China's reaction to huge EV tariffs is very different from how it responded to Trump-era tariffs that started a bit of a trade war
Earlier this week, the U.S. imposed massive new sanctions against Chinese-made products, especially electric vehicles. The Biden administration levied a 100% tariff on EVs made in China and hiked tariffs on other products as well to the tune of $18 billion in Chinese goods. Now, China is responding, but in a far more measured way than initially thought.
Of course, the country denounced the White House’s action and vowed “resolute measures.” However, it’s a very different reaction to when it responded to 2018 Trump-era tariffs on $300 billion in Chinese goods that started a bit of a trade war. From Reuters:
Among the differences between then and now: the Biden White House flagged potential measures to Chinese officials in advance and the tariffs target industries, including EVs and batteries, where the economic impact is limited and Chinese companies’ dominance appears unassailable.
In response to the tariffs, Chinese state media have shot back, accusing the United States of subverting its own free trade principles and taking action that threatens climate goals and will push up costs for American consumers.
In essence, the argument goes, you are hurting yourself.
That marks a break from the tone in 2018, when a Chinese negotiator said Washington was putting “a knife to China’s neck” and state media had suggested extreme counter-measures like a boycott of U.S. food imports or a sell-off of U.S. bonds.
“China can take the moral high ground,” said Wang Huiyao, founder and president of the Beijing-based Center for China and Globalization, a think tank. “It doesn’t play around with those who break international standards and norms.”
In the starkest language of its response, the Chinese commerce ministry said the White House had broken the spirit of an agreement to steady bilateral relations reached by Chinese President Xi Jinping and U.S. President Joe Biden late last year in San Francisco.
The Chinese electric vehicle industry is in a much different place than it was back in 2018, with EV sales growing to about 7,200,000 per year as compared to 800,000 back then. The country actually surpassed Japan as the world’s leading automotive exporter, sending cars to Southeast Asia and Europe. I suppose you could say they don’t really need the U.S. At the very least, they can take a blow like these tariffs far more easily.
Huawei, which had been crippled by U.S. sanctions in 2019, has bounced back, spearheading demand for China-made chips and challenging Apple $AAPL in the China smartphone business and Tesla $TSLA for EVs.
“What does not kill you makes you stronger,” Xinhua said in a commentary on the U.S. tariffs. “It seems the famous quote applies to China’s technology companies.”
Beijing knew this round of tariffs was coming. In recent visits to China, U.S. Treasury Secretary Janet Yellen and others had drove home a message that China’s industrial capacity to make more EVs, solar panels and batteries than its economy can absorb was a risk to American jobs and business.
Chinese officials and state media have rejected that argument, saying the country’s EV makers dominate because of innovation and supply chain advantages, not subsidies.
The United States imported $427 billion in goods from China last year and exported $148 billion to the world’s No. 2 economy, a trade gap that has persisted for decades and become an ever more sensitive subject in Washington.
Right now, there’s no telling exactly where these tariffs will end up for either the U.S. or China. A lot of that will depend on how the November presidential election shakes out.
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