Taking cues from the recent imposition of high tariffs by the US on various imports from China, CareEdge Ratings suggests that other nations might also adopt similar measures to safeguard their 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,” stated the rating agency in a global economic update this week.
Earlier this month, US President Joe Biden imposed heavy tariffs on Chinese products, including batteries, electric vehicles (EVs), steel, solar cells, and aluminum, as a protectionist measure to address trade imbalances. These tariffs include a 100 percent tariff on electric vehicles, a 50 percent tariff on semiconductors, and a 25 percent tariff on electric vehicle batteries imported from China. Additionally, items like medical gloves, syringes and needles, critical minerals, and solar cells will also face higher tariffs.
“For the US, consumer welfare may suffer if domestic substitutes fail to compete with Chinese imports on price,” CareEdge believes.
These proposed tariff increases are part of the US’ broader strategy to combat what it perceives as unfair trade practices by China. The US Trade Representative, Katherine Tai, emphasized the necessity of these measures to address the inundation of global markets with low-cost Chinese products.
According to the White House, approximately USD 18 billion worth of imports from China will be affected, with batteries and battery parts bearing the brunt of the impact.
Separately, Moody’s Analytics recently stated that China has reasons to exercise restraint in announcing retaliatory tariffs against the US following the imposition of import tariffs on various critical goods from China.
“China’s economy is fragile. With household spending and the property market on the decline, manufacturing for export markets remains 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 explained its rationale for why it doesn’t foresee a full-scale retaliation by China.
