The Biden Administration’s move this week to increase tariffs on $18 billion of Chinese goods may help boost the American manufacturing sector by protecting it from competition by lower-priced imports, but it will harm the consumers who ultimately pay the price of all tariffs, several trade groups have said.
Tariffs are taxes charged on imports, and are collected by U.S. Customs and Border Protection from American importers or brokers, who typically pass the extra cost along to their consumers and manufacturers in the form of higher prices on the affected goods.
The new directive stipulates that tariffs be paid on items such as batteries, electric vehicles, semiconductors, ship to shore cranes, solar cells, and steel and aluminum products. The intent of that policy is to discourage China from employing “unfair trade practices,” U.S. Trade Representative Katherine Tai said in a briefing.
“For too long, the PRC has been playing by a different set of rules with unfair and anticompetitive economic practices. Those unfair practices include forced technology transfer, including cyber hacking and cyber theft; non-market policies, such as targeting industrial sectors for dominance, labor rights suppression, and weak environmental protection; and flooding markets worldwide with artificially cheap products that wipe out the competition,” Tai said. “The President’s action today is a part of his vision to rebuild our supply chains and our ability to make things in America to lower costs, outcompete the PRC, and encourage the elimination of practices that undercut American workers and businesses. We are doing that by investing in manufacturing and clean energy here at home and raising tariffs to protect these investments.”
However, the American Apparel & Footwear Association said the move would backfire by imposing cost increases on manufacturers and consumers, thus fanning the flames of inflation. "The decision to extend Section 301 tariffs on a wide range of apparel, footwear, accessories, and textiles — while not unexpected — is a real blow to American consumers and manufacturers alike. Tariffs are regressive taxes that are paid by U.S. importers and U.S. manufacturers and ultimately passed along to U.S. consumers. At a time when hardworking American families are struggling with inflation, continued tariffs on consumer necessities are entirely unwelcome," AAFA president and CEO Steve Lamar said in a release.
Another potential side effect of the policy could be harming the nation’s effort to reduce greenhouse gas emissions, since it imposes a 100% tariff on Chinese-made electric vehicles, which could otherwise have helped to get more gas-burning cars off the road, according to Simon Geale, executive vice president of procurement at supply chain consulting firm Proxima. “The White House tariff hikes on a number of China-made imports into the US is the latest sign that the U.S. is ‘walking the walk’ when it comes to onshoring their supply chains and encouraging domestic industry. The 100% EV tariff is broadly symbolic, with recent calculations showing that only 1,700 Chinese EVs entered the United States in the first quarter of 2024, but it will potentially promote investment into the nascent EV industry in the States,” Geale said in an email. “Something that needs to be considered is the potential impact on net zero. China-made EV’s, clean energy technologies, computer chips, and minerals were bringing the cost of decarbonizing the US economy down, and a balance will need to be struck between bolstering domestic industries and continuing to progress net zero goals.”
A third criticism of the new policy is that the costs of the extended tariffs will ripple far beyond basic U.S. consumer price hikes. “The new tariffs are another hit to supply chains as they try to manage ongoing risks and build resiliency. Whenever tariffs are increased, regardless of the rational for doing so, the impact goes beyond cost increases to companies and consumers,” John Donigian, senior director of Supply Chain Strategy at Moody's, said in an email. For example, Donigian said that higher tariffs on Chinese goods could impact common strategies to offset their greater costs to American companies, such as reshoring supply chains, renegotiating contracts with suppliers, and increasing buffer stocks of inventory to cope with disruptions.
