On May 14th, the White House announced new tariffs on Chinese imports, targeting key sectors such as electric vehicles, lithium batteries, and solar panels that the Chinese Communist Party (CCP) touted as the “new three items” representing their external trade “new qualitative productivity”. The tariffs on these products were significantly increased. Just a week before, Chinese leader Xi Jinping met with French President Macron and European Commission President von der Leyen, promoting China’s new energy industries and refusing to acknowledge “overcapacity.” However, Biden dealt a blow to the CCP by imposing the new tariffs, leaving the CCP with no choice but to resort to “spiritual victory tactics.” The next move to be observed is the response from the European Union.
The White House’s new tariffs on China had been in preparation for some time. Both the U.S. Treasury Secretary Yellen and Secretary of State Blinken emphasized the issue of overcapacity under the CCP during their visits to China. President Biden himself hinted at imposing high tariffs on Chinese electric vehicles, aiming to prevent the CCP’s dumping practices and protect the U.S. automobile industry.
The escalating competition over China policy between Biden and Trump has become a key element in the election campaign. During his tenure, Trump initiated the U.S.-China trade war and left office with tariffs as high as 25% on $250 billion worth of Chinese imports. While Biden had hinted at potentially relaxing some tariffs over the past three years, the CCP never fully yielded, leading to a series of deadlocks.
In a surprising move, Biden not only did not reduce tariffs on China but increased them, with electric vehicles facing tariffs as high as 100%. This had long been anticipated as Biden’s move to surpass Trump’s tariff actions, and it has now become a reality.
During his election campaign, Trump had mentioned raising certain tariffs on China to 60%, and later even to 200% if re-elected, putting pressure on Biden’s team. The effects of the tariffs during Trump’s presidency continued to show, with the U.S.-China trade deficit reaching a recent low of about $279.4 billion in 2023, highlighting the ongoing shift of the U.S. supply chain away from China, exacerbated by the pandemic.
While Trump’s tariffs remained effective, the rise of electric vehicles in China was a relatively recent development. In just a few years, Chinese electric vehicles had started being exported on a large scale. Biden’s response was crucial as the U.S. neared the November election, demonstrating a firm stance against China’s unfair trade practices.
The White House announced that starting in 2024, electric vehicles imported from China would face a 100% tariff, while tariffs on solar panels, injectors and needles would increase to 50%. Moreover, tariffs on certain steel and aluminum products, battery components, lithium-ion electric vehicle batteries, key minerals, harbor cranes, some respirators, and masks, among other personal protective equipment, would rise to 25%. These tariffs would take effect gradually through 2026.
The scope of these new tariffs extended beyond those of the Trump era, with the 100% tariff on Chinese electric vehicles standing out. The CCP’s promotion of the “new qualitative productivity” and external trade “new three items” including electric vehicles, lithium batteries, and solar panels had quickly faced resistance from the White House. The CCP’s attempt to push these industries as “advanced” came crashing down with the new tariffs imposed by the U.S.
The slogan of “new qualitative productivity” was introduced during the CCP’s Two Sessions in March as a remedy to revive the Chinese economy. Despite international pressure, the CCP leadership in Zhongnanhai appeared obstinate and refused to acknowledge “overcapacity,” insisting on promoting the new energy industry as an “advanced sector.”
During Xi Jinping’s visit to France on May 6th, the White House’s new tariffs loomed large. Despite meeting with French President Macron and European Commission President von der Leyen, Xi Jinping continued to refer to China’s new energy industry as “representing advanced capabilities” without acknowledging any “overcapacity issues.”
The CCP’s claim of “advanced capabilities” appeared illogical. For instance, Tesla’s compact Model 3 in China had a starting price of 231,900 yuan with a mileage of 606 kilometers, while a comparable BYD vehicle, the Hanbao Elite, had a guided price of 179,800 yuan with a mileage of 550 kilometers. The BYD compact crossover Yuan UP had an even lower starting price of 79,800 yuan with a mileage of 301 kilometers. If BYD were truly more advanced, their pricing should have been higher than or at least on par with Tesla in the Chinese market, posing a question on the pricing strategy.
On April 28th, Chinese Premier Li Keqiang met with Tesla CEO Elon Musk in Beijing, following which Tesla’s autopilot was approved for entry into China. In contrast, BYD’s autopilot technology was just beginning to take off. However, this did not deter the CCP from continuing to promote Chinese electric vehicles as an “advanced industry,” driven by political necessity or perhaps a sense of helplessness.
