The Biden administration on Tuesday took a seriously protectionist stance, unveiling sweeping tariff increases affecting $18 billion in Chinese imports, core to which are electric vehicles and their supply chains.
Specifically, taxes on electric vehicles increased from 25% to 100% this year. The price increase is not only for completed electric vehicles but also for key elements of the supply chain. This year, the tariff rate on lithium-ion batteries and battery components increased from 7.5% to 25% when applied to electric vehicles, while a similar increase for lithium-ion batteries imported from China for Other purposes will apply starting in 2026.
The move makes it clear that the idea of U.S. automakers, assembly plants and autoworkers competing in a “global marketplace” is consigned to the history books—and those waiting waiting for a cheap $20,000 electric car from China might want to look for a cheap electric car from China. Third-party Presidential candidates support free trade.
The announced range of 100% tariff increases for electric vehicles would not create the same trade barriers 100% tax on Chinese cars produced in Mexico—EV or not— which former President and Presidential candidate Donald Trump proposed in March. But it targets key aspects of the electric vehicle supply chain in ways that will affect new vehicles no matter what type of fuel they use.
UAW Made Sticker on 2022 Chevy Bolt EV
Officially, to date, cars imported from China are only subject to a 25% tariff, while cars manufactured with Chinese parts in Mexico will only be subject to a 2.5% tariff – so this is actually a loophole that Chinese companies like BYD can fall into. capable of exploiting to gain a foothold in the US market.
Ironically, American automakers have nothing like the affordable electric vehicles that Chinese companies might try to bring into the US. Chevrolet Bolt EV had a sticker price under $30,000 and was made in the US, fully qualifying for the electric vehicle tax credit, but GM discontinued it last year and a replacement model won’t appear for a year again.
Stop the electric vehicle invasion that has occurred in Europe
For example, as an example of the China threat, the well-funded global automaker BYD is currently selling the Dolphin EV, a compact hatchback that has received good reviews in some markets in Europe. with a price equivalent to about 30,000 USD. BYD’s even lower-priced electric vehicle, the Seagull, could meet U.S. requirements for $20,000 or less — but the new 100% tariff is certainly a deterrent.
BYD Dolphin EV – European Specification
According to the Biden administration, the tax increases do not apply to everything, but they do apply to “strategic sectors,” closely paralleling the administration’s investments. In addition to electric vehicles and batteries, they also include steel and aluminum, semiconductors, critical minerals, solar cells, cranes used at ports, and medical products.
China now controls more than 80% of some aspects of the global EV battery supply chain, authorities say, which puts national security at risk, among other concerns.
Electricity or not, Biden’s tariffs will make automakers think twice about sourcing from China. For example, Chinese steel and aluminum products will receive 25% tariffs this year, up from 7.5%, and semiconductors will receive 50% tariffs in 2025, up from 25% currently. .
President Biden at the 2022 Detroit Auto Show
“As President Biden said, American workers and businesses can outperform anyone — as long as they have fair competition,” the Biden administration said in an announcement of the sweeping tax increases. “But for too long, the Chinese government has adopted unfair and anti-market practices.”
The administration later pointed to technology transfer and intellectual property theft as creating “unacceptable risks to U.S. supply chains and economic security,” noting that the China’s current overcapacity could lead to a surge in exports of low-cost vehicles, harming American workers.
Earlier this month, the Biden administration also issued a revised set of regulations that effectively give automakers more time. cutting China out of the electric vehicle supply chain without punishing them EV tax credit professional qualifications in the meantime.
President Donald Trump (Photo courtesy of Gage Skidmore/Wikimedia Commons)
However, the series of politically motivated measures to tighten trade leverage may not be over yet. Since last weekend, it seems that in an effort to gain an advantage over Biden, Trump has promised to impose 200% tariffs on China.
Mexico remains a potential vulnerability
What remains to be seen – and the key difference between the potential administrations – may have to do with what happens south of the border. According to Wall Street Journalin a query of US Census Bureau data from 2023 and 2024 through March, Mexico ranked third in electric vehicle imports to the US behind Germany and South Korea, while Japan and Belgium rounded out the top five. . Imported electric vehicles—including electric vehicles from China—whether or not they comply with the stricter electric vehicle tax credit requirements, still receive up to Discount of 7,500 USD on rental.
Under the previous Trump administration, the U.S.-Mexico-Canada Agreement replaced NAFTA with stricter trade terms but still allowed tariff-free products from Mexico in practice.
Biden’s tariffs do little to ensure that a Chinese internal combustion vehicle — say, even a hybrid — might not be assembled in Mexico and then shipped north. Beyond electric vehicles, it could be a serious test of the rules of trade and the industry is yet to come.
