Breaking News! New Tariffs of 25%, 50%, and 100% on Chinese Imports

The Biden Administration has just dropped a bombshell: it will apply new tariffs of 25%, 50%, and even a staggering 100% to $18 billion worth of Chinese imports. The new tariffs could lead to an escalation of the U.S.-China trade war that started during the Trump administration.

Let’s dive in to understand the specifics of the new tariffs on Chinese imports, assess their impact on supply chain management, and develop a mitigation strategy.

The new tariffs on Chinese imports

On May 14, 2024, President Biden announced a series of new tariffs on Chinese imports valued at $18 billion under Section 301 of the U.S. Trade Act of 1974. The announcement confirmed a leak from a government official from four days prior.

Products subject to new tariffs on Chinese imports

The new tariffs target key tech and renewable energy components and products like solar cells, electric vehicles (EVs), certain semiconductors, and various electronics. They will have a significant ripple effect throughout U.S. manufacturing supply chains.

Tariffs have been hiked to 25%, 50%, or 100+%, depending on the product category. They won’t all come into effect immediately; only some will be rolled out in 2024, while the U.S. will roll out the rest by 2025 and 2026.

Here are some of the product categories to keep an eye on:

Understanding the American stance on China

This announcement is part of a mandatory four-year review of the Section 301 tariffs, so it wasn’t unexpected.?

The official reasons behind this move include:

• Addressing China's unfair trade practices.
• Protecting national security.
• Promoting domestic industry.

According to the Biden administration, China may be attempting to address its economic slowdown and overcapacity by dumping excess goods into global markets. Several reports about abandoned EV graveyards in China have highlighted the severity of this excess in production.

The problem is that these EVs have an unfair price advantage over others because the Chinese government subsidizes them.

For example, the new BYD Seagull, a small 5-door hatchback EV, currently sells for just under $10,000 in China and would cost roughly $12,000–$14,000 in the U.S.

Equivalent EVs manufactured in the U.S. cost 2–4X as much, as this list of the five most affordable EVs in the U.S. clearly shows:

• 2023 Chevrolet Bolt EV 1LT: $27,495
• 2023 Chevrolet Bolt EUV 1LT: $28,795
• 2024 Nissan Leaf S: $29,280
• 2023 Mini Cooper Electric SE: $31,895
• 2024 Hyundai Kona Electric SE: $34,050

The same is true for the other items on the list of impacted imports.

Immediate impacts on supply chains

Despite fears of increased prices, the current measure is expected to produce only 0.01–0.1% inflation. After all, the new measure only impacts less than 0.5%? of the $4 trillion of goods that enter the U.S. market annually.

But individual industries will feel the pinch:

• Procurement professionals will see the most significant impact in the EV industry. In the near term, importers will see Chinese EV prices double.
• Domestic EV manufacturers will also see an increased price of EV batteries and other EV components in 2024.
• Prices for solar panels and some medical supplies may also increase significantly.

However, the direct impacts on the tech industry won’t be felt until next year or the year after.

Long-term implications

Looking ahead, it’s likely we’ll see:

• Retaliatory tariffs from China.
• Further disruptions in global trade.
• A potential shift in where tech and renewable energy companies source their components.

BYD is already setting up manufacturing plants in Mexico to supply the Mexican and American markets while avoiding tariffs.

It's crucial to start planning for these long-term scenarios today.

How can procurement professionals prepare?

If your industry is among the most impacted, diversifying your supplier base is crucial.

Other risk mitigation strategies include:

• Increasing inventory levels of critical components like solar cells and Li-ion batteries.
• Renegotiating contracts with suppliers.
• Improving supply chain visibility.

BabelusAI: Your partner in supply chain resilience

In these turbulent times, you need a partner who understands your challenges. BabelusAI 's AI-driven tools can help you quickly identify and vet alternative suppliers and make data-driven decisions to keep your operations humming.

Contact us today to learn more about how BabelusAI can help you diversify your supplier base, or schedule a call to set up a free pilot for your business.

Stay tuned for our next article, where you’ll discover a detailed list of the products impacted by the new tariffs on Chinese imports.