Analysis – A US-China EV Trade War Threatens Biden’s Clean Car Agenda | WKZO | Everything Kalamazoo

By Joseph White, Chris Kirkham and Nora Eckert

DETROIT (Reuters) – The Biden administration’s plan to impose tough new tariffs on Chinese electric vehicles and batteries would provide temporary protection to U.S. auto sector jobs, possibly at the expense of the White House’s efforts to tackle climate change by accelerating the adoption of electric vehicles in the US.

Few Chinese-made electric vehicles are currently sold in the United States, so the direct impact of higher EV tariffs on consumers would be minimal, analysts said. The White House also plans to more than triple tariffs on Chinese EV batteries and battery parts to 25%. New duties of 25% would be added on graphite, permanent magnets used in EV motors and other EV minerals. These rates may affect a wider range of vehicles.

US President Joe Biden’s administration in April issued exhaust pollution standards aimed at boosting the share of electric vehicles from 8% last year to as much as 56% by 2032. Automakers have warned that meeting EV targets will be a challenge, in part because several Biden administration rules prohibit federal subsidies to electric cars that source too much content from China.

Without access to cheaper batteries and battery materials made in China, electric vehicles will be too expensive for mainstream U.S. consumers, automakers say.

US automakers exported 155,337 vehicles worth $6.3 billion to China in 2021, according to the latest US government data. China sent only 64,067 vehicles to the United States in the same year, worth $1.45 billion. Most vehicles imported from China were sold under American brands, led by General Motors’ Buick division.

According to government data, four vehicle lines sold in the United States are currently made in China: Ford’s Lincoln Nautilus SUV, Buick Envision SUV, Polestar 2 and Volvo’s S90 sedans. Polestar and Volvo are subsidiaries of the Chinese car manufacturer Geely.

Chinese retaliatory tariffs targeting U.S. vehicles would target workers at the BMW plant in Spartanburg, South Carolina, which sends about 25,000 vehicles to China annually, or the Mercedes-Benz SUV plant in Alabama, which builds electric SUVs sold in its largest market sold worldwide could cause harm.

A clean technology trade war between the United States and China could also drive up the cost of EVs, batteries and other EV hardware, keeping overall EV prices high, industry executives and some analysts say. According to US Transportation Department data, US-branded electric vehicles such as the Mustang Mach-E or Tesla Model 3 contain 30% to 51% Chinese content.

“From battery, from mining, from all technology integration, China’s supply chain is now the leading supply chain. It is the best,” Stella Li, head of Chinese EV and battery maker BYD’s operations in America, said at the Milken conference last week. “Why not give an American company the freedom to choose the best supplier?”

Even before Biden’s action on Tuesday, electric vehicles had taken a central position in the US presidential race. EVs are now symbolic in partisan debates over climate policy and how the US should respond to China’s efforts to dominate crucial technologies in the 21st century.

Democrat Biden and his presumptive Republican opponent Donald Trump agree on very little, except when it comes to using high tariffs and other trade barriers to keep Chinese EV makers out of the US market. Biden and Trump are betting that anti-China trade policies will appeal to voters in swing states like Michigan, Wisconsin and Pennsylvania, which rely on manufacturing jobs.


Experts are divided on whether stronger tariff protection will help U.S. automakers in the long run or work to consumers’ advantage.

“The tariffs buy important time,” said Michael Dunne, a consultant who has watched China’s auto industry for years. “The US is five to seven years behind China when it comes to electric vehicles and battery supply chains.” China protected its automakers in the 1990s and 2000s, Dunne said. “US political leaders could rightly say we are just borrowing a page from China’s playbook.”

Advocates of accelerating the pace of electric vehicle adoption to reduce carbon emissions in the US warn that easing pressure from Chinese EV makers will backfire.

In the longer term, Detroit automakers, shielded from Chinese competition, could repeat the experience of the 1970s and 1980s, when import restrictions on imported Japanese cars gave domestic automakers a reprieve from low-priced rivals.

These trade barriers encouraged Toyota, Honda, and Nissan to transplant their lean production systems to new U.S. factories. The success of North American-made Japanese cars forced General Motors, Ford and the former Chrysler, now called Stellantis, to cut thousands of jobs and undergo painful overhauls in the 1990s.

BYD’s recent announcement that it plans to build an electric pickup in Mexico turns a hypothetical threat into a real one for established U.S. automakers. A Mexican-made electric car with enough parts sourced from North America could qualify for tariff-free entry into the U.S. market.

“If General Motors, Ford and Stellantis don’t have to compete with foreign companies making electric cars, they won’t make them. The market goes to BYD. And Americans will lose market share, just as they did in the 1970s,” said Daniel Becker of the Center for Biological Diversity, an environmental group that has pushed the Biden administration for stronger climate policies.

It is not clear how China will respond to Biden’s tariff changes. When Europe threatened to raise tariffs on Chinese-made electric cars, China responded by threatening high tariffs on French cognac.

GM President Mark Reuss last week downplayed the risk that Chinese authorities could make life more difficult for the Detroit automaker’s Chinese operations, which plunged into the red in the first quarter of this year. Two of GM’s biggest brands in China are American names: Chevrolet and Buick.

“For us in China, this has been a great advantage to work so closely with our JV partners for so many years,” said SAIC and Wuling, Reuss. In China, Reuss said, Buick is seen as both an American and a Chinese brand.

“It’s not as clean or clear as you might think from a more global, geopolitical point of view,” he said.

(Reporting by Joe White in Detroit; Additional reporting by Chris Kirkham in Los Angeles and Nora Eckert in Detroit; Editing by Brian Thevenot and Matthew Lewis)