US hits Chinese EVs with 100% tariffs

Biden announces 100% tariffs on Chinese EVs

An electric car plugged in against a background of a rural location at sunset
(Image credit: Justin Paget)

In a move that is “likely to inflame trade tensions between the world’s two biggest economies”, the US has imposed “more stringent curbs on Chinese goods worth $18bn”, says Larry Elliott in The Guardian

The centrepiece is a 100% tariff on Chinese-made electric cars (EVs), but the US will also hike tariffs on lithium batteries to 25% (from 7.5%), on critical minerals to 25% (from 0%), and on both solar cells and semiconductors to 50% (from 25%). 

Tariffs on steel, aluminium and personal protective equipment – which range from zero to 7.5% – will also rise to 25%. President Joe Biden’s administration says the measures are intended to “stop cheap subsidised Chinese goods flooding the US market and stifling the growth of the US green technology sector”.

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The growth of Chinese EVs

Both the US and the EU have expressed “alarm” at the rapid growth of China’s electric-vehicle manufacturing, says Richard Spencer in The Times. At the end of last year, China’s BYD overtook Tesla as the world’s leading seller of EVs. Its basic model sells in China for just £8,000. 

Critics argue that the low prices are the result of hidden subsidies from Beijing in the form of “cheap land from local government, cheap loans from state-run banks and cheaper energy”, and “unfair” Chinese trade practices with regard to technology transfer, intellectual property and innovation. 

China may well have achieved much of its advantage through its own unfair mix of protectionism and subsidies, but it is now “well ahead” of US firms in the EV sector and is “capable of producing a vast number of cars at a much lower cost”, says The Economist. 

The immediate impact will be limited because much trade in the tariff-hit categories has already shifted away from China, but US consumers will be the ones to pay the price for Biden’s tariffs, both in the short term, as they will spend more on EVs, but also in the long term, as domestic producers will be under less pressure to develop cheap goods. 

It may also represent a “lost opportunity” for the environment – lower prices for EVs, solar panels and batteries from China “would have boosted their appeal to consumers”.

Is 100% tariffs on Chinese EVs the right move? 

Indeed, trying to divorce the industry from China’s supply chain will make EVs a harder sell, says Jonathan Guilford on Breakingviews. Without access to “cheap, advanced Chinese tech”, US EVs might remain “expensive, niche products”, especially given that US domestic efforts are “faltering”. 

Ford and GM have cut their manufacturing targets, leaving Tesla, where growth is already starting to slow, as the remaining “creaking pillar” of America’s EV efforts. US protectionism is here to stay, says James Politi in the Financial Times

Trade policy is set to be the “heart” of this year’s presidential contest as Biden and Donald Trump compete to appear as the “most aggressive protector of working-class American jobs in the face of rising Chinese manufacturing prowess”. Biden has “embraced” Trump’s protectionism and gone further; Trump and the Republicans, for their part, want to go further still.

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Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri