U.S. increasing tariffs on Chinese imports, especially electric vehicles

Source: The post U.S. increasing tariffs on Chinese imports, especially electric vehicles has been created, based on the article “New tariff walls: US tariffs will further increase trade friction” published in “Business standards” on 15th May 2024.

UPSC Syllabus Topic: GS Paper 2– Economy -Effects of liberalisation on the economy, changes in industrial policy and their effects on industrial growth.

Context: The article discusses the U.S. increasing tariffs on Chinese imports, especially electric vehicles, to 100%. This move aims to win industrial workers’ support for Biden’s re-election. It also covers global reactions, India’s tariff policies, and the need for innovation and investment in the EV sector.

Why is the U.S. increasing tariffs on Chinese imports, especially electric vehicles?

The U.S. increased tariffs on Chinese imports, including a fourfold rise to 100% on electric vehicles (EVs), to support President Biden’s re-election campaign.

Biden is trailing in battleground state polls and aims to win back industrial workers to the Democratic Party.

Former President Trump proposed even higher tariffs of 200% on EVs.

The previous 25% tariff effectively limited Chinese EVs in the U.S. market.

Chinese EV manufacturers, like BYD, have become innovation leaders, producing advanced vehicles.

The tariff increase aims to protect American car manufacturers and their market share.

What has been the reaction from other countries?

The European Union (EU) is uncomfortable with setting tariffs at levels similar to the U.S.

The EU has launched an investigation into whether “unfair subsidies” are given to Chinese EV manufacturers by Beijing.

This investigation could enable the European Commission to impose tariffs or other restrictions later this year.

India has high tariffs on cars, particularly high-end EVs.

What is India’s policy on EV tariffs?

Recently, the Indian government announced it would reduce these tariffs on a case-by-case basis for companies planning to set up manufacturing units in India.

This policy is widely interpreted as an incentive for the American manufacturer Tesla.

The top Chinese EV company, BYD, has long sought to increase manufacturing in India. However, BYD has not received clearance for its proposed billion-dollar investment.

Indian policy aims to balance promoting domestic manufacturing with providing efficient cars to consumers.

The government seeks to attract investment and innovation in the EV sector to meet domestic and international demand.

Question for practice:

Discuss the impact of the U.S. increasing tariffs on Chinese imports, particularly electric vehicles, on both domestic and global fronts, including reactions from other countries such as the European Union and India.