Biden Administration to Raise Tariffs on Chinese EVs and Clean Energy Goods in Trade War Escalation

The Biden administration is gearing up to erect a formidable wall of tariffs to prevent Chinese electric vehicles (EVs) from entering the United States and threatening the market share of American automakers. On Tuesday, the US government is expected to announce a staggering increase in tariffs on Chinese vehicles, jumping from the current 25% to a whopping 100%, as reported by the Wall Street Journal. This move would make it nearly prohibitively expensive for Chinese automakers to sell their EVs in the US market.

In addition to the tariff hike on EVs, the Biden administration is also set to raise tariffs on other clean energy goods sourced from China, such as batteries, minerals, and solar cells. This decision aims to shield American manufacturers producing these items from Chinese competition.

The dramatic increase in tariffs signifies a major escalation in the ongoing trade war between the United States and China, highlighting the shift of the conflict into a new frontier: climate technologies. The US government’s concern stems from the high quality and low cost of Chinese EVs, largely attributed to substantial government subsidies. According to Dunne Insights, the average cost of an EV in the US stands at $47,500, while in China, it is a more affordable $28,000.

Industry experts and executives have warned that Chinese EVs pose an existential threat to American automakers. Kevin Williams, a writer for Inside EVs, recently attended the Beijing Auto Show and was thoroughly impressed by the vehicles on display, concluding that “Western automakers are cooked.” Tesla CEO Elon Musk echoed this sentiment in January, stating that Chinese EVs “will pretty much demolish most other car companies in the world” unless countries impose tariffs on them.

President Biden’s decision to raise tariffs comes in response to complaints from the battered US solar industry, which experienced a 50% price drop over the past year due to an influx of cheap Chinese products. The administration seeks to prevent a similar fate from befalling Detroit automakers.

However, Chinese EVs may encounter challenges expanding into other markets as well. The European Union is currently investigating whether these vehicles received unfair subsidies from Beijing and could potentially impose higher tariffs on them.

Critics of Biden’s forthcoming tariffs argue that they are counterproductive to the goal of reducing emissions. If the US aims to increase EV adoption, and one of the primary barriers is the high cost, blocking cheaper models from entering the US market seems counterintuitive. Meanwhile, in Europe, top executives at BMW and Volkswagen have spoken out against tariffs, citing potential threats to their substantial sales in China. BMW CEO Oliver Zipse stated, “We don’t think that our industry needs protection.”

As the US prepares to implement these tariffs, the global automotive industry braces for the ripple effects of this significant trade war escalation. The outcome of this decision will not only shape the future of the EV market but also have far-reaching implications for the broader clean energy sector and the fight against climate change.