President Biden’s new tariffs on goods from China will affect EVs, semiconductors and more

By Joel Wong

Story by Joey Garrison, Daniel de Visé, Todd Spangler, Bailey Schulz and Eric D. Lawrence, USA TODAY

On May 14, 2024, President Joe Biden imposed sweeping tariff hikes on several goods imported from China, countering what the White House calls unfair trade practices by China that have put U.S. industries at a disadvantage. Here are the key details:

1. Electric Vehicles (EVs): The tariff rate on Chinese electric vehicles imported to the U.S. will increase from 25% to 100% beginning this year
2. Semiconductors: Tariffs on semiconductors from China will double from 25% to 50% by 2025.
3. Lithium-Ion Batteries: The tariff rate on lithium-ion batteries from China used in electric vehicles will triple from 7.5% to 25%.
4. Solar Cells: Tariffs on solar cells imported from China will double from 25% to 50%.
5. Other Goods: Additional goods from China slapped with higher tariffs include advanced batteries, steel, aluminum, and certain medical supplies.

The goal is to create a level playing field for U.S. manufacturing in clean energy and microchips, areas where the Biden administration has targeted major government investments to catch up with China. While these tariffs may not have an immediate broad inflationary impact, they could affect prices for specific items like EV batteries and solar cells. China’s response remains uncertain, but the new taxes on Chinese products are likely to escalate tensions between the two economies.

However, tariffs are a double edge sword as China is likely to strike back. China’s Foreign Ministry has indicated that the country opposes the US move and has vowed to take all necessary measures to defend its legitimate rights and interests. This could mean imposing their own tariffs on American goods, targeting sectors such as agriculture or manufacturing, similar to the responses during previous trade disputes.

In addition, tariffs can lead to inflation:

• Increased costs: Tariffs raise the cost of imported goods, which can lead to higher production costs for businesses that rely on those goods.
• Price hikes: Companies may pass on these increased costs to consumers through higher prices, leading to inflation.
• Supply chain disruptions: Tariffs can disrupt global supply chains, leading to shortages and price increases.
• Reduced competition: Tariffs can limit competition from foreign companies, allowing domestic companies to raise prices.
• Higher raw materials costs: Tariffs on raw materials can increase production costs, leading to higher prices for finished goods.
• Wage inflation: As companies pay more for inputs, they may need to raise wages to maintain profit margins, leading to wage inflation.
• Currency fluctuations: Tariffs can lead to currency fluctuations, making imports more expensive and contributing to inflation.

Tariffs increase can further hurt the middle class. According to various studies and surveys, a significant percentage of Americans are already struggling financially and living from paycheck to paycheck. Here are some statistics, a 2022 survey by the American Payroll Association found that 76% of Americans are living paycheck to paycheck, and 54% would experience financial difficulty if their paychecks were delayed by just one week.