How big is the impact of the U.S. tariffs on Chinese electric vehicles to 100%?
On May 14, the Biden administration announced that it would raise import tariffs on Chinese goods such as electric vehicles, lithium batteries, photovoltaic cells, semiconductors, steel and aluminum products on the basis of the original Section 301 tariffs on China. Among them, the tariff on Chinese electric vehicles will be increased from the current 25% to 100%.
How much impact will this have on China's EV industry?
"In 2023, the total number of electric vehicles exported by China to the United States will only be more than 10,000, accounting for less than 1% of China's total electric vehicle exports. The U.S. market wasn't open to us in the first place, so there's nothing to fear from imposing tariffs. An industry expert told reporters.
The 100% tariff looks "very powerful", but it does not have much direct impact on China's electric vehicle exports
Section 301 tariffs refer to tariffs imposed by the Trump administration on Chinese goods in 2018 under the U.S. Trade Act. This tariff expires after four years, but can be re-examined as to whether or not to continue to take action. U.S. Trade Representative Katherine Tai submitted a report to Biden, recommending that tariffs on Chinese goods continue to be imposed and that they be more aggressive. On May 14, 2024, Biden instructed Tai Qi to take action.
The Biden administration has imposed the largest tariffs on electric vehicles this time. A 100% tariff looks "pretty bad". For example, if China wants to sell a car with a price of 50,000 US dollars to the United States, it will have to pay a tariff of 50,000 US dollars, and convert the tariff into the selling price, then the price of the car is 100,000 US dollars, and its market competitive advantage will undoubtedly be greatly reduced.
But why do professionals say it doesn't have much impact?
Because the U.S. market is not a "big cake" for Chinese electric vehicles. Look at a set of numbers: In 2023, the United States will import a total of $368 million of electric vehicles from China, while Canada will import $1.6 billion from China and Kyrgyzstan will import $650 million. Moreover, the more than 300 million in the United States also includes American brands or European brands that were originally produced in China and sold back to the United States. At present, among Chinese automakers in the U.S. market, only Geely Automobile Group has a small business, selling 2,217 vehicles in the first quarter of 2024. In other words, the door of the U.S. market is not open to China. The export markets for Chinese automobiles are mainly in Russia, Latin America, Southeast Asia, India and Europe.
It can only be said that the tariffs have basically blocked the way for Chinese electric vehicles to be exported to the United States.
What is the intention of the United States? A closer look at the timetable for the tariffs reveals some of the intentions behind it.
Tariffs on electric vehicles and lithium batteries for electric vehicles will be implemented from 2024, but tariffs on natural graphite and permanent magnets will only be implemented from 2026. Natural graphite can be used as an anode material for electric vehicle batteries, and permanent magnets can be used to make electric vehicle motors, both of which the United States is currently more dependent on China. This shows that the United States does not want to import Chinese vehicles, but needs China's industrial chain to support the development of the domestic electric vehicle industry in the United States, that is, to force companies not to produce in China, but to invest or transfer technology directly to the United States. At the same time, the United States will actively look for alternatives to China's electric vehicles or battery products, and if successful, China will be further squeezed out.
In addition, experts told reporters that the important purpose of the Biden administration in doing so may also be to win public opinion in the upcoming election. At the same time, the Biden administration may also want to set an example for the EU, mobilize them to learn, and force them to adopt similar trade protection measures against China's electric vehicles and others.
Will the resistance to the development of local electric vehicles in the United States affect the decarbonization of its transportation?
It is difficult to fully guess the true intentions, but there is one point, and the protectionist tendencies of the United States are becoming more and more obvious. According to the analysis of experts, a very important purpose of the Biden administration's tariff policy is to protect old American cars such as GM and Ford, so that they can temporarily avoid the strong impact of Chinese electric vehicle companies.
But the problem is that the development of the electric vehicle market in the United States has encountered significant headwinds, and the growth has not been as fast as many expected. Electric vehicles in the U.S. accounted for only 5.8% of new car sales in 2022, rising slightly to 7.6% in 2023. This is a far cry from the Biden administration's hopes. The Biden administration originally hoped that the share of new EV sales would reach 67% by 2032, but the auto industry has always been a pillar industry in the United States, and this goal is bound to touch the core interests of traditional interest groups in the auto industry, so it has been strongly opposed in the process of promoting it. Tesla also seems to be more focused on driverless driving than electric vehicles.
But currently, the U.S. transportation industry accounts for nearly 30% of total U.S. carbon emissions and about 4% of the global total. If the United States fails to build its own electric vehicle industry chain in the short term, and continues to squeeze Chinese car companies, will it affect its carbon emission reduction in the transportation sector?
An expert on low-carbon development in the automotive industry told reporters: "In fact, the United States is not so willing to reduce carbon emissions in its transportation sector through the development of electric vehicles. Total U.S. carbon dioxide emissions peaked around 2005 and then began to decline. The United States has low energy consumption per unit of GDP, and oil and natural gas reserves are abundant and relatively cheap, which makes it much less pressured to develop low-carbon than we are. Again, from a practical point of view, the United States is vast and sparsely populated, and the development of electric vehicles requires the improvement of infrastructure such as charging piles. The vast area and sparse population will inevitably lead to low utilization rate and poor economic benefits of charging piles. Moreover, the United States implements private ownership of land, and it is not so easy to find land to install charging piles. ”
"In terms of low-carbon development, the United States does not attach as much importance to it as our country," the expert said. The effectiveness of the US in reducing carbon emissions is not primarily due to technological progress, but largely due to 'deindustrialization', i.e., the transfer of large quantities of manufacturing to developing countries and the consequent high profits. However, the large-scale outflow of manufacturing has also led to the hollowing out of manufacturing, the loss of employment, and the backwardness of technology in these countries. With the changes in the global political and economic landscape and the outbreak of the new crown pneumonia epidemic, some developed countries have begun to seek the return of manufacturing. In recent U.S. administrations, the reshoring of manufacturing has been an important part of economic policy. But if manufacturing does return, the total amount of carbon emissions in the United States will certainly rise. The carbon emissions of automobiles may not be comparable to the increase in carbon emissions caused by the reshoring of manufacturing. However, the United States will not put carbon emission reduction in the first place, they will first protect their own interests. ”
