[Interview] Lainshi, Senior Fellow at US CSIS, "US 'China Tariff Bomb' Will Spread to EU and Others"

"Same Measures as Allies like the EU Needed"
Next Target: Chinese Electric Cars Bypassing Mexico
US Economy and Inflation Impact Expected to Be "Limited"

"The U.S. tariff increase on China will pressure other countries, including the European Union (EU), to take similar measures."

William A. Reinsch, International Economic Chair at the U.S. think tank Center for Strategic and International Studies (CSIS), said in an interview with Asia Economy on the 15th (local time) regarding the Biden administration's tariff hike on Chinese oversupplied products, "The U.S. wants to prevent essential industries from being flooded with Chinese imports caused by China's overinvestment and overproduction." Reinsch served as Deputy Secretary of Commerce during the Bill Clinton administration.

He predicted that the U.S. export of Chinese oversupplied products would be blocked by this measure, and like a 'balloon effect,' these products might shift to other regions. As a result, he saw a high possibility that other regions such as the EU would follow the U.S. in building tariff barriers against China.

Reinsch said, "The Biden administration wants the EU to take similar tariff increase measures against China as the U.S. has," adding, "The U.S. should use diplomatic power to encourage friends and allies to adopt the same strategy (toward China)." He also forecasted, "This will help prevent oversupplied products from returning to China."

He expected the next card the Biden administration would play to be Chinese automobiles circumventing through Mexico. The day before, Katherine Tai, U.S. Trade Representative (USTR), stated, "China's expansion of business within Mexico is a serious concern," and "We are reviewing all tools to address this issue."

Reinsch anticipated, "Next, tariff measures on Chinese automobiles imported from Mexico to the U.S. are expected," and predicted, "Unless China takes provocative actions, no measures other than this will be taken before the November elections."

He expected China's retaliatory measures in response to the U.S. tariff increase to be limited. He said, "China always retaliates, but typically at the same level as our actions," adding, "Since our measures are preventive, China's retaliation will not be comprehensive, and I do not think it will escalate into a full-blown U.S.-China trade war."

He assessed that the Biden administration's tariff increase would have little impact on the U.S. economy or inflation. He explained, "Many of the products affected by the tariff increase are not currently imported in large quantities into the U.S. market," and "The purpose of the tariff increase is to preemptively block products that may enter the market in the future." He emphasized, "There will be no significant impact on the U.S. economy or inflation."

However, regarding the inclusion of key minerals and materials for electric vehicle batteries, which China dominates in the supply chain, in this tariff increase, he diagnosed that there is a short-term risk of cost increases. He said, "In the short term, obtaining minerals will become more difficult and more expensive," but added, "In the long term, if the U.S. industry responds as the administration desires, it could help activate domestic industries related to those minerals."

Earlier, the White House on the 14th directed the USTR to raise tariffs on key strategic industries based on Section 301 of the Trade Act, citing China's unfair trade practices. Tariffs will be increased from 2024 through 2026 on major items such as Chinese electric vehicles (25% → 100%), steel and aluminum (0~7.5% → 25%), semiconductors (25% → 50%), lithium-ion electric vehicle batteries (7.5% → 25%), and solar cells (25% → 50%).