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The war for global economic power is set to take another turn this week as the U.S. looks to shield domestic industries and workers from foreign competition. It's a notable development for President Biden, who has kept in place all of the Trump administration's steep levies on about $370B of annual imports from China.
Not only will those continue to remain following a years-long policy review, but further protectionist measures will likely be unveiled at a White House event on Tuesday.
What's in store? Reports suggest that tariffs will quadruple on Chinese electric vehicles to 102.5% from 27.5%. Duties will also be hiked on the solar industry, while other sectors that may see tariffs double or triple could include steel and aluminum, batteries, or other clean-energy goods. Some see the tariffs as merely symbolic, as existing tariffs have already locked Chinese cars out of the American market, while many Chinese solar companies circumvent the duties by exporting to the U.S. via transit locations in southeast Asia.
There has been a big debate in recent years about whether additional tariffs would harm the fight against inflation. That debate is likely irrelevant now as the worst of the price pressures have come down and the U.S. gears up for a contentious election cycle. Protecting industries in key battleground states, like autos in Michigan and steel in Pennsylvania, are at the forefront of some of the races, and both sides are eager to address national security concerns, the loss of manufacturing jobs, and risks associated with the supply chain. Meanwhile, billions of dollars in subsidies have been doled out to key American sectors through mega-spending measures, including the Inflation Reduction Act and CHIPS and Science Act.
What to watch: The U.S. has also warned that China is flooding the market with subsidized goods, with Treasury Secretary Janet Yellen recently flying to Beijing to discuss "unfair trade" and "industrial "overcapacity." The bigger fear here is that protectionist policy could eventually become indistinguishable from industrial policy, and China Foreign Ministry spokesman Lin Jian has promised that Beijing would "take all necessary measures to defend its rights and interests." If China would retaliate, it could target American agricultural exports, or impose limits on critical components the U.S. still doesn't have in its domestic supply chain, like rare earths.
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Related EV stocks: Tesla (TSLA), Ford (F), General Motors (GM), Stellantis (STLA), Nio (NIO), XPeng (XPEV) and Li Auto (LI).
Related solar players: First Solar (FSLR), SunPower (SPWR), Tesla (TSLA), Enphase Energy (ENPH), Sunrun (RUN), SolarEdge (SEDG), Canadian Solar (CSIQ), JinkoSolar (JKS), Bloom Energy (BE), NextEra Energy (NEE), Sunnova Energy (NOVA), Brookfield Renewable Partners (BEP), Ormat Technologies (ORA), SolarWindow (OTCPK:WNDW), Daqo New Energy (DQ), ReneSola (SOL) and Maxeon (MAXN), PG&E (PCG), Consolidated Edison (ED), Dominion Energy (D), Duke Energy (DUK), American Electric Power (AEP), Exelon (EXC), Entergy (ETR), Alliant Energy (LNT), NextEra Energy (NEE) and Southern California Edison (EIX).