Chips from China will see 2x tariff hike, Biden says

President Biden announced hefty tariff hikes Tuesday on Chinese imports of many products, including EVs, EV batteries and a doubling of duties on semiconductors in a continuing battle over what the administration has called China’s unfair trade practices.

The tariff on semiconductors will jump from 25% to 50% by 2025, while the tariff on EVs will jump from 25% to 100% in 2024. Other increases affect steel and aluminum, solar cells, medical products and ship-to-shore cranes.  Biden directed the US Trade Representative to increase tariffs under the Trade Act of 1974 on $18 billion in imports in these areas from China.

China’s Commerce Ministry vowed retaliation and said it would take measures to defend its interests.  Biden’s move keeps tariffs created by former President Donald Trump while also increasing some others.

“For too long, China’s government has used unfair, non-market practices,” White House officials said in a statement. “China’s forced technology transfer 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.”

Regarding chips, Biden said China’s policies have led to its growing market share that risks driving out investment by market-driven firms. China is expected to make up half of all new capacity to make certain wafers in five years. Raising the tariff rate to 50% on semiconductors  “is an important initial step” to promote the sustainability of US investments in the sector, including with the CHIPS and Science Act with $39 billion in direct incentives for domestic chip fab facilities.

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Reaction to the tariff increases was mixed. The SEMI trade group, which represents 3,000 member companies, suggested the tariff increases could cause market disruptions. "SEMI reiterates its commitment to promoting free and fair trade as a key driver fo acclerating innovation, meeting sustainability objectives and developing the necessary technologies to advance our economy," the group said in an email to Fierce Electronics.

"Since October 2022, we've observed the disruptions in supply chains caused by unilateral trade measures and SEMI anticipates similar outcomes from increased tariffs."

Another trade group, the Semiconductor Industry Association, had no immediate comment. However, SIA urged the US Trade Representative in February to continue to grant exclusions for tariffs on some products imported to the US from China. “While our member companies and their customers have been working to move certain manufacturing operations outside of China, the fact remains that such transitions take time and China continues to be an important source of many low-tech and low-value added information/communication/technology/electrical components,” SIA said in a letter to the USTR."Identifying reliable, cost-competitive suppliers, particularly for products where China has been the primary or sole supplier, can take years. American manufacturing cannot afford to wait for completely new supply sources to emerge.”

Trade Representative Katerine Tai said in a report that in addition to products from China seeing an increase in tariffs, an exclusion process has been created that includes 19 exclusions for certain solar manufacturing equipment among hundreds of other industrial machines.

US Census Bureau figures found the US imported $427 billion in goods from China in 2023 and exported $148 billion to China.

The United Auto Workers have supported tariffs and in March said the nascent EV industry needs tariff protections, “otherwise we are going to be awash in imports.”

Third Bridge analyst Lucas Keh said a big question raised by Biden’s tariff increases is whether US fabs and the supply chain outside China can ramp up adequately by early 2025 to meet industry demand that will have to be made up from lost business in China.

Keh said potentially impacted companies include Texas Instruments, Analog Devices, NXP and MPS, even though they operate in the US. Those companies make legacy products and get as much as 25% of their business from China. Others that consume Chinese imports and could be potentially impacted include Mobileye, Anatolia, Nvidia, and Qualcomm, he told Fierce via email.  

The increase tariff on EVs from China to 100% comes in addition to an increase in lithium-ion batteries for EVs from 7.5% to 25% and an increase for photovoltaic cells used in to make solar panels from 25% to 50%.  Tariffs on syringes and needles will rise to 50% up from zero and some personal protective equipment used in clinics and hospitals will rise to 25% from as little as zero.