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Biden slaps new tariffs on Chinese imports, ratcheting trade war

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US President Joe Biden Biden has said he wants to win this era of competition with China but not to launch a trade war (Aljazeera)

President Joe Biden has slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminium and medical equipment, taking potshots at Donald Trump along the way as he embraced a strategy that’s increasing friction between the world’s two largest economies.

The Democratic president said on Tuesday that Chinese government subsidies ensure the nation’s companies do not have to turn a profit, giving them an unfair advantage in global trade.

“American workers can outwork and out-compete anyone as long as the competition is fair,” Biden said in the White House Rose Garden. “But for too long, it hasn’t been fair. For years, the Chinese government has poured state money into Chinese companies … it’s not competition, it’s cheating.”

China immediately promised retaliation. Its Ministry of Commerce said Beijing was opposed to the tariff hikes by the United States and would take measures to defend its interests.

Biden will keep tariffs put in place by his Republican predecessor Donald Trump while ratcheting up others, including a quadrupling of EV duties to more than 100 percent and doubling the duties on semiconductor tariffs to 50 percent.

The new measures affect $18bn in imported Chinese goods including steel and aluminium, semiconductors, electric vehicles, critical minerals, solar cells and cranes, the White House said. The EV figure, while headline-grabbing, may have more political than practical impact in the US, which imports very few Chinese EVs.

The US imported $427bn in goods from China in 2023 and exported $148bn to the world’s number-two economy, according to the US Census Bureau, a trade gap that has persisted for decades and become an ever more sensitive subject in Washington.

US Trade Representative Katherine Tai said the revised tariffs were justified because China was stealing US intellectual property. But Tai recommended tariff exclusions for hundreds of industrial machinery import categories from China, including 19 for solar product manufacturing equipment.

The tariffs come in the middle of a heated campaign between Biden and Trump, his Republican predecessor, to show who’s tougher on China.

Asked to respond to Trump’s comments that China was eating the US’s lunch, Biden said of his rival, “He’s been feeding them a long time.” The Democrat said Trump had failed to crack down on Chinese trade abuses as he had pledged he would do during his presidency.

Karoline Leavitt, the Trump campaign’s press secretary, called the new tariffs a “weak and futile attempt” to distract from Biden’s own support for EVs in the United States, which Trump says will lead to layoffs at car factories.

Administration officials said their measures are combined with domestic investment in key industries and unlikely to worsen a bout of inflation that has already angered US voters.

Biden has struggled to convince voters of the efficacy of his economic policies despite a backdrop of low unemployment and above-trend economic growth. A Reuters/Ipsos poll last month showed Trump had a seven percentage-point edge over Biden on the economy.

BYD[File pic] China’s BYD overtook Tesla as the biggest seller of electric vehicles  (Aljazeera)

Analysts have warned that a trade tiff could raise costs for EVs overall, hurting Biden’s climate goals and his aim to create manufacturing jobs.

Biden has said he wants to win this era of competition with China but not to launch a trade war. He has worked in recent months to ease tensions in one-on-one talks with Chinese President Xi Jinping.

Both 2024 US presidential candidates have departed from the free-trade consensus that once reigned in Washington, a period capped by China’s joining the World Trade Organization in 2001. Trump’s broader imposition of tariffs during his 2017-2021 presidency kicked off a tariff war with China.

As part of the long-awaited tariff update, Biden will increase tariffs this year from 25 percent to 100 percent on EVs, bringing total duties to 102.5 percent, from 7.5 percent to 25 percent on lithium-ion EV batteries and other battery parts and from 25 percent to 50 percent on photovoltaic cells used to make solar panels. Some critical minerals will have their tariffs raised from nothing to 25 percent.

More tariffs will follow in 2025 and 2026 on semiconductors, as well as lithium-ion batteries that are not used in electric vehicles, graphite and permanent magnets, as well as rubber medical and surgical gloves.

A number of lawmakers have called for massive hikes on Chinese vehicle tariffs or an outright ban over data privacy concerns. There are relatively few Chinese-made light-duty vehicles being imported now.

