In a move sure to escalate the ongoing trade war between the United States and China, President Joe Biden has announced that his administration is levying a 100% tariff on battery electric vehicles (BEVs) manufactured in China to protect local automakers from cheap Chinese electric cars. According to sources, the move is a preventative measure designed to prevent Beijing-subsidized cheap electric cars from proliferating America’s nascent electric vehicle market.
It is part of a group of measures designed to protect manufacturers in the U.S. from cheap imports. For the past few decades, one of China’s main tactics has been to provide somewhat dependable products or services and sell them at lower rates compared to western competitors. This has allowed China to monopolize most of the world’s manufacturing and helped Chinese companies compete with established companies in industries such as consumer electronics.
Beijing looked to conquer the burgeoning electric-vehicle industry similarly, pumping tens of billions of dollars into the country’s EV industry virtually since its inception and supporting the rise of EV giants such as BYD. Government subsidies helped Chinese automakers cut down electric vehicle production costs significantly, making it possible for them to sell their EVs at much lower prices compared to Western carmakers such as Tesla, Ford and General Motors.
While this has a significant impact on electric-vehicle adoption in China, lawmakers in foreign markets have been looking at the situation with growing unease. China’s lead in the race to develop affordable electric cars coupled with its dominance in the EV and EV-battery supply chain means Chinese companies are well poised to outcompete foreign companies even in their own markets.
Carmakers in Europe are already feeling the pressure now that Chinese carmakers are exporting into the continent, and European Commission officials have already launched a probe into Chinese electric cars to determine whether subsidies were used to artificially lower electric vehicle prices. The Biden administration plans to deal with the issue of cheap Chinese EVs before it reaches the same point in the U.S. by slapping 100% tariffs on every China-made electric car that enters the country’s ports.
Furthermore, the White House says it will impose even stricter controls on Chinese imports. Sources familiar with the matter say the decision came after a four-year review and is meant to prevent cheap Chinese goods from hindering the growth of America’s renewables technology segment. On top of raising Chinese EV tariffs from 25% to 100%, the Biden administration has increased levies for lithium batteries (7.5% to 25%), semiconductors (25% to 50%) and solar cells (25% to 50%).
American EV makers such as Workhorse Group Inc. (NASDAQ: WHKS) now have the opportunity to find ways to establish themselves on the local market while competitors from China incur the hefty tariffs imposed on their EVs.
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