China Vows ‘Resolute Measures’ After Biden’s New Tariffs

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(Bloomberg) -- China blasted the Biden administration’s move to increase US tariffs on a wide range of Chinese imports, vowing to take its own action, without giving specifics.

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“China will take resolute measures to safeguard its own rights and interests,” the Ministry of Commerce said in a statement Tuesday. “The US should immediately correct its wrong actions and cancel the additional tariff measures against China.”

President Joe Biden is hiking tariffs on imports from China including semiconductors, solar cells, and critical minerals, with rates ranging from 25% for batteries to 100% for electric vehicles. The announcement was the culmination of a review of predecessor Donald Trump’s tariff increases — none of which were rolled back.

Read more: Biden Adds Tariffs on Chinese Chips, Critical Minerals, EVs

China called the additional tariffs “political manipulation,” with the move coming ahead of US elections this year.

Some China stocks fell on the news on Wednesday. Semiconductor Manufacturing International Corp. dropped 1.8% as of 1:21 p.m. in Shanghai, while LONGi Green Energy Technology Co. lost 0.4%. Shenzhen-listed BYD Co., the leader in electric vehicles in China, retreated 1.7%.

In response to Trump’s tariff hikes from 2018 onwards, Beijing often attempted a tit-for-tat approach — trying to match the size and scope of US measures. But analysts expect a more limited response this time.

“Beijing’s direct retaliation against the US will avoid sharp escalation,” predicted Michael Hirson, a former US Treasury official who now heads China analysis at 22V Research. “Actions that lash out at prominent US firms or ramp up supply-chain restrictions, such as limiting exports of critical minerals, would hurt Xi’s efforts to shore up domestic and international confidence in China.”

President Xi Jinping in recent months has led efforts to bolster waning foreign investment in China. Hirson added that “China’s leadership will also seek to avoid actions that make China the center of the US presidential campaign.”

In a briefing on Tuesday afternoon, Chinese Embassy spokesman Liu Pengyu said accusations of Chinese overcapacity were a “false narrative” aimed at hindering the country’s economy. He praised China’s manufacturing sector as simply more competitive, innovative and efficient.

“We want to tell our US colleagues that blaming others won’t make yourself more competitive,” Liu told reporters. “Stop using overcapacity as an excuse for trade protectionism. Stop politicizing economic and trade issues.”

Read More: Xi Says US CEOs Should Invest in China, Economy Hasn’t Peaked

US measures announced Tuesday are themselves limited — which may help to contain Beijing’s response, according to Tobin Marcus and Chutong Zhu at Wolfe Research in New York. Biden’s tariff hikes only amount to an 8% increase in “total exposed import volume” from China, and the phase-in periods “will mitigate impact,” they wrote in a note.

“We expect there will be some Chinese response, but that Beijing will aim for proportionality, which means the US fallout should be limited,” Marcus and Zhu wrote.

Read More: China’s Factory Glut Alarms the World But There’s No Quick Fix

Biden is trying to balance looking tough on China and vowing to protect US jobs without destabilizing the domestic economy or inflaming inflation.

Last month, he vowed 25% tariffs on Chinese steel and aluminum that were largely toothless, as the Asian nation sells little of either metal to America.

Treasury Secretary Janet Yellen said on Monday ahead of the tariff announcement that “hopefully we will not see a significant Chinese response — but that’s always a possibility.”

She added on Tuesday that the new tariffs would protect US firms and workers without hurting the pocketbooks of the nation’s consumers.

“I don’t believe that American consumers will see any meaningful increase in the prices that they face,” Yellen said in an interview on the PBS NewsHour.

--With assistance from Iain Marlow and Philip Glamann.

(Updates with China stock reaction.)

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