U.S., Canada hits Chinese EVs with 100% tariff in $300 bn trade battle

U.S. consumers and businesses are bracing for the impact of steep tariff hikes on Chinese imports, designed to protect key American industries from China’s industrial policies. While some see the tariffs, a tax to be paid on a particular class of imports or exports, as a necessary step toward economic self-reliance, others warn of potential disruptions to supply chains and rising costs.

Beginning September 27, the Biden administration will implement significant tariff increases on various Chinese imports, including a 100% duty on electric vehicles (EVs). These moves are part of a broader effort to shield strategic U.S. industries from China’s state-backed manufacturing practices, which have been blamed for creating unfair competition. In addition to EVs, solar cells will see a 50% tariff, and key materials such as steel, aluminium, and lithium-ion batteries will face a 25% duty.

What this means for you

For the average consumer, this could mean higher prices on EVs and electronic devices as manufacturers grapple with increased costs. U.S. businesses, especially in the auto and technology sectors, may face challenges sourcing affordable materials as tariffs affect critical components like semiconductors and solar panel materials.

However, the announcement has sparked mixed reactions across industries. While some hail the move to reduce reliance on Chinese imports, others fear significant disruptions.

Jason Oxman, President of the Information Technology Industries Council, criticised the decision, arguing it will hurt businesses and consumers without addressing the issue’s root. “Since implementation, the tariffs have cumulatively cost American businesses and consumers $221 billion, while failing to alter Chinese trade policies and practices of concern,” Oxman said.

In contrast, the Biden administration remains firm in its stance. Lael Brainard, the White House’s top economic adviser, described the tariffs as “tough, targeted” measures to counter China’s state-driven subsidies. “The 100% tariff on electric vehicles reflects the unfair cost advantage that Chinese EVs have used to dominate global car markets,” she said.

A new chapter in U.S.-China trade relations

These tariff hikes come after a two-year review of policies first imposed by former President Donald Trump. While President Biden has maintained many of Trump’s tariffs, which affect over $300 billion worth of Chinese goods, the administration has introduced new measures. These include a 25% tariff on lithium-ion batteries and key minerals used in EVs, which will take effect on January 1, 2026.

Despite pleas from U.S. automakers to lower tariffs on critical materials such as graphite, the administration has kept high duties in place, aiming to reduce dependency on Chinese suppliers.

 Global Impact: EU and Canada Follow Suit

The United States isn’t alone in imposing tariffs on Chinese goods. The European Union (EU) and Canada are also implementing new tariffs on Chinese EVs, with Canada matching the U.S.’s 100% duty.

However, the Chinese government has expressed strong opposition. A spokesperson from China’s embassy in Washington warned that these tariffs would “backfire,” accusing the U.S. of “unilateralism and protectionism.” China has vowed to take all necessary measures to protect its interests.

China also expressed frustration with the EU’s response to its efforts to avoid hefty tariffs on electric vehicles. According to the Chinese Ministry of Commerce, the EU rejected proposals from Chinese EV makers for minimum import prices, a move intended to stave off punitive tariffs. “The European Commission ignored the sincerity and efforts of the Chinese industry, putting forward a flexible solution that was dismissed without in-depth communication,” a spokesperson from the ministry said.

Read more on Volvo Cars blames EU tariffs, cuts 2024 sales forecast