Other countries may follow suit after Biden's latest tariff on Chinese imports: CareEdge Ratings
May 26, 2024
New Delhi [India], May 26 : Taking the latest cues from the US after it imposed high tariffs on various imports from China, CareEdge Ratings believes that other countries may also follow suit to protect their respective domestic industries.
"Impact on China's growth to be limited as tariffs cover only 0.5 per cent of exports. However, escalating US-China tensions raise concerns," said the rating agency, in a global economic update this week.
US President Joe Biden, in a move that is seen as a protectionist measure to reduce trade imbalance, earlier this month, imposed heavy tariffs on Chinese products, including batteries, EVs, steel, solar cells, and aluminium. These tariffs encompass a 100 per cent tariff on electric vehicles, a 50 per cent tariff on semiconductors, and a 25 per cent tariff on electric vehicle batteries imported from China.
The other items that will attract higher tariffs are medical gloves, syringes and needles, some critical minerals, and solar cells, among others.
"For the US, consumer welfare may suffer if domestic substitutes fail to compete with Chinese imports on price," CareEdge believes.
These proposed increase in tariffs were part of the US' broader strategy, aimed at combating what it deems as unfair trade practices by China. The US Trade Representative, Katherine Tai, had emphasized that these measures are necessary to counter the flooding of global markets with low-cost Chinese products.
As per White House, about USD 18 billion of imports from China will be affected. The bulk of the impacts will lie with batteries and battery parts.
Separately, Moody's Analytics recently said it believes China has reasons to exercise restraint in announcing retaliatory tariffs against the US, at a time when the latter has imposed import tariffs on various critical goods from China.
In a report, Moody's Analytics recently asserted that retaliatory action from China is likely, but a return to a full tit-for-tat trade war is unlikely.
"China's economy is fragile. With household spending and the property market on the wane, manufacturing for export markets is one of its few bright spots. Beijing will not want to cut off its nose to spite its face. More broadly, China is desperately trying to encourage new foreign investment. Rash retaliatory action could spoil its case," Moody's Analytics had explained its rationale as to why it doesn't see full-scale retaliation by China.
