US hikes tariffs on Chinese imports, and other global trade stories to read this month

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Guillaume Dabré, Project Specialist, World Economic Forum

• This monthly roundup brings you a selection of the latest news and updates on global trade.
• Top international trade stories: US imposes new tariffs on China imports; Surge in demand for green energy minerals; South Africa considers lodging complaint with WTO over EU’s carbon border tax.

1. US hikes tariffs on Chinese imports

The United States has sharply hiked tariffs on a range of Chinese imports as a trade tiff between the two economic superpowers escalates.

US President Joe Biden announced new charges on imports including electric vehicle (EV) batteries, computer chips and medical products. According to Reuters, the new measures affect $18 billion in imported Chinese goods.

The tariff hikes see the rate on EVs rising to 100% while semiconductors, solar cells for photovoltaic panels, and syringes and needles now attract a rate of 50%.

Data from the US Census Bureau shows goods worth $427 billion were imported from China to the US, while $148 billion of goods were exported from the US to the world’s second-largest economy. This trade deficit, which has endured for several decades, has become an increasingly contentious issue in Washington, according to Reuters.

China’s commerce ministry said Beijing was opposed to the US tariff hikes and would take measures to defend its interests. Days after the increases, China instigated an inquiry into US and European imports of plastics commonly used in the manufacturing sector, a move widely seen as the first response to the latest tariff increases.

In what may point to further escalation of the tensions over trade, on 21, May US Treasury Secretary Janet Yellen used a speech at a meeting of G7 finance ministers in Frankfurt, Germany, to call on European countries to back the US stance on China’s industrial overcapacity in a “strategic and united way”.

2. Demand surges for critical minerals

The demand for critical minerals is surging as manufacturers scramble to secure supplies to drive the green energy transition.

According to the International Energy Agency’s (IEA) Critical Minerals Outlook, 2024: “Demand for critical minerals experienced strong growth in 2023, with lithium demand rising by 30%, while demand for nickel, cobalt, graphite and rare earth elements all saw increases ranging from 8% to 15%.”

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Increased demand for energy-related critical raw materials could bring development opportunities for resource-rich countries. ”— World Eonomic Forum white paper: Translating Critical Raw Material Trade into Development Benefits

The IEA cites the need for raw materials to make batteries for EVs and to meet requirements for the manufacture of solar panels, wind turbines and other green energy technology as the drivers behind this growth.

Despite the rise in demand for critical minerals, market prices have fallen dramatically. The spot price of lithium fell by 75% in 2023, with cobalt, nickel and graphite costs dropping 30-45%, according to the IEA. It adds that a spike in the supply is responsible for the fall in prices but emphasizes that prices are vulnerable to volatility given the fragile nature of some mineral supply chains.

The price of critical minerals is falling despite surging demand. Image: International Energy Agency

Moreover, a new white paper from the World Economic Forum, Translating Critical Raw Material Trade into Development Benefits, outlines how many countries are now engaging in state-to-state arrangements to encourage new project development and supply resilience in critical minerals.

“Increased demand for energy-related critical raw materials could bring development opportunities for resource-rich countries,” the paper states. “Trade deals need to be better leveraged to this end.”

Discover

What is the World Economic Forum doing about digital trade?

What is the World Economic Forum doing about digital trade?

The Fourth Industrial Revolution – driven by rapid technological change and digitalization – has already had a profound impact on global trade, economic growth and social progress. Cross-border e-commerce has generated trillions of dollars in economic activity continues to accelerate and the ability of data to move across borders underpins new business models, boosting global GDP by 10% in the last decade alone.

The application of emerging technologies in trade looks to increase efficiency and inclusivity in global trade by enabling more small and medium enterprises (SMEs) to repeat its benefits and by closing the economic gap between developed and developing countries.

However, digital trade barriers including outdated regulations and fragmented governance of emerging technologies could potentially hamper these gains. We are leading the charge to apply 4IR technologies to make international trade more inclusive and efficient, ranging from enabling e-commerce and digital payments to designing norms and trade policies around emerging technologies (‘TradeTech’).

3. News in brief: Trade stories from around the world

South Africa is considering lodging a formal complaint with the World Trade Organization (WTO) over the European Union’s (EU) “protectionist” carbon border tax. The EU has proposed a carbon border adjustment mechanism that will impose charges on imports of carbon-intensive goods like steel and cement into Europe. This proposal has drawn criticism from some developing nations.

WTO data reveals a radical shift in the transport sector. By the end of 2023, EVs accounted for more than a third of all car imports in value terms. China exported over 1.5 million battery EVs in 2023, meaning its factories produced one out of every four exported worldwide that year.

A World Bank report says carbon pricing rates are too low to drive action that will help meet the targets of the Paris Climate Accord. Despite countries collecting a record $104 billion last year, less than 1% of global greenhouse gas emissions are covered by payments at a high enough rate to limit temperature rises.

Rising sea levels could severely disrupt crude oil shipments and erode energy security for import-dependent nations, researchers have warned. The China Water Risk think-tank’s report cautioned melting ice and swelling seas from rising temperatures could swamp key oil ports, coastal refineries and petrochemical facilities.

Six Western Balkan countries aspiring to join the European Union are discussing how to speed up necessary reforms, create their own single market and ultimately join the bloc. The countries – Albania, Bosnia, Kosovo, Montenegro, North Macedonia and Serbia – were promised EU membership years ago but the accession process has slowed to a crawl.

A trade agreement between the European Union and New Zealand entered into force this month. In recent years, trade in goods between the two partners has risen steadily, hitting almost €9.1 billion in 2022. According to an EU assessment, the agreement is expected to increase trade between the EU and New Zealand by 30%.

4. More on trade from Agenda

As demand for critical raw materials surges worldwide, further insights are needed to determine what trade and investment facilitation actions would be sufficient to whet investor appetite for specific mining activities or the ensuing value chain. As debates in this area continue, we asked several thought leaders for their perspectives on trade, critical minerals and sustainable development. Here’s what they had to say.

Growth in global trade could more than double in 2024 as inflation falls and the US economy gathers pace. That’s the view of three major international economic organizations – the International Monetary Fund, the Organization for Economic Co-operation and Development and the World Trade Organization – which all forecast an uptick in global trade flows in 2024.

Rising geopolitical tensions are a major risk to global trade in 2024, according to a new World Economic Forum white paper on the cost of geopolitical rivalries. The paper explores the pressures caused by political instability and provides an analysis of how corporations and policy-makers can best prepare for and respond to the various geopolitical pressures fragmenting the global economy.