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Semiconductor, EV shots fired in US-China trade war

Semiconductor, EV shots fired in US-China trade war

Business news |
By Nick Flaherty

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The US is heating up its trade war with China with dramatically increased tariffs on semiconductors, electric vehicles, batteries and critical raw materials.

The US is doubling tariffs on semiconductor from China from 25% to 50% from 2025 and on EVs from 50% to 100% later this year.

It is also increasing tariffs on batteries and battery parts from 7.5% to 25% later this year, and on solar panels from X to X in a very clear challenge to what it says are unfair trade practices.

“Today’s actions to counter China’s unfair trade practices are carefully targeted at strategic sectors,” said President Joe Biden.

These are all areas covered by the CHIPS and Science Act and the Inflation Reduction Act (IRA). The tariffs on critical raw materials will cover graphite for batteries and permanent magnets for EV motors for the first time.

US looks to 100% China EV tariffs

“China’s unfair trade practices concerning technology transfer, intellectual property, and innovation are threatening American businesses and workers. China is also flooding global markets with artificially low-priced exports. In response to China’s unfair trade practices and to counteract the resulting harms, today, President Biden is directing his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China,” said the US White House.

“For too long, China’s government has used unfair, non-market practices. China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy, and health care, creating unacceptable risks to America’s supply chains and economic security.”

The European Union is set to be pulled into the trade war.

“We will continue to work with our partners around the world to strengthen cooperation to address shared concerns about China’s unfair practices—rather than undermining our alliances or applying indiscriminate 10 percent tariffs that raise prices on all imports from all countries, regardless whether they are engaged in unfair trade,” he said.

“China’s policies in the legacy semiconductor sector have led to growing market share and rapid capacity expansion that risks driving out investment by market-driven firms. Over the next three to five years, China is expected to account for almost half of all new capacity coming online to manufacture certain legacy semiconductor wafers,” he said.

CHIPS Act is raising US share of global production, says report

 The CHIPS and Science Act includes $39 billion in direct incentives to build, modernize, and expand semiconductor manufacturing fabrication facilities as well as a 25% investment tax credit for semiconductor companies. The US sees raising the tariff rate on semiconductors is an important initial step to promote the sustainability of these investments.

EVs and batteries

The tariff rate on electric vehicles under Section 301 will increase from 25% to 100% in 2024 as China’s exports of EVs grew by 70% from 2022 to 2023

The tariff rate on lithium-ion EV batteries will increase from 7.5%% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. The tariff rate on battery parts will also  increase from 7.5% to 25% in 2024.
 
The tariff rate on natural graphite and permanent magnets will increase from zero to 25% in 2026. The tariff rate for certain other critical minerals will increase from zero to 25% in 2024.
 
“Despite rapid and recent progress in US onshoring, China currently controls over 80 percent of certain segments of the EV battery supply chain, particularly upstream nodes such as critical minerals mining, processing, and refining,” said Biden. “Concentration of critical minerals mining and refining capacity in China leaves our supply chains vulnerable and our national security and clean energy goals at risk.”

The Inflation Reduction Act has seen $20bn of investment in battery manufacturing as well as tax credits to incentivize investment in battery and battery material production in the United States. The US President has also established the American Battery Materials Initiative to mobilize a dependable, robust supply chain for batteries.

Solar Cells

The tariff rate on solar cells (whether or not assembled into modules) will increase from 25% to 50% in 2024. This is intended to protect against China’s overcapacity that depresses prices and inhibits the development of solar capacity outside of China.

“China has used unfair practices to dominate upwards of 80 to 90% of certain parts of the global solar supply chain, and is trying to maintain that status quo. Chinese policies and nonmarket practices are flooding global markets with artificially cheap solar modules and panels, undermining investment in solar manufacturing outside of China,” said the administration.
 
The Inflation Reduction Act provides supply-side tax incentives for solar components, including polysilicon, wafers, cells, modules, and backsheet material, as well as tax credits and grant and loan programmes supporting deployment of utility-scale and residential solar energy projects. This has led to nearly $17bn in planned investment, up by a factor of eight in US manufacturing capacity.

www.wh.gov

 

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