A series of robust tariffs announced by President Joe Biden are aimed at China. The duties include a 25 percent duty on electric vehicle batteries and the critical minerals to make them, a 25 to 50 percent tariff on solar panels, a 50 percent tariff on semiconductors, and a 100 percent tariff on manufactured EV’s.
“Because we’re not going to let China flood our market, making it impossible for American auto manufacturers to compete fairly.”
Still, this is a concern for farmers as there was a trade war the last time this happened. China responded with retaliatory tariffs, costing farmers billions. Iowa Senator Chuck Grassley says they are worried that could happen again.
“Since we’re so dependent on exports of our agricultural products, China knows it’s our weak spot. And I’m not sure whether that’s where he would retaliate, but since we saw it after Trump put tariffs on, I think it’s a fair assumption we’re going to have some hurt on agricultural products.”
By the numbers, that hurt was 27 billion fewer dollars of ag products sold from 2018 to 2019. According to the USDA’s Economic Research Service, 71 percent of that was soybean export losses. But in an assessment posted online, geopolitical analyst Peter Zeihan says there’s another angle to the tariff announcement.
“The goal very simply is to prevent the Chinese from swamping industries the Biden Administration is attempting to develop.”
Those industries revealed by the tariffs: electric vehicle production and that business could offset losses retaliation would bring. This suggested by President Biden who described the tariffs as a way to make sure American workers and businesses.
“Can compete and win in the industries of the future, because that’s what this is about. The fact is that American workers are – can outwork and outcompete anyone, as long as the competition is fair. But for too long, it hasn’t been fair. For years, the Chinese government has poured state money into Chinese companies across a whole range of industries”
One of which may be worth trillions. Market research firm Markets and Markets predicts the electric vehicle industry will grow $600 billion dollars by 2030 to $950 billion. And with the new tariffs, Zeihan says the U.S. plans to make sure it has a share.
“The Chinese will respond to this by increasing their subsidies even more, which will force this administration or the next one to again up the tariff levels, basically the Chinese government will not be allowed to swamp products of these types, and an increasingly variety of types, into the American market at all.”
Zeihan says there is strong bipartisan support in the U.S. to deal with China’s subsidized influence. Senator Grassley, however, is not in support.
“I want to make clear to everybody, that I think whether you have a Trump tariff or you have a Biden tariff, that it’s a slippery slope that’s going to invite retaliation.”
Grassley argues capitalism globally is proven. It expanded broadly and reduced poverty.
“I as a free trader tend to think we’ve forgot history, and I’m going to do everything I can to remind people of that history.”
There is, however, a historical shift in China. Zeihan says its population has shrunk more than the Chinese government expected.
“So, they no longer have enough people under the age of 45 to mount any sort of consumption-led economic recovery. And with the exception of industrial demand in China the last two years, we’ve really seen no increase in consumption at all, their population has simply aged out. So, export-led growth is all they have, and they’re no longer being allowed access to the American market and very soon they won’t be allowed sufficient access to the European market as well.”
As he mentioned, Europe too is putting together a series of tariffs similar to the U.S. which at the moment are around 10 to 40 percent. Zeihan thinks that’s just the start.
“Chinese subsidization of these industries is so extreme that anything less than the 100 percent that the Biden Administration has done is really not going to do more than slow things. And if you think Ford and GM have a lot of political pull in the United States that’s nothing compared to Mercedes and Fiat and Volkswagen. So high, high, high tariffs are coming to Europe on these topics.”
And a high, high, high, retaliation could be on the way to U.S. farm products.