The big headline of President Biden’s new tariffs on Chinese goods announced Tuesday was a big hit on Chinese-made electric vehicles.
The new tariffs on EVs from companies such as BYD (BYDDY), Geely Automobile (GELYF), and NIO (NIO) are set to quadruple from 25% of the vehicle price to 100% in 2024.
But the question remains: Will Biden’s EV tariff move make any difference to American EV sales?
The White House’s sweeping new tariffs would increase duties on $18 billion worth of Chinese imports, ranging from steel and semiconductors to medical products. However, the focus on EVs and manufacturing is outstanding.
The White House has allocated billions of dollars through the Control Inflation Act and the Bipartisan Infrastructure Act to promote EV adoption and charging and create a U.S. manufacturing complex to support EV production.
Biden’s move to protect his EV bet is not surprising. And since few Chinese-made EVs are sold in the U.S., the overall impact on U.S. consumers will initially be small.
Currently, only Buick (GM), Lincoln (F), Lotus, Polestar (PSNY), and Volvo (VOLCAR-B.ST) are shipping vehicles manufactured in China to the United States, according to AutoForecast Solutions. Sam Fiorani pointed out to Yahoo Finance.
Of these, only Polestar imports Chinese-made EVs to the United States. Lotus has just started shipping its luxury EV in very limited quantities. Polestar said in a statement that it “appreciates” Tuesday’s White House announcement, noting that its next SUV, the Polestar 3, will begin production in South Carolina this summer.
According to KBB, 1.2 million EVs will be sold in the U.S. in 2023. Polestar doesn’t break down global sales by region, but the company delivered 54,600 cars last year in regions including China, the European Union and the United States. Even if a good half of these vehicles are counted as US sales, the proportion of Chinese-made EVs sold in the US is just over 2% of total EV sales.
“This new level is unlikely to have a significant impact on the U.S. auto market as imports of Chinese-made EVs are relatively small,” Beacon Policy Advisors said in a note to clients. “This will only further discourage interest in EVs.”
“But what’s valuable to Biden is the attention it gets for nearly quadrupling the tariffs and providing the president with a clear campaign talking point.”
And it’s no surprise that the auto industry’s major lobbying arms support the move.
”[China has] A serious EV overproduction problem has arisen. They’re building too many EVs for the domestic market – heavily subsidized EVs – and have no choice but to look overseas to unload those vehicles affordably. . It’s already happening in Europe,” John Bozella, president and CEO of the Alliance for Automotive Innovation, said in a statement Tuesday morning.
“It is appropriate that the White House is considering ways to prevent the United States from becoming a dumping ground for subsidized Chinese EVs.”
The United Auto Workers union, which endorsed Biden’s re-election campaign earlier this year, also praised the president’s “decisive” action, calling it “a huge step in the right direction.”
Ohio Sen. Sherrod Brown is also on the same page. Urging Biden to go furtherposted last week that tariffs alone are not enough: “We need to ban imports of Chinese-made EVs from the US.”
Nevertheless, quadrupling import duties to 100% could significantly reduce even these minimal sales. And new tariffs could ultimately hurt American consumers in ways that go beyond sales at dealerships.
Gary Hufbauer, a senior fellow and free trade expert at the Peterson Institute for International Economics, told Yahoo Finance that “Chinese EVs and batteries will be removed from the U.S. market along with solar products.” . “As a result, U.S. prices will rise and the adoption of climate-friendly technologies will be slowed. This is the unfortunate cost of the U.S.-China Cold War and the political dynamics of the U.S. president.”
AutoForecast Solutions’ Fiorani also believes these new tariffs will slow the expansion of Chinese EVs in the U.S., but there could be a backdoor.
“Congress is trying to restrict imports of Chinese-branded cars, but that’s going to be difficult if they’re not made in China,” Fiorani said.
“Establishing production facilities outside China, particularly in Mexico and South Korea, would be one possible way to circumvent the Basic Law.”
For example, BYD will debut a new plug-in hybrid EV pickup later this week that will be assembled in Mexico.
Proponents of the tariffs believe protection from EV imports from China is necessary. Otherwise, U.S. automakers could be overwhelmed by competition, triggering a backdoor through Mexico.
But Hufbauer also believes the tariffs are too extreme and likely to go too far.
“If Chinese EVs and batteries were limited to, say, 15% of the market, the U.S. auto industry could certainly survive and even thrive,” Hufbauer said.
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
