US takes aim at China’s green economy with new tariffs – but why?
There are at least three things Joe Biden’s new tariffs on Chinese goods are intended to achieve.
Interestingly enough, preventing Chinese goods from entering the United States (typically the main purpose of tariffs) is arguably the least important of them.
That’s because the most eye-watering of all the new tariffs – a 100% rate on electric vehicles – is being imposed on a category where China doesn’t really compete all that much. Consider: last year the US imported nearly $19bn worth of electric cars. Of those imports, a mere $370m came from China – less than 2% of the total.
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That’s not to say that China is not already a world leader when it comes to making electric cars.
Right now a large chunk of electric cars being bought in Europe and elsewhere besides are Chinese. You might even be driving one today, because most of the Chinese cars being sold on these shores don’t actually have Chinese badges – like BYD. If you have a Tesla Model 3, a Tesla Model Y, an MGs or a Polestar… you’re driving a Chinese car.
Back when cars were all about their internal combustion engines, China never used to be a motoring manufacturing powerhouse. But thanks in large part to enormous support packages, China has achieved dominance of electric car manufacture.
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How China dominates Western business
It has done so in part because it has invested so much not just in making those cars but, even more importantly, in making the batteries inside them – not to mention the chemicals and minerals that go inside those batteries. Look at the global electric vehicle business and China has dominance all the way down the supply chain.
It’s a similar story in much of the green technology sector. China makes the vast majority of the world’s solar panels. It’s staking out a leading position in making wind turbines, not to mention green hydrogen electrolysers and carbon capture technology.
This helps explain why the tariffs announced by the White House today are not just focused on electric cars.
There will also be a doubling of tariffs on solar panels to 50%, as well as further tariffs on steel and aluminium. The justification for the latter two is that Chinese steel and aluminium is produced with more carbon emissions than elsewhere.
Joe Biden has maintained US pressure on China’s sprawling manufacturing sector that began under Donald Trump. Pic: Reuters
They are part of a broader Biden strategy. Many assumed there would be a big shift in economic diplomacy when Mr Biden took over from Donald Trump, and that he would rescind the tariffs and rules the Trump White House imposed on Beijing.
However in reality, the Biden White House has, if anything, doubled down. They have introduced a host of new subsidies on the production of green technology (the Inflation Reduction Act) and semiconductors (the CHIPS Act), fighting China at its game.
The back story here is that the world is on the brink of a new industrial revolution. As countries around the globe push towards net zero, it necessitates a panoply of new industries – to provide the green energy and cleaner products necessary to hit that goal. And the US is determined not to allow China to win the race to build out these new industries. Hence why the White House is now going one step further with tariffs.
The Biden tariff regime also targets Chinese-made solar panels. File pic
Economists dislike tariffs. They fret about what happened in the 1930s, when the global economy slid into depression as countries around the world followed “beggar-thy-neighbour” policies of ever-increasing tariffs. They fear this might happen again, and, frankly today’s tariffs from the White House probably make such an outcome more likely.
So why is this administration, whose Treasury Secretary Janet Yellen is hardly what you’d call a radical economist, going to such lengths? That brings us back to the other two things these new tariffs are intended to achieve.
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The first is to do whatever it takes to give the US a fighting chance at competing with China at producing electric cars and solar panels. Today’s measures might be construed as a tacit admission that the subsidies in the Inflation Reduction Act aren’t helping enough in and of themselves. Whether these tariffs help anymore is an open question. China’s lead is extensive. But we’re about to find out what happens when the world’s two economic superpowers pull out all the stops to compete with each other.
The final reason for these tariffs is more prosaic – but it might actually be the most important of all (at least for Mr Biden himself). They are intended as a political message to show how tough he is on China, and to outdo Donald Trump himself. These tariffs are aimed as much at appealing to the American electorate ahead of the election as they are to affect trade with China.
Nonetheless, they will doubtless provoke some tit-for-tat tariffs from China. Trade – and industrial strategy – have never been so dramatic, or interesting.
There are “no discussions around taxpayers’ money” to prop up Jaguar Land Rover’s (JLR) suppliers, according to the prime minister’s official spokesman, as the carmaker grapples a lengthening production shutdown following last month’s cyber attack.
JLR factories fell silent more than two weeks ago. While it is damaging for the company, it represents a perilous loss of business for the supply chain which has also been forced to send workers home.
Some have already lost their jobs.
Unions and the business and trade committee of MPs were among those to request the possibility of aid to prevent job losses and employers going bust as the disruption drags on.
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What happened?
It was revealed on 1 September that global production at JLR had been stopped following a cyber attack.
IT systems were taken offline by the company under efforts to limit penetration and damage.
The company appeared confident initially that manufacturing could resume but restart dates have been consistently put back.
What damage was done?
Jaguar Land Rover has said very little about the extent of the attack.
But it admitted last week that some data had been accessed. It gave no further details.
Who is to blame?
A criminal investigation is continuing.
A group of English-speaking hackers claimed responsibility for the JLR attack via a Telegram platform called Scattered Lapsus$ Hunters, an amalgamation of the names of hacking groups Scattered Spider, Lapsus$ and ShinyHunters.
