The US government has decided to significantly increase tariffs on Chinese imports to protect domestic industrial sectors. From September 27th, the USA wants to impose drastic tariffs on imported goods from China.
For example, 100% tariffs are due on electric cars, as the Reuters news agency learned from the office of US Trade Representative Katherine Tai. Many other products are also affected by this measure. 50% should be allocated to solar cells, 25% each to aluminum, steel, batteries for electric vehicles and important minerals.
US Trade Representative Tai said in Washington that the tariff increases were aimed at “countering the People’s Republic of China’s harmful policies and practices that continue to impact American workers and businesses.”
According to White House chief economic adviser Lael Brainard, the measures are aimed at decoupling the US electric car industry from China’s dominant supply chain. Such tariffs are necessary to counter China’s state subsidy and technology transfer policies. This led to a lot of over-investment and to excess production capacity in some economic sectors.
“The 100% tariff on electric vehicles reflects the significant unfair cost advantage that Chinese manufacturers in particular are using to dominate auto markets in other parts of the world at a breathtaking pace,” Brainard said. The US government will not allow that.
But you have to know that the government in Washington itself mobilized hundreds of billions of dollars in tax subsidies to strengthen domestic production of electric cars and solar systems. China has criticized the tariff increases and signaled retaliation. The success of the Chinese electric car industry is based on innovation and not on government support.
The EU had also announced further tariffs against China at the beginning of July. However, these measures will not be officially introduced until later. According to a Commission communication in August, the additional tariffs could come into force by the end of October at the latest and be valid for 5 years.
The EU Commission accuses China of illegal subsidies for its electric car manufacturers, too, and fears damage to European companies. There is already talk of company closures or layoffs.
According to EU estimates, the market share of Chinese brands in Europe has increased from under 1% to 8% in 2019 and could perhaps reach 15% next year. The prices of the cars are usually 20% lower than models manufactured in the EU.
These tariffs come at a time when both Vice President Kamala Harris and former President Donald Trump are courting voters in auto and steel-producing US states. Both candidates are trying to position themselves as tough fighters against China ahead of November’s presidential election.
Donald Trump has promised to impose 60% tariffs on all Chinese imports. This topic is discussed again and again in the media. But what happens next in this economic war?
We must always consider these measures in the overall context of economic developments in China. The Chinese authorities actually announced economic reforms last year. Among other things, domestic demand in China should be stimulated. This should also make foreign investments easier.
But the European Chamber of Commerce sees little to no progress. Instead, the Chinese government focused on exporting goods and promoting production capacities.
However, the resulting excess capacity not only led to greater competition and falling prices on the Chinese market. The competitiveness of industry in Europe has also come under pressure. If more goods are produced but demand in China does not grow, overcapacity problems will continue to increase. The overcapacity also threatens to exacerbate trade conflicts with other countries.
If these products cannot be sold in China, they must go abroad. But China still remains a country for investors. German companies are also continuing to invest in the Chinese market. However, in order to remain competitive, they are increasingly relying on innovations from China and investing in research and development.
And after the China-Africa Forum, Beijing wants to invest billions in Africa. China wants to send billions more in aid to the states on the African continent. In the next three years, the People’s Republic plans to issue a further 360 billion yuan (around 45 billion euros) in loans.
210 billion yuan will flow through loans and another 80 billion through various aids. The remaining 70 billion are to be invested through Chinese companies.
Xi promised the approximately 50 heads of state and government from Africa that he would have partnerships in the areas of the military, education and training, trade, agricultural development and renewable energy, among other things.
China also pledged to further open its market to Africa and promised duty-free trade. So we can see that the economic war between the US and China is intensifying. The European Union is also afraid of China’s economic rise. But the Asian Giant is continuing on its international path.
In the long term, a Sino-African partnership will certainly surpass trade relations with the USA and Europe. All of these developments must always be seen in the context of a world that is changing very quickly.