The United Auto Workers, a politically important union that endorsed Biden, said the tariff moves would ensure that “the transition to electric vehicles is a just transition.”

(Aljazeera)



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Budget 2025: A spectrum of reactions and perspectives

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By Sanath Nanayakkare

The 2025 Government Budget has begun to attract multiple comments from the corporate sector, academics, the government ranks and the Opposition. Reproduced below are a few of them.

First Capital Research’s analysts pointed out that the budget heavily leant towards social welfare and infrastructure development significantly increasing government expenditure.

“The already announced tax revenue measures and the digitalization drive are expected to boost Government Revenue allowing the Budget Deficit to be contained at 6.7% of GDP. A significant portion of increased government spending has been directed towards social spending with increased public sector salaries and pensions, coupled with higher allocation for assistance programs such as Aswesuma and other additional social benefits. While this ensures financial relief for many households, it also influences overall economic behavior in ways that will be felt across society. Efforts have also been made to support the lagging economy via public investments with spending targeted towards road construction, water projects, housing and city developments,” First Capital said.

“Despite the extravagant spending increases, a substantial increase in revenue is also planned with bulk of the revenue increase expected from taxes on vehicles while VAT on digital services, the imposition of corporate income tax on the export of services, and an increase in the corporate tax on cigarettes/liquor, and gaming is expected support to achieve the target. Further support is anticipated via digitalization and the expansion in the economy where the Government expects to provide a boost through spending on infrastructure, with the aim to balance spending with fiscal discipline while fostering long-term economic stability,” First Capital noted.

Government

“The Opposition was helpless when the President presented a progressive budget that brings good times for the people of this country. It was the most successful budget when looking back at the budgets presented in the past few decades,” Deputy Minister of Fisheries Ratna Gamage said.

“The government has delivered the best salary increments for state employees. The basic salaries of all state employees have increased across the board in significant amounts. Deputy Minister of Labour, Mahinda Jayasinghe said.

Academics

“Sri Lanka needs new technology-driven production economy. For that the contribution of the private sector is needed. The budget has not focused on that aspect,” Economist Professor Wasantha Athukorale said.

“There is some risk emanating from the increase of state employee salaries which will cost Rs. 300 billion within the next three years. This is more than what is collected from PAYEE tax. Dhananath Fernando of Advocata said.

Opposition

“The Budget represented the voice of the IMF, the sovereign bondholders and the scam-laden super-rich,” Peratugami Activist Pubudu Jayagoda said.

“The Budget presented by President Anura Kumara Dissanayake was the mother of all deceptions”, SLPP General Secretary Sagara Kariyawasam said.

“When state employees get their salary in April, they will realize that they have been taken for a ride by the government, SJB MP Marikkar said.

Janasetha Peramuna leader Ven. Baththaramulle Seelarathan said the government which came to power through the massive support of Buddhist monks., has not made an allocation in the budget for enhancing the quality of education at Pirivenas although other areas of education had allocations.”

Udaya Gammanpila , Leader, Pivithuru Hela Urumaya said that they have identified 12 projects that no allocations were set apart for, through the budget.

Referring to a popular verse about wearing someone else’s pants and strutting about, Gammanpila said,” “The essence of the Budget reveals that the President is confidently adopting Ranil Wickremesinghe’s policies as if they were his own.

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‘Dependence on solar panels hindering national power grid stability’

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By Ifham Nizam

As Sri Lanka accelerates its transition to renewable energy, particularly through the widespread adoption of rooftop solar installations, it is encountering significant hurdles in maintaining the stability of its national power grid.

While the country’s commitment to sustainability aligns with global trends, the increasing reliance on intermittent sources like solar energy has introduced complex challenges, especially during periods of low industrial demand such as weekends and holidays.

A senior electrical engineer, speaking to The Island Financial Review, raised alarm over the escalating frequency fluctuations and instability in the power system, particularly on sunny Sundays when energy demand plummets. The high penetration of non-despatchable renewable energy (NCRE), such as solar power, has reduced system inertia, putting the grid at a heightened risk of failure during these low-demand periods.

