Biden Ramps Up Trade Tensions with China over EV Subsidies, Potentially Harming European Automakers

President Joe Biden has announced that tariffs on electric vehicles (EVs) imported from China will quadruple from 25% to 100%. This move is aimed at protecting American manufacturers from what the White House calls China’s unfair trade practices. The decision follows investigations into allegations that heavily subsidised Chinese products are flooding European and US markets. The European Commission has indicated that it may impose additional tariffs on Chinese exports following its investigation into subsidies. Rhodium Group analysts suggest that duties of 55% may be required to deter Chinese EV exports to Europe. The US has also raised duties on a range of Chinese goods, including solar equipment and syringes. The move comes as President Biden gears up for a rematch against former President Donald Trump, who frequently criticised Biden’s support for EVs and warned that the rise of EVs would lead to job losses in the US. However, some experts warn that higher tariffs could ultimately hurt European automakers, many of which manufacture cars in China that they then sell in Europe. Agatha Kratz, a director at research provider Rhodium Group, suggests that duties on Chinese EVs would need to be at least 40% to deter exports to the EU. She warns that any higher tariffs would likely harm both the US and the EU, potentially triggering retaliation from Beijing. Other experts suggest that the EU and China are engaging in a low-level trade war, with the EU using its whole toolbox to defend European jobs from what it perceives to be unfair trade practices from China. Josh Lipsky, a senior director at the Atlantic Council, suggests that leaders from the Group of Seven (G7) developed economies will discuss how to protect their industries from Chinese competition at a summit in Italy next month. The White House has stated that it will continue to work with allies to address shared concerns about China’s unfair practices.