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Biden Jacks Up Tariffs on $18 Billion in Chinese Imports

Biden spoke about his economic agenda.
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By Yuval Rosenberg and Michael Rainey
Tuesday, May 14, 2024

Happy Tuesday!

The House and Senate were in session today, but Speaker Mike Johnson visited New York City to criticize the election-interference case against former President Donald Trump. The speaker joins a lengthy list of Republicans who have flocked to the courthouse to show their support for Trump and slam the prosecution.

Johnson arrived on a dramatic day, as the trial continued with more testimony and a cross-examination of Michael Cohen, the former president’s onetime fixer and the key witness for prosecutors seeking to convict Trump of 34 felony counts of falsifying business records related to a $130,000 hush money payment to adult-film actress Stormy Daniels, which prosecutors say was made to hide information that could have damaged his 2016 presidential campaign.

Here's what else we're watching as we await Caitlin Clark’s pro debut tonight.

Biden Hikes Tariffs on $18 Billion in Chinese Imports

Saying he intends to protect American jobs and strategic industries, President Joe Biden on Tuesday announced major increases in tariffs on a range of goods imported from China, including electric vehicles, semiconductors, solar panels, steel and aluminum.

The increases, which affect about $18 billion worth of goods, vary by product. The tariff on electric vehicles will rise to 100%, a fourfold increase from current levels, while the tariff on semiconductors will increase from 25% to 50%. Steel and aluminum will see an increase to 25% from a current range of 0 to 7.5%, and the tariff on solar cells will jump from 25% to 50%. Other products seeing tariff increases include lithium-ion batteries (25%), ship-to-shore cranes (25%), syringes and needles (50%) and rubber medical gloves (25%).

Biden also endorsed maintaining the tariffs imposed during the administration of former President Donald Trump, which apply to roughly $300 billion worth of goods imported from China per year. According to US Customs and Border Protection data cited by CNN, those tariffs have generated roughly $235 billion in payments from American businesses and consumers since they were imposed in 2018 and 2019.

Biden said his decision on tariffs was driven by a desire to support good jobs and defend key industries at home, in a global market in which China unfairly boosts its own firms. "China heavily subsidized all these products, pushing Chinese companies to produce far more than the rest of the world can absorb," Biden said at the White House. "And then dumping the excess products onto the market and unfairly low prices, driving other manufacturers around the world out of business."

"China is determined to dominate these industries," he said on social media. "I'm determined to ensure America leads the world in them."

The political battle: Biden and GOP presidential frontrunner Trump traded barbs over the policy move. Biden had previously criticized Trump for imposing tariffs on Chinese goods, saying they hurt U.S. farmers, consumers and manufacturers, who are forced to pay higher prices for imports.

Trump, who has sung the praises of protectionist policies against China and promised to impose more tariffs if he wins a second term in office, accused Biden of moving too slowly. "Where have they been for three-and-a-half years? They should have done it a long time ago," he said.

Biden accused Trump of wasting an opportunity, saying his tariffs were less effective than they could have been because he did little to nurture strategic industries in the U.S., unlike the current administration, which has promoted significant investment through legislation including the Chips Act and the Inflation Reduction Act. "My predecessor promised increased American exports and boosted manufacturing," the president said. "But he did neither. He failed."

The tariff conundrum: Some critics of the Biden tariff decision echoed earlier complaints about the Trump tariffs, including the charge that they function as a tax on consumers that will delay the implementation of much-needed environmental policies and technologies. "This is horrible news for American consumers and a major setback for clean energy," said Jared Polis, the Democratic governor of Colorado. "Tariffs are a direct, regressive tax on Americans and this tax increase will hit every family."

But some on both the left and the right said tariffs are needed to protect U.S. participation in the industries that will define the future. David Dayen, executive editor of progressive magazine The American Prospect, said that Biden’s effort at industrial policy makes the tariffs a necessity, at least in the short run. "[I]f you’re the White House, and you’ve just committed hundreds of billions of taxpayer dollars to creating a homegrown electric-vehicle industry and an entire ecosystem of batteries and minerals around it, you might want to make sure that commitment doesn’t go completely to waste," he wrote.

Still, tariffs alone won’t create the businesses of the future. "Domestic auto producers have to rise to the moment," Dayen said. If the industries protected by tariffs fail to invest properly and use them instead to simply raise prices and collect larger profits, then the policy could end up hurting U.S. consumers while acting as a drag on global economic growth.

Editorial of the Day: Taking Down Trumponomics

Bloomberg’s Editorial Board warns that inflation will be a challenge for whichever candidate wins the presidency this November — and that "former President Donald Trump’s economic agenda seems to be dedicated to raising prices."

They cite Trump’s history of imposing tariffs — which they say "eliminated jobs, slashed incomes and cost consumers about $51 billion annually" — as well as his proposals for new tariffs, especially on products made in China. "Bloomberg Economics estimates that this would raise consumer prices by 2.5% over two years and reduce growth by 0.5%," the editors note.

In addition to trade wars, the editors warn that Trump’s reported plans regarding monetary policy and his flirtation with devaluing the dollar are both also likely to end up raising prices.

And then there’s Trump on taxes:

"He says he’ll extend the expiring provisions of the Tax Cuts and Jobs Act of 2017 and has at times mused about a further reduction in the corporate rate, to 15% from 21%. Recall that the drafters of the law tied themselves in knots to avoid acknowledging its true costs (hence the expirations). Extending it in full would cost about $3.8 trillion by 2033. A 15% corporate rate would cost perhaps a half-trillion more. Trump’s plans for further tax cuts — ‘I’ll give you a Trump middle class, upper class, lower class, business class big tax cut,’ he said at a rally on Saturday — remain rather nebulous, but fiscal discipline does not sound like the governing priority. It’s safe to say (at risk of repetition) that these policies, too, will contribute to higher prices."

A couple of caveats: We should note that critics of Biden’s policies complain that they are also frequently inflationary. And Bloomberg’s opinion writers note that Trump’s plans and promises can’t necessarily be taken literally or that these problematic policies may never take effect — but, they argue, it would be best not to find out what would happen if they do.

Quote of the Day: Powell’s Confidence in Falling Inflation ‘Not as High as It Was’

"It looks like it will take longer for us to become confident that inflation is coming down to 2% over time."

− Federal Reserve Chair Jerome Powell, at a Foreign Bankers’ Association event in Amsterdam, indicating again that interest rates will stay higher for longer as officials at the central bank wait for additional evidence that pricing pressures are easing. Powell offered a bullish outlook on the U.S. economy and job markets. And he said he expects inflation will decline after a series of higher readings so far this year, though he admitted that is confidence in that outlook "is not as high as it was."

The Fed chief did, however, downplay the chances of a rate hike and a new report that showed wholesale prices rose more than expected last month, calling the data mixed.

The consumer price index for April is due out Wednesday morning, and economists surveyed by Bloomberg estimate that it will show prices rose 3.4% over the previous year.

Send your feedback to yrosenberg@thefiscaltimes.com.

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