The restrictions are expected to affect Chinese good worth $18bn and are likely to exacerbate trade tensions between the two economies.
The decision follows a four-year review and is designed to stop cheap subsidised Chinese goods entering the US market and undermining the American green technology sector.
Tariffs on EVs are being increased from 25% to 100%, while levies will rise from 7.5% to 25% on lithium batteries and from zero to 25% on critical minerals. Both solar cells and semiconductors will see levies increase to 50% from 25%.
According to the administration these increases are seen as being a proportionate response to China’s overcapacity in the EV sector.
It’s believed that China is currently producing 30m EVs a year but has a domestic market of only 22-23m – so those surplus vehicles are finding markets in the US and Europe and there are worries that Chinese exports are set to increase substantially.
The announcement is unlikely to have much of an impact as Chinese EVs have been virtually locked out of the US by tariffs imposed by Donald Trump during his presidency.
But what is does do is block potential exports to the US in what the Alliance for American Manufacturing had warned would be an “extinction-level event” for US carmakers.
These tariffs kick-in in around 90 days and are seen as offering a more targeted – and less risky – approach to the threat posed by China. The upcoming US elections has President Biden’s opponent, Donald Trump, calling for much tougher trade restrictions to be imposed on China.
Biden said that his approach was not about picking a fight with China but rather providing fairer levels of competition.
While the US said that it didn’t want to escalate trade tensions it's likely China will respond.
The ball is now in their court.
