President Biden hiked tariffs on electric vehicles and assorted clean-energy goods from China on Tuesday, as the White House looks to insulate portions of the U.S. economy from preternaturally low-priced competition from China. Solar stocks surged Tuesday.
The Biden administration announced the tariffs on Tuesday following a review, begun in 2022, of China tariffs imposed by former President Donald Trump.
The new trade policy includes tariffs on Chinese EVs hiked to 100%, up from 25%. The previous 25% tariff on China-made EVs has helped keep the vehicles from the U.S. market.
Under those protections, Tesla dominates EV market share, even as EV programs from General Motors and Ford have struggled to gain traction.
China's EV exports grew by 70% in 2023 vs. 2022, according to White House data.
"A 100% tariff rate on EVs will protect American manufacturers from China's unfair trade practices," the Biden White House wrote Tuesday.
The Biden administration also announced tariffs Tuesday on Chinese critical minerals, solar goods and batteries. Tariffs on lithium-ion EV batteries will increase to 25%, from 7.5%, in 2024 while "battery parts" will be taxed at 25% in 2024. About 70% of the EV battery supply chain relies on China, according to Morgan Stanley.
The White House also hiked the tariff rate on solar cells from 25% to 50% in 2024. Tariffs on steel and aluminum products will also increase from 0%-7.5% to 25% in 2024. Meanwhile, the Biden administration is increasing the tariff rate on semiconductors to 50%, up from 25%, by 2025.
Biden has been looking to boost the U.S. clean-energy sector during his presidency, most notably with the Inflation Reduction Act (IRA), enacted in August 2022. The regulations include a massive slate of federal investments and incentives for renewable energy projects and electric vehicle manufacturing.
Solar Stocks Rallying
Sunnova Energy surged 27.5% to 5.33. Meanwhile, Sunrun jumped 6.5% to 12.27 and SolarEdge Technologies gained 3% to 53.75 Tuesday during market trade.
Enphase Energy advanced 5.7% to 117.11.
SunPower ballooned 60% to 4.39, riding the current meme stock frenzy.
China's Economy And Exports
Despite tariffs in the U.S., China's exports have surged recently. Critics in the U.S. and Europe blame government backing and swelling capacity for the low prices of goods. But deflation has also played a key role, unwinding the value of the yuan vs. the dollar.
As of early May, China's real effective exchange rate had erased a decade of progress, according to the Wall Street Journal, rewinding to 2014 levels.
That weakness in the yuan, also called the renminbi, gives China-made goods a competitive edge over inflation-plagued regions, led by the U.S. In addition, it makes goods imported into China comparatively expensive, driving down China's demand for imports. The combination has ramped the U.S./China trade imbalance higher.
Bloomberg reported Friday that China could be exporting deflation across the Asian region, amplifying the risk to U.S. and Europe.
Biden Tariffs: Jobs And Clean-Energy Stocks
In 2019, the Solar Energy Industries Association claimed more than 62,000 jobs and around $19 billion in new private sector investment had been lost due to tariffs imposed in 2018 by the Trump administration against solar imports — primarily from China.
Meanwhile, the Tax Foundation, an international think tank, estimates the previous Biden-Trump tariffs reduced long-run gross domestic product by 0.21%, wages by 0.14% and employment by 166,000 full-time equivalent jobs.
The IBD-tracked Energy-Solar industry group is down nearly 12% this year after sinking 28% in 2023 as rising interest rates have challenged the industry. The group has climbed more than 150% since tariffs were imposed in 2018.
Prior to the tariff news, SolarEdge Technologies had fallen around 47% this year. Enphase Energy, which sank 50% in 2023, fell more than 18% in 2024.
However, clean-energy stock First Solar has shaken off its losses from early 2024 and is currently up around 11% since the end of 2023.
Earlier this year, Morgan Stanley analysts mused that additional U.S. tariffs on China could affect companies benefiting from low-cost energy battery systems, used as solar storage.
This includes U.S. rooftop solar names Sunrun, Sunnova Energy and SunPower. Also large-scale renewable developers like NextEra Energy and AES.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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