In Depth: Why Biden’s Tariffs Increases Won’t Cause China Much More Pain

Washington’s recent tariff increases on Chinese imports are expected to have a minor effect on domestic manufacturers as many have moved their production overseas, mitigating the impact. Past tariffs have already lowered Chinese exports to minimal levels [para. 1].

On May 14, the Biden administration declared an increase in tariffs on $18 billion worth of Chinese imports, affecting 14 categories including electric vehicles (EVs), semiconductors, lithium-ion batteries, and solar cells. Nine of these will see implementation on August 1, including a significant rise on EV tariffs to 100% [para. 2]. This decision is part of a broader strategy to protect U.S. manufacturers and jobs, aimed at gaining electoral support from blue-collar workers [para. 3].

Despite the new measures, the impact on the global economy will be limited due to the reduced number of affected products and industries. The targeted products make up just 4.2% of U.S. imports from China and less than 1% of China's total exports [para. 4]. Analysts argue that these tariffs will have minimal short-term effects on Chinese exporters but caution against the possible imposition of similar tariffs by other regions [para. 5]. For example, Canada and Mexico are contemplating similar tariff increases, and the EU is conducting an investigation into Chinese EV imports [para. 6][para. 7]. Analysts emphasize more attention should be paid to the cumulative effect of trade barriers [para. 8].

The hike in tariffs from 7.5% to 25% on lithium-ion EV batteries, where China accounted for 71.5% of U.S. imports in early 2024, will significantly impact Chinese manufacturers. Yet, there could be benefits for Chinese companies with U.S.-based plants, such as Envision and Gotion [para. 11][para. 13]. Envision is expanding its EV battery manufacturing in South Carolina, with new facilities expected by 2027 [para. 14][para. 15].

In the medical devices sector, where China supplied nearly 20% of U.S. imports, the impact will be minimal due to declining demand post-Covid-19, leading many producers to pivot to other industries [para. 21]. For steel and aluminum, the tariff increases won't affect exports much as prior tariffs have already minimized these exports [para. 23]. The same goes for semiconductors, with current measures since 2018 already having reduced Chinese supplies to the U.S. significantly [para. 27][para. 28].

The forthcoming tariffs on EVs will also not heavily affect exports, as producers have shifted focus away from the U.S. [para. 37]. In contrast, Tesla could suffer more due to its reliance on exporting from China [para. 42]. In the solar industry, Chinese manufacturers have relocated production to Southeast Asia, lessening the immediate impact of new tariffs [para. 46]. Any new tariffs might actually increase U.S. market prices for PV modules, affecting local developers [para. 48].

In the batteries sector, tariffs on non-EV lithium-ion batteries set to rise to 25% in 2026 might erode the cost advantage of Chinese exporters [para. 53]. Tariffs on natural graphite and rare earths slated for 2026 also highlight the U.S.' current dependence on Chinese imports, with industry experts cautioning against rapid changes that could make EVs unaffordable [para. 55][para. 57]. In essence, while the immediate impact of these tariffs is limited, they signify ongoing tensions and potential future challenges for international trade and industries. [para. 61]