President Joe Biden announced 100% tariffs on Chinese electric vehicles (EVs), 25% on steel and aluminum, 50% on semiconductors, and 50% on solar panels via an X post Tuesday morning. 

“China is determined to dominate these industries,” Biden said in the post. “I’m determined to ensure America leads the world in them.”

I just imposed a series of tariffs on goods made in China:

25% on steel and aluminum,
50% on semiconductors,
100% on EVs,
And 50% on solar panels.

China is determined to dominate these industries.

I’m determined to ensure America leads the world in them.

— President Biden (@POTUS) May 14, 2024

The Associated Press broke the news Monday and reported anonymous officials said the tariffs on EVs are meant to divert fears that China’s low-cost vehicles pose a threat to U.S. jobs and security.

“Industrialized nations including the United States and its European allies fear a wave of low-priced Chinese exports will overwhelm domestic manufacturing,” the AP article says. “On the U.S. side, there is particular concern that China’s green energy products will undermine massive climate-friendly investments made through the Democrats’ Inflation Reduction Act that President Joe Biden signed into law in August 2022.” 

The New York Times reported the move is aimed at gathering votes in swing states that house vehicle manufacturing plants.

“We know China’s unfair practices have harmed communities in Michigan and Pennsylvania and around the country that are now having the opportunity to come back due to President Biden’s investment agenda,” Lael Brainard, who directs the White House National Economic Council, told reporters, according to the NYT article.

According to MSN, manufacturers are also concerned by EV production in China, specifically a Build Your Dreams (BYD) vehicle named the Seagull. 

The tiny EV sells for about $12,000 in China, drives well, and is well manufactured, MSN says. A shorter-range version of the vehicle costs less than $10,000. 

BYD has said it doesn’t plan to import to the United States any time soon, according to multiple media reports. MSN adds that the cost of U.S. tariffs is one reason that likely keeps the company from doing so. Chinese vehicles already have a 25% tariff, according to the AP article. 

However, MSN says the Chinese EV market still has the potential to shake up the auto industry in the same way Japan did in the 1970s. 

“Any car company that’s not paying attention to them as a competitor is going to be lost when they hit their market,” Sam Fiorani, a vice president at AutoForecast Solutions, told MSN. “BYD’s entry into the U.S. market isn’t an if. It’s a when.”

Elon Musk said earlier this year that Chinese EV makers could “demolish” their competitors, if there were no trade barriers, according to an NBC article. 

John Lawler, Ford CFO, said during the Bank of America Automotive Summit March 26 that the company is turning its focus to smaller EVs because of Chinese competition. 

“The real competition, where we see it, is the low-cost EVs from China, as well as Tesla,” Lawler said. “Of course, we are going to have large EVs as well but they are going to be very limited.”

The Alliance for American Manufacturing released a paper in February titled “On a Collision Course” focused on the threat of the Chinese EV market to the U.S. auto industry. 

“The introduction of cheap Chinese autos, which are so inexpensive because they are backed with the power and funding of the Chinese government, to the American market could end up being an extinction-level event for the U.S. auto sector, whose centrality of the national economy is unimpeachable,” the paper says. 

The paper says tariffs currently keep Chinese automakers out of the U.S. and European Union but the companies are searching for solutions. 

“BYD, which became the world’s largest EV manufacturer in 2023, is building a factory in the heart of the European Union and is among half a dozen Chinese companies preparing to manufacture in Thailand, thereby gaining access to nearby markets through regional trade pacts,” the paper says. 

Chinese companies are also spending on plants in Mexico, through which they could access the United States, the paper says. 

The paper urges federal policy and financial support of the U.S. auto market as a necessity to compete with China. 

Another MSN article reports that Geely is the only Chinese automaker to export to the United States with 2,217 cars. 

Geely sells some EVs under its Polestar brand, the article says. It says Polestar was founded by Geely and Sweden’s Volvo Cars, which is majority-owned by Geely. At this time, Polestar makes most of its cars in China. 

However, the company recently said it is accelerating efforts to produce more vehicles outside of China and plans to start production in South Carolina for U.S. and European markets in 2024, according to the article.

IMAGES

Photo courtesy of Robert Way/iStock