WASHINGTON - US President Joe Biden’s administration is poised to unveil a sweeping decision on China tariffs as soon as next week, one that is expected to target key strategic sectors while rejecting the across-the-board hikes sought by Donald Trump, people familiar with the matter said.

The decision is the culmination of a review of so-called Section 301 tariffs first put into place under Trump starting in 2018. The new tariffs will focus on industries including electric vehicles (EVs), batteries and solar cells, with existing levies largely being maintained. An announcement is scheduled for May 14, two of the people said.

While a decision could be delayed, it nonetheless represents one of Mr Biden’s biggest moves in the economic race with China. It builds on his call in April to hike tariffs on Chinese steel and aluminium, and the formal launch of a fresh probe into China’s shipbuilding industry.

China’s renminbi weakened on the news, while the CSI 300 Index of Chinese shares fell as much as 0.6 per cent in early trading before paring about half of its decline. China’s Foreign Ministry and Commerce Ministry did not immediately reply to requests for comment.

“It’ll definitely cause investors to pause on stocks that are potentially exposed,” said abrdn’s director of investment Ng Xin-Yao, adding that many green-tech brands such as battery giant Contemporary Amperex Technology have already limited their US exposure. “Everyone knows it’s a risk.”

Chinese President Xi Jinping’s strategy of ramping up manufacturing to arrest an economic slowdown at home has triggered alarm abroad. US and European Union leaders have warned Beijing that excessive state subsidies have fuelled a deluge of cheap exports that are threatening jobs in their markets.

The United States is standing up to China’s “unfair economic practice and industrial over-capacity”, Mr Biden said in April. “I’m not looking for a fight with China. I’m looking for competition, but fair competition.”

The tariffs would likely have little immediate impact on Chinese firms, as its world-beating EV giants are mostly locked out of the American market by auto tariffs. Its solar companies mostly export to the US from third countries to avoid curbs, with US firms seeking higher tariffs on that trade, too.

Mr Biden and Trump are both jockeying to be seen as tough on China, as they head toward an election rematch in November. Mr Biden in April signed into law a Bill that began a countdown for video-sharing platform TikTok to divest from its Chinese parent ByteDance, or quit the American market.

Trump has promised to hike tariffs on China across the board if re-elected, vowing a 60 per cent tax on all Chinese imports. Many Democrats have dismissed that approach, in part because it would raise prices for US consumers grappling with inflation.

During Trump’s last administration, Washington and Beijing became embroiled in a tit-for-tat trade war, which saw China retaliate with measures that aimed to exact pain in the American heartland by targeting agricultural exports. 

US Senator Chuck Grassley, an Iowa Republican, said he expects Beijing to respond. “We know how China reacted when Trump put tariffs on,” he added. “They hit agriculture with it. I can’t be sure that China would hit agriculture the same as they did in the Trump ones, but they’re going to hit back.”

Strategic tariffs

Mr Biden’s announcement would be formally enacted by the office of US Trade Representative (USTR) Katherine Tai, who said in April that she expected a conclusion to a review that began in 2022 to end “soon”. The administration had been looking at ways to make the tariffs more strategic and effective, she added.

The move comes after Mr Biden in April proposed new 25 per cent tariffs on Chinese steel and aluminium, part of a series of steps to shore up the American steel sector and woo its workers in an election year. That move was viewed as largely symbolic, because China currently exports little of either metal to the US.

The full range of existing duties spans imports from industrial inputs, such as microchips and chemicals, to consumer merchandise including apparel and furniture. Trump imposed the first of the tariffs in 2018, citing Section 301 of the Trade Act of 1974.

For years, internal divisions prevented Mr Biden’s team from arriving at a consensus on what to do about the tariffs. Some officials, including Treasury Secretary Janet Yellen, had argued that reducing curbs on household items could help ease US inflation.

While the Biden administration had considered the political implications of changes to the tariffs, the USTR in late 2022 began a legally required formal review of their impact. In the absence of such an evaluation, the curbs would have started to automatically expire in mid-2022.

Under Trump, Washington and Beijing reached the so-called phase one agreement in early 2020. That reduced some duties in exchange for China pledging to address intellectual-property theft and buy energy, farm and manufactured goods along with services through December 2021. China fell more than one third short of its promises.

Mr Biden’s tariff move comes after his nation’s turbulent relationship with China has stabilised in recent months amid a flurry of diplomatic engagements. After the US President met his Chinese counterpart in California in November, Mr Biden said they had achieved “real progress”. BLOOMBERG