He said one critical example was on September 22, 2024, when the national grid registered its lowest demand of 670 MW at 10:53 AM. To keep the grid stable, the Ceylon Electricity Board (CEB) had to curtail 160 MW of solar power and other NCRE sources between 10:00 AM and 3:00 PM. This action was taken to elevate the grid demand to 820 MW, thus ensuring the dispatch of higher-inertia power plants that provide more stability.

Despite these efforts, the CEB has warned that continued low demand could lead to more frequent instances of under-frequency load shedding (UFLS). In extreme cases, the instability could even result in the tripping of large thermal power plants, such as the Lakvijaya Power Plant in Norochcholai.

The CEB has identified a series of interventions aimed at mitigating these risks and ensuring the power grid remains stable:

New Tariff Structures for Industries: The CEB proposes incentivized electricity rates for industries during weekends and holidays to encourage higher electricity consumption, helping to balance demand fluctuations.

Hydropower as a Stability Solution: Large hydroelectric plants, including Victoria, Kothmale, and Samanalawewa, could be operated in synchronous condenser mode, which would allow them to provide reactive power support without generating electricity, bolstering grid stability.

Gas Turbine Generators for Inertia Support: The operation of the Kelanitissa Gas Turbine 7, with its high inertia, in synchronous condenser mode is being considered to provide further grid stability.

Fast Frequency Response and Energy Storage: Investments in energy storage technologies such as battery energy storage systems (BESS), flywheel storage, and fast-acting gas turbines are seen as critical for stabilizing frequency fluctuations quickly.

NCRE Control Desk Implementation: A dedicated monitoring and forecasting unit for renewable energy generation will help to manage the fluctuating supply of renewable energy more effectively.

Review of Spinning Reserve Requirements: The CEB is reassessing the adequacy of the current hot spinning reserve of 5%, considering the growing proportion of renewable energy on the grid.

Regulatory Framework for NCRE Curtailments: The establishment of a regulatory mechanism to control the dispatch of renewable energy, particularly from plants larger than 5 MW, will be essential in ensuring grid stability.

Optimization of Power Plant Operations: The CEB is exploring ways to optimize the operations of hydro and thermal power plants, particularly concerning their minimum operating power levels and ramp rates, to increase the overall inertia of the system.

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Sri Lanka Bank’s Association welcomes budget as “Positive,” stresses importance of implementation

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Sri Lanka’s banks have welcomed the maiden budget of the new government, describing it as “positive” and one that seeks to maintain policy consistency, especially on the fiscal path.

In a statement, the Sri Lanka Banks’ Association (SLBA), which represents all licensed banks in Sri Lanka, commended the budget proposals presented to Parliament by President Anura Kumara Dissanayake in his capacity as Minister of Finance, Planning and Economic Development.

In particular, the SLBA commended the budget’s emphasis on digitization, the proposed establishment of Credit Guarantee Institute for Small and Medium Enterprises (SMEs), and the focus on export orientation, and said the key to achieving the envisaged outcomes would be effective and consistent implementation of the proposals in both “letter and spirit.”

Pointing out that the banking sector contributed about 10% of government revenues in 2024 and continues to play a significant role in the growth agenda of the country, the SLBA said the country’s banks remain committed to supporting the implementation of the proposals in the budget.

The Association noted that Point-of-Sale (POS) machines at every VAT registered business entity would lead to transparent business transactions in digitized form, reducing the use of physical cash, and that this would result in a greater percentage of cash-flows being captured in the banking channels.

“Increased digitalization of the financial economy would also increase investments from the financial institutions into digital infrastructure to drive online transactions, tighten anti-money laundering procedures, improve surveillance, and control cyber-crime,” the SLBA said.

It said the establishment of a credible Credit Guarantee Institute for the SMEs and establishing a development bank through the infrastructure of an existing state bank are positive steps that should enhance the segment’s capacity to secure credit and improve the quality of its relationship with the banking sector.

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