New US tariffs will not lead to a full-blown trade war with China, say observers

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New tariffs imposed by the United States on China are politically motivated and are not likely to lead to an uncontrolled trade war, analysts said on Wednesday (May 15).

Following a review of tariffs imposed during a trade war between Washington and Beijing, the White House announced on Tuesday that it is hiking tariffs on US$18 billion worth of imports from China, targeting strategic sectors like electric vehicles (EVs), batteries, steel and critical minerals.

“It doesn’t take three years to review tariffs imposed by a previous administration that you don’t like. If you wanted to change them earlier, the Biden administration certainly could have,” Dr Derek Scissors, senior fellow at the American Enterprise Institute, told CNA’s Asia First.

The tariff rate on EVs is set to quadruple to 100 per cent this year, while the one for semiconductors will surge from 25 per cent to 50 per cent by next year, said the White House.

The action is aimed at encouraging China to “eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation”, it added in a statement.

“The Biden administration is looking down the road and thinking in 2025, 2026, we could see a flood of Chinese goods in these areas and we want to get out ahead of that. But they could have done that last year. They could have done it next year. They’re doing it now for the election,” said Dr Scissors, who is also chief economist of the China Beige Book. The US-based research firm tracks data on the Chinese economy. 

The upcoming US presidential election in November is likely to be a face-off between President Joe Biden and former president Donald Trump.

Despite a strong response from China – its Foreign Minister Wang Yi said the move shows that some in the US may be “losing their minds” – there likely will not be a full-blown trade war, said observers.

“This latest round, it’s a ramping up (of trade restrictions), but so far I think we haven’t seen either side really want things to get out of control,” said Dr Chong Ja Ian, a political scientist and associate professor at the National University of Singapore.

“There’s a risk, yes, and the risk may have increased. But I think (there’s) that sort of sense that the PRC (People’s Republic of China) and the US both want fairly even-keeled stabilised relations. Even if it’s competitive … I think the degree of escalation won’t get too far, whatever the sort of angry words that we are hearing.”