The 100% tariffs on Chinese electric vehicles announced by Joe Biden on May 14 mark a turning point in the protectionist escalation between the US and China, observes Agathe Demarais, who directs the geo-economic studies of the European Council for International Relations. She says that Europe could be at the losing end of the looming economic conflict.
What impact will the new US measures targeting Chinese electric vehicles, batteries and solar panel equipment have?
These announcements mark a real turning point. Until now, the US strategy has been to reduce its economic dependence on China and not to fuel Beijing’s military advances. To achieve this, it has privileged sanctions – against entities linked to the Chinese army, for example – and export controls on cutting-edge technologies, such as semi-conductors.
This time, they are imposing tariffs in a sector that is crucial to their economy – clean technologies – but which is not directly linked to the Chinese military and in which, as in the case of electric vehicles, Chinese companies are far from having a dominant position in the United States. With tariffs ranging from 25% to 100%, the restriction on access to the US market becomes drastic.
Seen from China, which exports its products massively to the rest of the world, this is a worrying turn of events, as it is the first time that the US has so severely restricted access to its market for Chinese companies, and perhaps not the last. Especially if the Europeans in turn impose tariffs on their electric vehicles, Beijing’s concerns will increase further.
What does this mean for consumers?
These tariffs are designed to protect producers from Chinese competition over the long term and to enable the development of American green industries, which are also supported by massive investment under the Inflation Reduction Act. For consumers, higher tariffs mechanically translate to higher prices. This won’t hurt Chinese electric vehicles, however, as Americans buy few of them. It will be far more of an issue for batteries as China supplies around 70% of the American market.
In recent decades, liberal globalization has severely penalized certain industries in the US and Europe. Will these protectionist measures support reindustrialization in these countries?
This is not a simple matter, particularly in Europe. Manufacturing in France to environmentally friendly standards with higher wages than in China or emerging countries requires major investments and, here again, will necessarily generate additional costs for consumers. This choice is based not only on economic logic but also on social and safety considerations. What’s more, designing high-tech products such as semiconductors in Europe is not that simple, since skilled labor and know-how are in Taiwan or South Korea.
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