Industry experts dissect White House’s tariffs announcement

As reported by LM earlier this month, after a statutory four-year review process of Section 301 tariffs levied on United States-bound imports from China conducted by the Office of the United States Trade Representative, the final outcome, the White House announced, that those tariffs are remaining intact, with ones for certain products, to see increases.

These tariffs initially took effect in 2018 under the direction of the Trump administration. And the impetus for the increase in tariffs under Section 301 of the Trade Act of 1974 on $18 billion worth of imports from China is due to various actions China has taken, according to the White House, including unfair trade practices concerning technology transfer, intellectual property, and innovation threatening American workers and flooding global markets with artificially low-priced exports.

Notable tariff hikes on U.S.-bound imports from China cited by the White House include:

• certain steel and aluminum products under Section 301 increasing from 0-7.5% to 25% in 2024;
• semiconductors increasing from 25% to 50% by 2025;
• electric vehicles under Section 301 increasing from 25% to 100% in 2024;
• lithium-ion EV batteries increasing from 7.5% to 25% in 2023, with the tariff rate on lithium-ion non-EV batteries increasing from 7.5% to 25% in 2026, and the tariff rate on battery parts increasing from 7.5% to 25% in 2024 (the White House said that China controls more than 80% of certain segments of the EV battery supply chain “despite rapid and recent progress in U.S. onshoring”);
• solar cells tariff rates, whether or not assembled into modules, increasing from 25% to 50% in 2024;
• ship-to-shore cranes increasing from 0% to 25% in 2024; and
• for medical products, tariffs on syringes and needles increasing from 0% to 50% in 2024, certain personal protective equipment, including certain respirators and face masks, increasing from 0-7.5% to 25% in 2024, and tariffs on rubber medical and surgical gloves increasing from 7.5% to 25% in 2026

As for what this development means for supply chains, there has been no shortage of opinions.

John Donigian, Senior Director of Supply Chain Strategy at Moody's, stated that the new tariffs are another hit to supply chains as they try to manage ongoing risks and build resiliency.

“Whenever tariffs are increased, regardless of the rational for doing so, the impact goes beyond cost increases to companies and consumers,” he explained. “Discussions on redesigning supply chains surface through considerations for reshoring as one way to offset costs. Supplier relationships are strained as contract re-negotiations to offset tariff impacts become commonplace. Companies may also adjust their inventory positions through increased buffer stocks to account for delays or disruptions in the supply chain. All of this leads to additional risk and complexity in an already strained supply chain environment.”

According to Paul Bingham, Director, Global Intelligence & Analytics, Transportation Consulting, for S&P Global Market Intelligence, this news can be viewed as a timely development even if 2024 was not an election year.

He observed that the additional targeted tariffs imposed by President Biden on Mainland China exports of select commodities are not surprising given the earlier announcements and investigations regarding Mainland China trade and industrial policy. What’s more, he noted that the timing and tariff rates differ by import commodity, with some not taking effect until 2026, allowing more time for those U.S. import markets to adjust in advance of the higher tariff rates being imposed, while also noting that typically importer dependance on specific suppliers, such as in Mainland China, may be a reason the Administration has delayed the start of some of these tariff increases.

“The stated focus for tariff protection for U.S. producers competing in these sectors seems to be for serving the U.S. domestic market, not in boosting U.S. exports for these product categories to other countries,” Bingham told LM. “Instead, the intended result would be for a reduction in total U.S. import trade with domestic consumption of goods in these categories replaced by supplies coming from domestic production from U.S. manufacturing plants, some of which are new.

There does not seem to be any mention of likely retaliatory tariffs, which the U.S. has routinely seen imposed by trade partners, including Mainland China, in response to new or higher rates of U.S. import tariffs. There would be economic impacts on U.S. exporters and the U.S. economy from retaliatory tariffs imposed, which can be analyzed following details of the likely retaliatory tariffs to come from this latest U.S. import tariff round.”

From a manufacturing perspective, Tom Derry, CEO of the Institute for Supply Management, said it is worth asking why the White House has kept the Trump-era tariffs in place.

Addressing that, he explained that in an era of global superpower competition, why would an administration, regardless of political party, give up bargaining chips put in place by a previous administration? His answer: it will not happen and it would be foolish to do so.  

“I do think the Biden administration is being expedient, and there's an element of industrial policy here,” said Derry. “We’re targeting EVs, which the country is trying to be a preeminent leader in. And the presidential election does factor into the calculation. The Trump administration brought such protectionism tools back into play. It changed how countries see what’s available to them, and we’ve seen it play out worldwide.”

Back to the election year and the Trump administration—on a separate but related note—a March report issued by London-based Transport Intelligence (TI) made the case that while in office, the issue regarding Trump imposing tariffs on Chinese and some European goods was that it generated huge costs, mainly for U.S. businesses and consumers. TI said that based on estimates, Trump’s tariffs cost U.S. households an additional $600 a year, U.S. companies paid $46 billion in tariffs, and 300,000 jobs were lost.

Not minor numbers, by any means.

What’s more, TI added that should Trump return to the White House, he has committed to imposing a 10% tariff on all imports regardless of what country they come from.

“Some analysts believe that this policy is designed to destroy the existing global trade regime in order to re-industralize the USA by whatever means possible,” said TI.

It goes without saying that a 10% “global tariff,” of sorts, would have significant impacts on the global supply chain. What happens from here remains to be seen, but it is clear that tariffs are here to stay, and, based on the outcome of the election, it will be a question of to what extent.