New US Tariffs Designed to Protect EV/Battery Industries from China Trade Practices

China is accusing the US of "bullying" China's EV and battery companies with new tariffs. Concurrently, Chinese EV makers such as BYD are hurrying to ship EVs to Mexico and Brazil before the tariffs are in full force and further trade restrictions are applied by the US and other countries. A shipping industry source informed Nikkei Asia that the expedited transportation of EVs from China to Brazil and Mexico actually started in March and will extend through June.

These actions are China's initial response to the Biden administration's new—if not completely unexpected—measures aimed at countering what it describes as China's unfair trade practices. The new tariffs will impact $18 billion worth of Chinese imports, including steel, aluminum, semiconductors—and EVs.

These increased tariffs are designed to protect domestic producers from what the administration considers unfairly priced and subsidized Chinese products. The administration will also strengthen trade enforcement mechanisms, enhancing the capacity of agencies like the Office of the United States Trade Representative (USTR) and the Department of Commerce to investigate and counteract unfair trade practices.

These actions are designed to protect American workers and industries in key sectors such as electric vehicles (EVs) and batteries as well as steel, aluminum, and semiconductors. The goal is to bolster the competitiveness of American industries by imposing higher tariffs and enhancing trade enforcement, while also investing significantly in domestic manufacturing and securing supply chains.

Here are the specifics:

Domestic manufacturing protection

Support for domestic manufacturing is a cornerstone of Biden's "Investing in America" agenda, which includes substantial investments in clean energy and advanced technologies. These investments are expected to support the production of EV batteries and expand semiconductor manufacturing capabilities within the United States. Efforts will also focus on securing and diversifying supply chains for critical materials and technologies, aiming to reduce dependency on Chinese imports and foster a more resilient U.S. manufacturing base.

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The battery industry, particularly the production of batteries for electric vehicles and renewable energy storage, stands to benefit significantly from these measures. Increased tariffs on Chinese batteries and related components aim to incentivize domestic production and investment in battery technologies. This support and protection are hoped to spur innovation and development, leading to job creation and adherence to stricter environmental standards.

These actions are part of a broader strategy to enhance US economic security and technological leadership, according to the White House: The focus on high-tech industries like semiconductors and EVs underscores the administration’s commitment to maintaining a competitive edge in crucial future-oriented sectors. The US semiconductor industry is critical for national security and economic stability, and the increased tariffs and support for domestic production aim to mitigate risks associated with over-reliance on foreign suppliers. Ensuring a robust domestic EV manufacturing sector is also vital as the global shift towards electric mobility continues.

Global ramifications and China’s response

These measures reflect a more assertive US trade policy towards China. By taking a firm stance against what it considers unfair trade practices, the administration aims to protect American economic interests and uphold fair trade principles. While these actions may strain US-China relations, they reflect a strategic imperative to safeguard critical industries. Other nations may view the US approach as a precedent for addressing similar concerns with China, potentially leading to a more concerted international effort to enforce fair trade practices.

The Chinese foreign ministry reacted strongly to the US move. AP reports that China ministry spokesperson Wang Wenbin accuses the US of suppressing advanced industries under the guise of addressing overcapacity and engaging in protectionism under the pretense of free competition. "It’s a naked act of bullying," Wang said. He emphasized that China's rapid growth in new-energy sectors like EVs, lithium batteries, and photovoltaics is driven by technological innovation and market competition, not by subsidies. This robust industrial expansion comes as China grapples with economic challenges from a faltering real estate market and past pandemic lockdowns, prompting efforts to boost production beyond domestic demand.

The administration maintains that these steps are part of a broader strategy to secure US economic interests and technological leadership in an increasingly competitive global landscape. For the battery industry, these actions are meant to bring significant benefits, including increased innovation, job creation, and environmental advantages.