Biden’s China Tariffs will Undermine American Consumers, Not Alter China’s Policies: CEI Analysis

President Biden announced today he is raising protectionist tariffs on various Chinese imports, like electric vehicles, solar cells, semiconductors, and advanced batteries, ostensibly to fight back against Beijing subsidizing domestic producers. Competitive Enterprise Institute energy and trade experts expect that, as usual, tariffs will do more to increase costs for American consumers than change China’s policies.

Statement by Marlo Lewis, CEI senior fellow:

“Biden’s proposed EV and battery minerals tariffs are the latest example of the political establishment’s addiction to ‘industrial policy’—better known as corporate welfare.

“Domestic EV and battery manufacturers are already eligible for tens of billions of dollars in tax credits. Now Biden wants to further subsidize them with protective tariffs on imports. By restricting the supply of cheaper EVs and batteries from China, Biden will make EVs—which most Americans cannot afford—even costlier at the same time Biden’s EPA and the State of California collude to progressively ban combustion engine vehicles from the new car market. This will further diminish the purchasing power of middle-income households already squeezed by the rising costs of food, housing, credit, and energy.   

“There is a simpler and more consumer-friendly way to stop China from dominating the U.S. auto market—nix the regulatory policies that artificially inflate domestic demand for EVs—a product category in which China enjoys several comparative advantages vis-à-vis the US: cheap labor, cheap energy, and abundant mineral processing facilities.

“Eliminating the EPA’s de facto and California’s de jure EV mandates would free U.S. automakers to retain their historic comparative advantage in the production of combustion engine vehicles. Scrap the mandates, and the ‘need’ for additional special-interest manipulation of the marketplace would disappear.”

Statement by Ryan Young, CEI senior economist:

“Tariffs on Chinese EVs won’t just make Chinese EVs more expensive, they will also make American EVs more expensive. This is because domestic producers can now raise their prices without fear of being undercut by competitors. Good for them but bad for consumers—and for the Biden administration’s policy goal of increased EV adoption.

“Something like this happened just a few years ago when former president Donald Trump enacted 25 percent steel tariffs in 2018. Domestic steel producers raised their prices by almost exactly the amount of the tariff, and America soon had the world’s highest steel prices. As a result, car prices went up by about $200 to $300 on average. Larger trucks with more steel content increased even more. Now Biden is going to do the same thing to EVs.”