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Why Biden’s tariffs on Chinese EVs will have little immediate impact on the US auto market
The big headline President Biden’s New Tariffs on Chinese Products announced on Tuesday was the big hit in China-made electric vehicles.
New tariffs on EVs from companies like BYD (Goodbye), Geely (GELYF) and NIO (NIO) are expected to quadruple in 2024, going from 25% to 100% of the vehicle’s cost.
But the question remains: Will Biden’s EV tariff change make any difference to EV sales in America?
The White House’s wide range of new tariffs will increase tariffs on $18 billion worth of Chinese imports, from steel and semiconductors to medical products. But it’s the focus on electric vehicles and manufacturing that stands out.
The White House has allocated billions through the Reducing Inflation Act and the Bipartisan Infrastructure Act to boost EV adoption and charging and create an American manufacturing industrial complex to support EV production.
Visitors look at a BYD DM-i electric car at the 2024 Beijing International Automotive Expo in Beijing, China, May 3, 2024. (Photo by Costfoto/NurPhoto via Getty Images) (NurPhoto via Getty Images)
Biden’s decision to hedge his bet on electric vehicles is not surprising. And the overall effect on the American consumer will initially be slim to none, since there are very few Chinese-made electric vehicles on sale in America.
Currently, only Buick (GM),Lincoln (F), Lotus, Polestar (PSNY) and Volvo (VOLCAR-B.ST) ship Chinese-made vehicles to the U.S., AutoForecast Solutions’ Sam Fiorani noted to Yahoo Finance.
Of these cars, only Polestar imports a Chinese-made EV to the US. Lotus has just started shipping its luxury EV in extremely limited quantities. According to KBB1.2 million EVs were sold in America in 2023. Polestar did not immediately respond to a request for comment.
Polestar does not break down its overall global sales by territory, but the company delivered 54,600 cars in territories including China, the EU and the US last year. Even though a generous half of these vehicles are counted as US sales, the percentage of Chinese-made EVs sold in America represents just over 2% of all EV sales.
“The tax is unlikely to have a significant impact on the U.S. auto market, as relatively few Chinese electric vehicles are being imported, and this new level will only further discourage buyers from turning to Chinese electric vehicles,” Beacon said. Policy Advisors in a note to clients.
“The value for Biden, however, is the attention that nearly quadrupling the tariffs attracts and provides the president with a clear campaign talking point.”
US President Joe Biden speaks to the media after driving the new electric Ford F-150 Lightning at the Ford Dearborn Development Center in Dearborn, Michigan, on May 18, 2021. (NICHOLAS KAMM/AFP via Getty Images) (NICHOLAS KAMM via Getty Images)
And the auto industry’s main lobbying arm is, not surprisingly, supporting the measure.
“[China has] I had a major problem with excess EV capacity. They are building too many electric vehicles – too many heavily subsidized electric vehicles – for the domestic market and have no choice but to look abroad to offload these vehicles at affordable prices. This is already happening in Europe,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation (AAI), in a statement Tuesday morning.
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“It is appropriate for the White House to look for tools to prevent the US from becoming a dumping ground for subsidized Chinese EVs.”
The United Auto Workers (UAW), which supported Biden’s re-election campaign earlier this year, also applauded the president’s “decisive” action, calling it “a huge step in the right direction.”
Ohio Senator Sherrod Brown is poised pushing Biden to go furtherposting last week that tariffs are not enough and “we need to ban Chinese EVs from the US.”
A Polestar electric vehicle is at the New York International Auto Show in New York on Saturday, March 30, 2024. (AP Photo/Ted Shaffrey) (ASSOCIATED PRESS)
However, quadrupling import tariffs to 100% could seriously harm even these minimal sales. And the new fees could ultimately hurt the American consumer in ways that go beyond dealership sales.
“Chinese electric vehicles and batteries, along with solar products, will be excluded from the US market,” free trade expert Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told Yahoo Finance. “The result will be higher prices in the US and slower adoption of climate-friendly technologies. This is an unfortunate toll of the US-China Cold War and US presidential political dynamics.”
AutoForecast Solutions’ Fiorani also believes these new tariffs will slow the spread of Chinese-made EVs in America, but there could be a back door.
“Congress intends to control the import of Chinese brand vehicles, but this will be difficult when they are not manufactured in China,” said Fiorani.
“Establishing production facilities outside of China, especially in Mexico or South Korea, will be one of the possible methods to circumvent basic legislation.”
Later this week, for example, BYD will launch a new plug-in hybrid EV pickup truck which will be assembled in Mexico
A prototype version of BYD’s plug-in hybrid pickup truck, the Shark (credit: BYD) (BYD)
Supporters of tariffs believe protection against Chinese EV imports is necessary. Otherwise, American automakers will be crushed by competition and a backdoor through Mexico could be the trigger.
Hufbauer also believes, however, that the tariffs are too extreme and likely exaggerated.
“The U.S. auto industry could certainly survive and even thrive if, say, Chinese electric vehicles and batteries were limited to 15% of the market, rather than excluded,” Hufbauer said.
Pras Subramanian is a reporter for Yahoo Finance. You can follow it Twitter and so on Instagram.
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