During President Joe Biden’s administration, billions of dollars in factories making semiconductors, electric vehicle parts and solar panels were built partly to take advantage of federal subsidies meant to bolster U.S. production of these goods. Now Biden's put some of those signature legislative items to the test.
Biden on Tuesday approved higher tariffs on various cheap Chinese imports, including computer chips and EVs. The move is intended to fight “anticompetitive, unfair practices” by China, the White House said in a statement.
“American businesses are now struggling to compete with underpriced Chinese-made supplies dumped on the market,” the White House said in the statement.
The administration also raised tariffs on Chinese steel, aluminum, batteries, minerals, port cranes and medical products such as syringes, respirators and surgical gloves. The move affects about $18 billion of Chinese goods, according to Reuters.
China’s sputtering economy combined with the U.S. election season “add up to a perfect recipe" for escalating U.S. trade frictions with China, Cornell University professor of trade policy Eswar Prasad told the Associated Press.
The White House highlighted how the federal CHIPS and Science Act, Infrastructure Investment and Jobs Act, Inflation Reduction Act and other programs have beefed up U.S. production of certain items, lessening reliance on Chinese imports. The federal government has invested at least $53 billion in U.S. semiconductor manufacturing, as China has increased its production of computer chips used in automobiles, appliances, medical devices and other consumer products.
Semiconductor makers have rushed to develop factories to take advantage of the funds. The federal government is providing up to $6.4 billion in grants to Samsung to develop new chip plants and research facilities in central Texas. Taiwan Semiconductor Manufacturing Co. will receive up to $6.6 billion in federal funds to expand manufacturing in the Phoenix area. In Utah, Texas Instruments will use federal CHIPS and Science Act money for a planned $11 billion expansion of a facility near Salt Lake City.
Biden visited Syracuse, New York, in April to announce that Micron Technology would receive $6.1 billion in grants to build two plants in upstate New York and a third plant in Boise, Idaho.
Property Leasing
Federal grants to the computer-chip sector have boosted office and industrial property leasing in certain U.S. markets, according to CoStar data. Property values have increased in markets where plants are under development and some areas have seen an uptick in multifamily development.
In the automotive industry, the Biden administration has awarded at least $20 billion in grants to expand U.S. production of lithium-ion batteries and other minerals used for electric vehicles. China controls about 80% of certain segments of the EV battery supply chain.
Electric vehicle sales have stagnated in the United States, and new tariffs are intended to stimulate sales of EVs made by American companies. Biden approved raising tariffs on Chinese electric vehicles from 25% to 100%, taking effect this year.
The administration has approved at least $7 billion in grants to support the development of electric vehicle battery manufacturing. The first phase of funding went to a battery recycling facility in Kentucky, a lithium mine in North Carolina and other projects.
The solar power industry will also get an assist from the higher tariffs. Tariffs on solar cells will rise from 25% to 50% this year.
Solar manufacturers have announced about $17 billion in planned investments in the United States, taking advantage of tax incentives. New industrial developments for the solar industry have been announced in Georgia, North Carolina and Nevada.
Higher tariffs have directly affected the industrial real estate market in the United States. Last year, Mexican imports surpassed Chinese imports for three straight months for the first time in decades, a direct result of the 2018 tariffs against China, according to CoStar data. That’s led to a tightening of available industrial space in markets on the U.S.-Mexico border, including San Diego and Laredo, Texas.
The risk in raising tariffs is that it could lead to higher consumer prices for items such as mobile phones, residential solar panel installations and electric cars and trucks, according to some economists. Recent polls have shown some voters blame Biden for persistently higher inflation.
Tariffs on Chinese imports were increased in 2018 under former President Donald Trump. Biden said none of those tariffs will be repealed.
The Chinese commerce ministry said in a statement on Tuesday that the tariff increase “violates President Biden’s commitment to ‘not seek to suppress and contain China’s development,’” according to Reuters.
“The U.S. should immediately correct its wrongdoing and remove the additional tariffs imposed on China,” the ministry said.