May 23, 2024
Last week, President Joe Biden announced a significant increase in the number of tariffs imposed on Chinese goods. At Auba, we looked closely at their impact and estimated that, in the short run, these could result in a disruption of some $3 bn worth of imports in strategic sectors.
This is not the first time that the US imposes tariffs on Chinese goods, further complicating international logistics. In fact, the trade dispute with China is now a long-standing reality. The first efforts to curb Chinese trade began during the Trump administration, when the US government imposed tariffs on over $380 bn worth of goods. Then, the tariffs —mostly focused on steel and aluminum products— were designed as a strategy to gain better trade terms and compete with a rising China.
Now, President Biden has continued with the same animosity. Despite his many disagreements with his predecessor, the Biden administration has, by and large, followed the same policies, keeping Trump era tariffs and, on top of it, sanctioning over 26 Chinese companies for using forced labor from the Xinjiang region, where Uygur muslims are allegedly kept in concentration camps and used in the manufacturing industry.
But what is most telling of President Biden’s strategy is precisely what we can learn from these new tariffs which seem to be far more strategic than those placed by his predecessor. Instead of addressing broad categories such as “steel and aluminum” as the Trump administration did, President Biden has focused on curbing Chinese power in areas of strategic competition. These include batteries (China currently makes 66% of global supply), electric vehicles (60% of global supply), and solar panels (80% of global supply). Other goods on the list include semiconductors, port cranes, and a variety of rare metals (none of which were specified).
Crucially, we found little evidence of the US importing large amounts of these goods, likely hinting at the more strategic approach taken by the Biden administration. To do this, we took the official tariff announcement from the Biden administration and then, compared it to a list of all Chinese imports by HS code—broken down to HS6, which is the most minute description publicly available of Chinese imports. This allowed us to quantify the exact impact of tariffs on the US economy. Although, since the Biden administration didn’t specify the specific rare minerals and steel products they intend to target with these tariffs, we chose to leave them out of our analysis.
Firstly, we found that the tariffs target goods worth over $13.5 bn in 2023 imports. This, however, accounts for just 2.5% of Chinese imports to the US, likely suggesting that the tariffs are more symbolic or strategic in nature. When we look at the actual amount of money to be collected from these tariffs, it comes out to $3.8 bn—roughly equivalent to 0.6%. If the Biden administration sought to impose severe restrictions on trade, they could’ve targeted other categories such as toys (worth $15.4bn in exports) or plastic products ($10.8 bn).
Share of US-China Trade now Subject to Tariffs
(Data from OEC and the White House)
In fact, looking thoroughly at the goods being targeted, we found that most of the revenue would come from one HS code alone: electric batteries. These account for 77.9% of the total market of goods now subject to tariffs. Furthermore, we found little evidence on recent imports of some of the categories addressed such as solar panels and electric vehicles—although the latter is likely the result of a lack of proper HS codes to classify them.
US Tariffs on Chinese Goods by HS4 Code
(Data from OEC and the White House)
Finally, since the Biden administration released a schedule for the imposition of these tariffs, we also found that the bulk of their impact is set to take place this year, and mildly increased in 2025 and 2026.
Impact of US Tariffs on China over Time
(Data from OEC and the White House)
Given the small value of goods being targeted, it is likely the case that the Biden administration is preparing for future tensions. More so in strategic areas of value such as electric vehicles, and solar panels—both crucial to an energy transition but not currently being imported en masse from China. For future supply chains, this could well be a sign of regionalization, pushing away the idea of global hegemony and instead favoring localized supply chains for complex goods—a phenomenon commonly referred to as nearshoring.
The US might not seem aggressive in these new tariffs, but it certainly is strategic. By addressing key areas now, it could avoid further competition from Chinese companies in the future even if, in the short run, this results in a major complication to international trade.
