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Why new tariffs on Chinese EVs might not mean much for US consumers

One industry analyst told Tech Brew that the US tariffs amount to “political saber-rattling that…doesn’t really have much of an impact in the real world.”
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4 min read

Chinese EVs priced as low as $10,000 might spark envy for Americans shelling out, on average, more than $50,000 for a plug-in car—and now it’s even less likely that these lower-priced models will make their way to the US.

That’s if new tariffs announced last month by the Biden administration do their job. And, amping up the geopolitical drama, the European Commission recently followed the US in hiking up its own tariffs on Chinese EVs.

Chinese EV makers don’t currently have much of a foothold in the US market. But manufacturers like BYD and NIO have established themselves as dominant forces thanks to the innovative products they’re selling at incredibly affordable prices, aided by state subsidies.

These companies have started to compete in Europe and are investing heavily in Mexico, prompting concerns among US automakers that low-priced Chinese EVs could one day flood the market—potentially undercutting both domestic models and the Biden administration’s agenda.

So, the Biden administration announced last month that the US would nearly quadruple import duties on Chinese EVs to more than 100%, as well as hike tariffs on other goods imported from China, like lithium-ion batteries and semiconductors.

The new rates will be phased in over three years, the Associated Press reported. In all, they apply to an estimated $18 billion worth of goods.

“The competitiveness of the auto industry in the US will be harmed if heavily subsidized Chinese EVs can be sold at below-market prices to US consumers,” John Bozzella, president and CEO of auto industry lobbying group the Alliance for Automotive Innovation, said in a May press release responding to the tariff announcement.

“The Biden administration’s decision addresses concerns that a substantial increase in Chinese imports could pose significant challenges to North American EV startups, such as Rivian,” Shoggi Ezeizat, an analyst at Third Bridge, said in a statement shared by Rosa Sobrino of Craft & Capital, “and hinder legacy domestic automakers who are still in the process of vertically integrating their EV manufacturing infrastructure to compete effectively with Chinese counterparts.”

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Across the pond, the EU recently announced new duties of up to 38.1% on EVs imported from China in a bid to give European automakers time to catch up to Chinese competitors. However, Chinese automakers are already moving to build factories in Europe.

Several European automakers have expressed opposition to the tariffs because they’re concerned about potential retaliation from China, the WSJ reported. For its part, China has been critical of both sets of tariffs and signaled it will respond.

The US tariffs are unlikely to have much of an impact on consumers, Olivier Blanchard, research director at The Futurum Group, told Tech Brew in responses provided by spokesperson Lizzy Harris.

According to Blanchard, “the tariffs work mostly along two strategies: 1) as a preemptive move to make it more difficult for Chinese automakers to enter the US EV market, and 2) as political saber-rattling that looks good on paper but doesn’t really have much of an impact in the real world.”

He also doesn’t expect the tariffs to affect the pace of adoption here—but Europe could be a different story given that low-cost Chinese EVs are already available there. Blanchard said the EU tariffs could lead to higher prices and, as a result, slower sales.

He questioned whether the EU’s top priority is hitting its adoption goals or protecting domestic automakers: “Because it can’t do both simultaneously, at least not by working against Chinese EV imports that fill demand gaps that European OEMs can’t fill. Either the EU will have to adjust its EV adoption targets next year or relax its protectionist tariffs against Chinese EVs, especially in the lower price tiers.”

Keep up with the innovative tech transforming business

Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.