Biden Administration Quadruples Tariff On Chinese EVs. Does It Matter?

Screech!

That noise you heard today was the Biden administration trying to put the brakes on the sale of Chinese EVs in the U.S. by quadrupling the existing tariff from 25 percent to 100 percent. The White House has also slapped a 25 percent tariff on Chinese-made batteries that are used in electric vehicles. The tariff was previously 7.5 percent.

As he announced the EV tariffs, President Biden accused China of unfair labor practices. “It’s not competition. It’s cheating,” he said, during a ceremony in the White House Rose Garden.

So what will be the immediate effect?

“It’s not going to make much of a difference at the moment,” said Sam Fiorani, vice-president for global vehicle forecasting at AutoForecast Solutions. “The current level of tariffs was already preventing most vehicles from coming in from China, and raising it isn’t going to make much difference. There are some companies in China that are targeting the U.S. at any cost, and it’s likely their plans will be delayed as they find alternate routes. But in the near term, there will be little to no effect.”

“Alternate routes” could be assembling vehicles outside China, and then importing them to the U.S. “Presuming the government doesn’t find some way to prevent Chinese-branded vehicles from coming in, they are likely to find factories in Mexico or South Korea or some other friendly nation in order to bring their vehicles into the U.S.,” Fiorani said.

The added tariff on Chinese-made EV batteries may be an issue for U.S. manufacturers that use them, which includes Tesla and Ford. “There are a number of vehicles that are using Chinese batteries,” Fiorani said, “and it will hamper the profitability of those vehicles, and potentially speed up the production of batteries sourced from other countries.”

Chinese-built electric vehicles may not be an immediate threat to the U.S. automotive industry, but in the future, that may not be the case. An Associated Press story was distributed May 13 with this headline: “Small, well-built Chinese EV called the Seagull poses a big threat to the U.S. auto industry.”

The story is about a car manufactured by the Chinese company BYD, which stands for “Build Your Dreams.” The Seagull sells for about $12,000 in China, has a range of 252 miles, and is available with six airbags, disc brakes, and electronic stability control. It has “American automakers and politicians trembling,” the story says.

A company named Caresoft Global, which does automotive benchmarking, imported a BYD Seagull and dismantled it at their Livonia, Michigan, facility. The company president, Terry Woychowski, was so impressed with the quality of the Seagull that he told AP it should be a “clarion call” to U.S. manufacturers. “Things will have to change in some radical ways in order to be able to compete,” he said.

A Reuters story cited federal data that said only four vehicles presently sold in America are made in China. They are the Lincoln Nautilus, the Buick Envision, the Polestar 2, and Volvo’s S90 sedan. Polestar and Volvo are “affiliates” of Chinese automaker Geely, the story says. Geely also has a controlling stake in Lotus and multiple other brands.

We’ve tested the China-built 2025 Volvo EX30, a small electric SUV that was supposed to come to market in the U.S. by the end of this year at a base price of $36,245. No word yet on how Volvo is reacting to the new tariff. The company will build the EX30 in a plant in Belgium beginning in 2025, but early models will come from China unless Volvo’s plan changes.

Make no mistake, said analyst Fiorani: Tariff or not, “The Chinese are coming. It may take a third country, but the U.S. market is so desirable by any nation whose economy relies on the automotive business. These vehicles are going to find their way here.”

That’s because America is “the goal market” for the Chinese, Fiorani said. “To bring a vehicle into the U.S. shows that you have made it.”

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