Such claims by the CCP were mainly aimed at deflecting the newly imposed U.S. tariffs, trying to assert that the U.S. deliberately targeted China’s “advanced industries.” Like its narrative on U.S.-China relations, the CCP had always shifted blame to the U.S. to cloak its own leadership errors. The CCP’s proclaimed “overcapacity” in electric vehicles and other industries was actually another manifestation of low-quality overproduction under CCP governance, leaving Zhongnanhai in an embarrassing position.
In response, the CCP deliberately elevated new energy industries to cover up leadership incompetence and falsely accused the U.S. of suppressing China’s “advanced industries.” Turning incompetence into a merit, the CCP continued to play its nationalist rhetoric. The CCP’s Ministry of Foreign Affairs and state media had already prepped for such diplomatic rhetoric escalation.
On May 13th, Xinhua News Agency began publishing a series of articles titled “China’s new energy industry: Where does the real capacity come from – The international significance of China’s advanced capabilities series of comments.” Subsequent articles on May 14th further highlighted how China’s new energy industry can benefit the world, emphasizing China’s “advanced capabilities.”
Being unable to engage in a new tariff war with the U.S., the CCP found itself trapped after the White House’s decisive action, resorting to internal propaganda to maintain a façade.
In light of the new tariffs imposed by the White House on May 14th, Xinhua News Agency promptly released articles titled “Taxation, the ‘boomerang’ game of U.S. protectionism” and “Taxing Chinese electric vehicles, U.S. protectionism will harm itself.”
The CCP resorted once again to “spiritual victory tactics.” If the White House’s actions genuinely inflicted more harm on the U.S., there would be no need for Xinhua to suggest that perhaps the U.S. should hurt itself. However, the reality was the opposite as the White House preemptively blocked the export path for Chinese electric vehicles, leaving China with significant excess capacity that couldn’t be absorbed domestically. If the EU followed suit, the CCP’s bluff wouldn’t hold.
Just as the CCP was planning significant exports of electric vehicles to North America, the White House effectively closed off that path, leaving Zhongnanhai now focusing on the European market. In 2023, the European electric vehicle market surpassed that of North America, with approximately 3.23 million vehicles sold compared to around 1.61 million in North America. With the Chinese, European, and North American electric vehicle markets capturing 95% of the global market share, the CCP was losing ground in North America, turning its attention toward the EU market.
In 2023, China’s electric vehicles accounted for about 19.5% of the EU market share, nearly one-third in France and Spain alone. Analysts projected that by 2024, China’s share of the electric vehicle market in Europe could exceed 25%. However, in September 2023, the EU initiated an anti-subsidy investigation concerning Chinese electric vehicles.
During Xi Jinping’s visit to France, the tough rhetoric continued, indicating difficulty in finding a resolution and possibly exacerbating tensions. With the U.S. taking the lead, the focus turned to when the EU might follow suit.
While Xi Jinping was in France, President Macron once again urged Xi to commit to not providing military assistance to Russia. According to France’s statement, Macron believed Xi had made an oral commitment, but the CCP’s response remained evasive.
The Russia-Ukraine war raised security concerns in Europe, prompting Russian President Putin to seek further support from the CCP. Depending on whether Zhongnanhai maintained restraint or converged further in its attitude towards Moscow, the EU’s response might not be immediate. If the CCP continued to adopt a confrontational stance to counter the U.S. and NATO with Russia, the EU might swiftly emulate the White House’s actions to restrict exports of Chinese electric vehicles and more.
Despite needing to avoid provoking the EU, the CCP was likely irked by the White House’s new tariffs, limiting their response options. A significant move in the Taiwan Strait or amplifying ties with Russia might play out, but the outcome would likely backfire, further isolating the CCP. For now, the CCP’s relatively restrained response to the White House indicated a dilemma within Zhongnanhai.
The primary concern for Zhongnanhai wasn’t external containment but internal stability. With Biden’s firm stance, the CCP could no longer gloss over the fragile U.S.-China relationship, opting instead to exaggerate the promotion of “new qualitative productivity” or “advanced industries.” However, the Chinese populace couldn’t easily be deceived, and the CCP leadership found itself dealing with another challenging issue at the Third Plenum.
[End of the translated article.]