Biden Administration Increases Tariffs on Chinese Electric Vehicles

Announcement of Increased Tariffs

The Biden administration has declared an increase in tariffs on Chinese electric vehicles (EVs) from the existing 25 percent to 100 percent in 2024. This announcement also includes a significant hike in tariffs on Chinese steel and aluminum products, lithium-ion batteries, and solar cells.

Lael Brainard, director of the National Economic Council, stated that China's approach to boosting its growth at the expense of others by investing despite excess capacity and flooding global markets with underpriced exports due to unfair practices is not acceptable. She further added that these tariff increases align with President Joe Biden’s policy of responsibly managing competition with China.

The administration plans to make further adjustments to these tariffs based on feedback from the private sector, consumers, allies, and China.

Chinese EVs: Affordable and in Excess

Both the United States and China have prioritized EVs strategically. For the U.S., EVs are crucial for its climate-related initiatives and its "Made in America" policy to enhance the country's auto manufacturing industry.

China, on the other hand, has been heavily subsidizing its EV industry, leading to overcapacity. The country has distributed $29 billion in EV subsidies from 2009 to 2022. Despite the official end of these subsidies before 2023, other programs effectively continue the incentives. This has resulted in cheap Chinese cars posing a significant challenge to America's auto industry.

According to the China Center for Information Industry Development (CCID), Chinese EV production capacity is expected to reach 36 million in 2025, leading to an excess of 20 million EVs next year.

Overcapacity Becomes a Central Issue

Nazak Nikakhtar, former assistant secretary for Industry and Analysis at the Department of Commerce during the Trump administration, believes that more measures are needed to curb China’s overcapacity problem.

Currently, Chinese-brand EVs are not sold in the U.S. market. However, American brands have lost a 15 percent home market share in the past three years, according to Kelly Blue Book, a vehicle valuation and automotive research company. The lost share was taken up by German and South Korean brands, and Swedish brands owned by Chinese.

Further Tariff Increases

In addition to EVs, the Biden administration has imposed new tariffs on Chinese port cranes and certain medical products. It will also triple tariffs on Chinese lithium-ion batteries, steel, and aluminum products to 25 percent this year and double the tariff on Chinese semiconductors to 50 percent by next year.

These tariffs, initially implemented by the Trump administration in 2020, are up for review after four years, according to the "phase one" trade agreement between the United States and China.

In addition to commercial considerations, President Biden has also expressed national security concerns over Chinese cars. In February, he asked the Department of Commerce to investigate whether Chinese vehicles pose data or infrastructure risks to the United States.

Conclusion

The Biden administration's decision to increase tariffs on Chinese EVs and other products is a significant move in managing competition with China. However, it also raises questions about the impact on the global EV market and the potential implications for consumers and manufacturers. What are your thoughts on this development? Share this article with your friends and let us know