TMTPost -- U.S. Treasury Secretary Janet Yellen tries to play down potential consequences of China’s response to new U.S. tariffs on Chinese exports.

Credit：Xinhua News Agency

 “I hope that the Chinese react in a rational way to what is a very targeted set of actions,” Yellen said Tuesday in an interview on the PBS NewsHour. “We have a deep trade and investment relationship with China. We think most of it is beneficial both to America and also to China, and most of it is unproblematic and uncontroversial.”  

Yellen stressed overcapacity of certain Chinese industries again. She noted China’s capacity to produce solar panels is twice global demand for these panels, which means prices of these products will drop to levels that make American firms uncompetitive. Yellen suggested the new tariff should not be a surprise since she has been very straightforward and public about her concerns in this area and China itself has mentioned such concern about overcapacity.

 “I don't believe that American consumers will see any meaningful increase in the prices that they face,” Yellen replied when asked about whether American consumers will bear the cost of the tariffs. The Secretary said the new tariffs are “very carefully targeted” at sectors where the Biden administration is supporting through legislation considers it critical to create good jobs. The government thinks it’s very important to protect American workers and firms in these sectors from the dumping due to China’s massive overcapacity, Yellen said. She added other countries like Japan, India, Brazil and European countries also concerned about overcapacity in these areas. She argued that the levies would protect the development of sectors critical to the U.S. economy, make their supply chains more secure and ultimately result in lower prices for the products they make.

Yellen’s remark came on heels of announcement of tariffs hike on Chinese electric vehicles (EVs), chips and other products. The White House announced U.S. President Joe Biden directed his Trade Representative to raise tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China. The direction leads to sharp increases in tariffs across strategic sectors such as semiconductors and impose new tariffs on cranes and medical products. The tariff rate on EVs under Section 301 will increase to 100%, quadrupling the current tariff of 25%.

Prior to the annoucement, Chinese Foreign Ministry spokesperson Wang Wenbin said China opposes unilateral tariffs that violate WTO rules and will take all measures necessary to defend our legitimate rights and interests. Wang commented on Wednesday that the recent U.S. tariff hike will only significantly drive up the cost of imported goods, inflict more loss on American companies and consumers, and make the US consumers pay even more. 92% of the cost for the tariffs hike falls on American consumers and average US household expenditure increases by 1,300 dollars annually, Wang quoted Moody’s estimates. Wang said China urges the U.S. to earnestly observe WTO rules and immediately cancel the additional tariffs. He reiterated Beijing will take all measures necessary to defend its rights and interests.