the USA market. That’s why they have invested so heavily in Mexico. Keep in mind, Blackrock (a Biden benefactor investment firm) is enmeshed with this Chinese move.
This tariff claim by the Biden administration on “import Chinese EV’s” is optics only for political benefit. Whereas the 100% tariffs proposed by Donald Trump specifically target Chinese EV’s made in Mexico.
(Via New York Times) – The Biden administration is set to announce new tariffs as high as 100 percent on Chinese electric vehicles and additional import taxes on other Chinese goods, including semiconductors, as early as next week, according to people familiar with the matter.
The move comes amid growing concern within the administration that Mr. Biden’s efforts to jump-start domestic manufacturing of clean energy products could be undercut by China, which has been flooding global markets with cheap solar panels, batteries, electric vehicles and other products.
[…] The long-awaited tariffs are the result of a four-year review of the levies that President Donald J. Trump imposed on more than $300 billion of Chinese imports in 2018. Most of the Trump tariffs are expected to remain in place, but Mr. Biden plans to go beyond those by raising levies in areas that the president showered with subsidies in the 2022 Inflation Reduction Act.
That includes Chinese electric vehicles, which currently face a 25 percent tariff. The administration is expected to raise that to as much as 100 percent in order to make it prohibitively expensive to buy a Chinese E.V.
[…] Mr. Trump has said he would escalate his trade war with China if re-elected and said this year that he was considering imposing tariffs of 60 percent or more on Chinese imports. In March, Mr. Trump said he would impose a 100 percent tariff on cars made in Mexico by Chinese companies.
The scale of the Biden administration’s tariffs, which are expected to be applied to Chinese electric vehicles, batteries and solar products, is not clear. The new tariffs on Chinese electric vehicles are not expected to apply to traditional gasoline-powered cars that are made in China, according to a person familiar with the plans.
[…] “My U.S. trade representative is investigating trade practices by the Chinese government regarding steel and aluminum,” Mr. Biden told steelworkers in Pittsburgh, referring to Katherine Tai, who heads the office. “If that investigation confirms these anticompetitive trade practices, then I’m calling on her to consider tripling the tariff rates for both steel imports and aluminum imports from China.”
The president added: “I’m not looking for a fight with China. I’m looking for competition — and fair competition.”
The U.S. solar industry has also been lobbying the Biden administration to impose new tariffs on Chinese imports as an influx of cheap solar panels and components has caused prices in that sector to drop by around 50 percent over the last year. (read more)
Stand back and elevate your thinking on this Chinese EV issue; the substance of it is a consequence of a much larger dynamic. It is somewhat of a self-fulfilling prophecy.
There is a cleaving underway, a dedollarization that continues in global trade. Nations are no longer relying (dependent) on dollars as the baseline for trade parity; they are determining their own nation to nation trade valuations outside the use of the dollar as a benchmark.
The result of this dedollarization taking place is massive inflation inside the USA that continues as the dollar (yellow zone) is weakened against the increasingly non-dollar-aligned world (grey zone). The frequency of dollar use is lessening as alternatives are being used.
Trade into the yellow zone still requires a benchmark of dollars, but bilateral trade within the grey zone increasingly does not. This is the root of the global financial and economic cleaving.
China is trying to position their transportation sector (auto, planes, trains and mass transit manufacturing) as Apple manufacturing is to cell phone use. Some of these Chinese electric vehicles are actually impressive, which makes sense when you consider that China steals the engineering and design elements from knuckleheaded western corporations who use China for industrial manufacturing (see Tesla etc).