President Joe Biden is gearing up to significantly increase the tariffs on electric vehicles (EVs) imported from China. This move aims to stem the flow of cheaper Chinese EVs into the US market, thus protecting domestic automakers from overseas competition that could threaten their survival.
The Biden administration is reportedly planning to quadruple the existing tariffs on imported Chinese EVs from 25% to a staggering 100% while also imposing an additional duty of 2.5%. The Wall Street Journal reports that these steps are designed to tighten the entry of Chinese-made EVs, which are generally less expensive and increasingly appealing to American consumers.
Concerns about Chinese competition
There's growing concern among U.S. officials about China's support for its automotive sector. China is the top global exporter of vehicles, with electric models making up about 30% of its vehicle sales. Many of these vehicles are acclaimed not just for their affordability but also for their innovative designs and functionality. However, the potential entry of these competitively priced EVs, such as the BYD Seagull, available for around US$10,000, could pose a severe challenge to U.S. automakers. High-profile industry figures like Tesla CEO Elon Musk have warned that without protective trade barriers, Chinese manufacturers could “demolish” their American counterparts.
Policy measures and political reactions
To safeguard domestic interests, the Biden administration has enacted several protective measures. Notably, the US$7,500 EV tax credit is structured to encourage automakers to source their batteries domestically or from trade allies, excluding entities from “foreign entities of concern,” which includes China. This policy, along with ongoing investigations into the security risks associated with smart car technologies from China, reflects a broader strategy to mitigate the influence of Chinese automotive products in the U.S. market.
Despite these protective measures, some critics, including former President Donald Trump and other Republicans, argue that Biden's policies may not fully prevent Chinese companies' potential dominance of the global auto market, including clean energy sectors like solar panels and critical minerals.
These tariff adjustments and regulatory measures underline the administration's commitment to preventing a market takeover by cheaper, foreign-produced EVs, a crucial step in Biden's broader agenda to reduce transportation-related carbon emissions in the face of a slowing market for affordable EVs in the U.S.
