Biden’s new China tariffs are more symbolic bark than bite
The Biden administration’s additional tariffs on China are essentially a rounding error for inflation and GDP, carrying no implications for monetary policy. However, Biden’s decision to implement additional tariffs on China is another indication that US industry policy is shifting toward the stick approach, such as more use of tariffs.
What you will learn:
- The Biden administration’s additional tariffs on China, particularly on electric vehicles, semiconductors, solar, and batteries, will not have a noticeable impact on US inflation or GDP, based on our modeling.
- The tariffs, to be announced later this week, would lift y/y growth in the PCE deflator by 0.01ppt, or 1bps, with a similar drag on GDP; this does not warrant a change to our baseline forecast.
- One reason for the small impact on GDP and inflation is that past tariffs on imported Chinese manufactured EVs had already taken a bite. Last year, China exported around $400 million in battery EVs to the US while the European Union exported nearly $7.5 billion to the US.
Tags:
Related Reports
Post
Toss-up US elections increase downside risks again for our Q3 IFRS 9 and CECL scenarios
While our short-term outlook for the global economy has largely remained steady over the past quarter, the balance of risks around the base case has become more negative. This is evidenced by the number of clients expressing increased pessimism in their expectations around global growth in our latest Global Risk Survey.
Find Out More
Post
Risks to US industry from election skew to the downside
Our baseline forecast is for some form of divided government that will not alter the current trajectory of industrial growth. If either side achieves a governing trifecta and fully implements its agenda there are, however, differences: the growth consequences are mostly negative under former president Trump and mostly positive (albeit very marginal) under Vice President Harris.
Find Out More
Post
Assessing the impact of a Trump vs. Harris presidency for Canada
While a Kamala Harris presidency wouldn't materially alter the economic outlook for Canada. Another term for Donald Trump would usher in stiff tariffs and a renewed era of global uncertainty that would likely mean higher inflation, tighter monetary policy, and slower economic growth relative to our baseline.
Find Out More