Scattered Spider, a loose group of relatively young hackers, were behind the Co-Op, Harrods and M&S attacks earlier in the year.
It is widely believed that M&S paid a sum to regain control of its systems after it was targeted with ransomware though it has refused to confirm if this was the case.
How is this affecting JLR as a business?
The business was highly profitable last year but 2025 has seen new trade war challenges in addition to the cyber attack: File pic: Reuters
JLR typically produces about 1,000 vehicles a day.
Production staff are being paid but kept away from plants at Halewood on Merseyside, Solihull in the West Midlands, and its engine factory in Wolverhampton. It is the same story for workers at sites in Slovakia, China and India.
JLR revealed on Tuesday that production lines would now remain shut until at least 24 September.
David Bailey, professor of business economics at the Birmingham Business School, told the PA news agency: “The value of cars usually made at the sites means that around £1.7bn worth of vehicles will not have been produced, and I’d estimate that would have an initial impact of around £120m on profits.”
JLR achieved a pre-tax profit of £2.5bn for the financial year ending 31 March 2025, so should be able to absorb such a hit.
Sales and service operations continue as normal at its retail partners but the longer the disruption goes on, so do the risks to its inventories and bottom line.
Why does its supply chain need help?
JLR’s supply chain includes everything from components to paint. Pic: Reuters
This is the part of the operation that was always bound to suffer most in the event of a global JLR production shutdown.
No manufacturing means no need for parts.
The company usually depends on a ‘just in time’ supply chain to feed its factories and keep production lines running smoothly.
The Unite union has appealed for a COVID-style furlough scheme to prevent job losses and the risk of affected companies, often small or medium-sized firms, being forced out of business.
JLR’s operations are understood to directly support more than 100,000 jobs in the UK though that sum doubles through indirect roles.
The loss of any major supplier would risk further production delays once JLR’s IT systems are back online.
It is currently understood that the vast majority of directly affected workers remain in their jobs but have either been sent home or are on restricted tasks.
JLR suppliers Evtec, WHS Plastics, SurTec and OPmobility have had to temporarily lay off roughly 6,000 staff while a growing number of other firms are cutting workers, with temporary or contracted workers most likely to be affected.
What has the government said?
In addition to the remarks by the PM’s official spokesman, minister for industry Chris McDonald told Sky News: “We know this is a worrying time for those affected by this incident and our cyber experts are supporting JLR to help them resolve this issue as quickly as possible.
“I met the company today to discuss their plans to resolve this issue and get production started again, and we continue to discuss the impact on the supply chain.”
The NHS will increase the amount it spends on medicines in response to criticism from pharmaceutical companies that the UK is becoming uncompetitive, science minister Lord Vallance has told MPs.
Investments worth close to £2bn have been paused or cancelled this year by three of the world’s largest companies, Merck, AstraZeneca and Eli Lilly, amid a fraught negotiation between the industry and government over medicines pricing.
Addressing an emergency session of the science, technology and innovation select committee, Lord Vallance acknowledged that low prices historically paid by the NHS, and pressure from US President Donald Trump to cut prices for US consumers, had made the UK less attractive to industry.
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He said: “I’m deeply concerned that there’s been a 10-year decrease in the investment in support for a vital industry; vital for the economy, vital for patients and vital for the NHS at a time when medicines are making a bigger contribution than ever.
“I think the NHS will spend a larger percentage of its budget on medicines. These things are all about trade-offs, and the trade-off that has been made for the last decade has been [to spend] a lower percentage on medicines.
“We are now reaping the consequences of that in a very urgent way, and that is what we need now to address.”
Lord Vallance’s comments came after industry executives warned MPs the UK’s commitment to the life sciences faces a “credibility challenge”, and was losing out on investment to competitors including Germany, Ireland and Singapore.
Science minister Lord Vallance
Ben Lucas, the UK managing director of drugs giant Merck, which last week cancelled a £1bn research investment in London, said the decision was made in part because of the “end-to-end” difficulty of doing business in the UK.
He said: “This is a credibility challenge. The reality is we have been having, with successive governments, this continued conversation about the potential of the UK. But from a US-based executive team looking in, I hear; ‘We have heard this plan before, but it hasn’t necessarily been delivered’.”
Tom Keith-Roach, the UK president of AstraZeneca, which has paused or cancelled $650m of investment in recent months, said: “The UK is an increasingly challenging place to bring forward that innovation, to get through the front door… of the NHS, to deliver to patients and improve patient lives.
“What we are seeing globally is that discretionary investment in R&D is flowing into countries that are seen to value innovation and pull that through to patients. It is increasingly challenging to bring that investment into an environment that is apparently not.”
Read more:
UK drugs industry’s challenges may prove costly
The industry wants the threshold for allowing new drugs into the NHS increased from the current £20,000-£30,000, unchanged since 1999, and to increase an overall medicines budget that has fallen in real terms by 11% in a decade.
It also wants a reduction in the complex “clawback” arrangements governing drug pricing, which this year will see the industry return 23% of total revenues to the NHS, around four times comparable schemes in Europe.
Lord Vallance said discussions with industry over reforming the clawback arrangements continued, despite formal negotiations ending without agreement earlier this year.
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