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- Tariffs, Tariffs, and More Tariffs: The Soaring Cost of Chinese EVs ๐
Tariffs, Tariffs, and More Tariffs: The Soaring Cost of Chinese EVs ๐

Hey there! ๐
Have you been keeping an eye on the electric vehicle market? There's been a significant shake-up recently, with the US and EU taking aim at Chinese EV imports. It's a move that could reshape the entire electric car market.
The transition to a greener future has made electric vehicles (EVs) a fundamental tool in reducing carbon emissions. Fossil fuels like petrol and diesel produce carbon dioxide (CO2) when burned, which harms the environment and contributes to climate change and pollution. In contrast, EVs emit only a fraction of the greenhouse gases over their lifespan compared to traditional vehicles. According to myclimate, one EV saves around 1.5 million grams of CO2 per year, equivalent to driving 3,712 miles in a typical car.
In 2023, the Chinese EV market saw staggering growth, with new EV registrations totalling over 8.1 million. This included vehicles from manufacturers such as BYD, MG, and Nio, accounting for 60% of the global total EVs produced. Of these, China exported 1.2 million worldwide, with an estimated 40% going to Europe. In contrast, American manufacturers registered approximately 1.8 million EVs in the same year. Notably, earlier this year, news broke that BYD had overtaken Tesla in the final quarter of 2023 as the company with the most EV sales.
What are Tariffs and Why Are They Being Used? ๐ญ
A tariff is a tax imposed by one country on goods or services imported from another country. Such countries may introduce tariffs to make domestic goods appear cheaper than international ones. This would protect the commercial interests of domestic producers.
Tariffs are used to prevent imported goods from having an unfair advantage over domestic goods by increasing the price of these imports. This makes foreign goods less attractive to consumers, ultimately boosting the revenue of domestic producers.
Getting Up to Speed ๐ ๐
Last month, in the latest instalment of the China-US Trade War saga, the Biden administration hiked tariffs on multiple goods imported from China, affecting $18 billion worth of imports. This collection included solar panels, steel, and lithium batteries. The most significant being tariffs on EVs, which saw a steep increase from 25% to 100%.
President Biden defended this decision, stating that China possessed an unfair advantage over domestic goods due to Chinese manufacturers benefiting from high subsidies and cheap loans from the Chinese government. The President stated that Chinese cars are "flooding the market," making it increasingly difficult for domestic producers such as General Motors, Ford, and Tesla to attract consumers who are drawn to the lower-priced vehicles imported from China.
For instance, EVs from BYD cost around 20% less than domestically produced competitors.
Essentially, EVs are cheaper to make in China due to factors such as large government subsidies, a cheap labour force, and easy access to minerals like cobalt, nickel, and lithiumโkey components in the production of EV batteries. For example, China produces 70% of the worldโs cobalt. These competitive advantages have also been leveraged by Elon Musk, who has a Tesla manufacturing plant in Shanghai that exports cars to Europe.
The EU Threatens to Follow Suit ๐ช๐บ
Hot on the heels of America, the EU announced the possibility of increasing tariffs on Chinese goods from 17% to 38%.
The EU cited the same reason as the US: that Chinese producers had an unfair advantage over domestic producers due to heavy subsidies from the Chinese government, allowing them to sell more EVs at lower prices. By increasing tariffs, the EU hopes to make domestic cars more attractive to consumers by making Chinese EVs more expensive.
China argues that both measures from the US and EU are "purely protectionist."
Consequences for the Automotive Industry and International Trade ๐ก
The tariffs imposed by the US and proposed by the EU may have several implications for the automotive industry:
EV manufacturers in the US and EU may see increased sales domestically due to lower prices. This could boost profits and stimulate production efforts to compete with China's strong EV manufacturing capabilities.
These tariffs could potentially slow down the international expansion of Chinese EVs, aiming to encourage self-sufficiency in individual nations. The push for US self-sufficiency stems from lessons learned during the pandemic, where disruptions in international trade highlighted vulnerabilities. Additionally, sanctions on Russian oil and natural gas have further motivated the Biden administration to prioritise self-sufficient trade practices.
What About the Green Transition? ๐ณ
Although EVs are fundamental to reducing greenhouse gas emissions, protecting domestic trade interests appears to take priority over achieving carbon neutrality for both the US and EU. With an anticipated increase in domestic EV sales on the horizon for both powers, will this strategy hinder or accelerate the race to net zero emissions? Only time (and tariffs) will tell.