President Biden has quadrupled tariffs on electric vehicles from China — from 25% to an eye-watering 100% — in a move designed to bolster U.S. jobs and manufacturing.
"I'm determined that the future of electric vehicles be made in America by union workers. Period," Biden said on Tuesday.
Former President Donald Trump first imposed the tariffs, which are taxes paid by Americans who import goods, on vehicles and a wide range of other China-made products. After a review, the Biden administration opted to keep all of the tariffs and even increase some of them — including on solar cells, batteries, computer chips, steel and aluminum.
The White House says "strategic" hikes, paired with massive subsidies previously passed by Congress, can help build a U.S.-based supply chain for green energy.
"Until China changes its practices, these tariffs are also meant to give our industries a break, a respite, to be able to breathe," U.S. Trade Representative Katherine Tai told NPR.
Here are five things to know about the tariffs on EVs.
They keep out cheap Chinese EVs
So far, the Trump-era tariffs have largely kept affordable Chinese-made vehicles out of the U.S., even as they gain popularity in Europe and other markets. The tariff hikes are meant to ensure that doesn't change.
Chinese electric vehicles from makers like BYD aren't just cheap — they're also good. Economist Sue Helper, a former Biden official who recently took a BYD Seagull for a test ride, called the car "impressive" and "cute."
And it retails for just $10,000 in China. Smaller sizes, innovative designs and efficient business practices help keep the prices of Chinese autos down. But exploitative labor practices and enormous government subsidies also play a big role.
There's bipartisan concern that if those cars were sold in the U.S. at such cheap prices — "unfairly underpriced," as White House economist Lael Brainard put it — they would undercut U.S.-made vehicles and result in catastrophic job losses at American factories.
Biden's climate plan hinges on U.S. jobs
Increasing the price of electric vehicles seems to contradict another Biden priority: Cutting carbon emissions. A widespread transition from gasoline vehicles to battery-powered cars is central to Biden's climate goals.
But Biden wants to cut emissions in a specific way, which is why EVs and other clean industries are getting both giant subsidies and protectionist tariffs. He wants a U.S.-based green energy supply chain — from raw materials all the way to finished products — with American jobs, preferably union jobs, at every step.
The two goals are sometimes in tension. The consumer tax credits for electric vehicles, for example, come with a long list of restrictions designed to nudge auto companies toward U.S. suppliers. That means fewer vehicles qualify than they would otherwise. But as a result, companies have already started shifting supply chains — the other goal. The tariffs are meant to buy U.S. industry more time to make the transition.
Some climate groups argue that long-term, it's better to support — and regulate — U.S. companies as they go green, rather than import Chinese clean-energy products now. And there's a political case that embracing Chinese EVs, if it does cost jobs, could trigger a backlash that would reduce support for climate action.
There's bipartisan support for made-in-America EVs
Not too long ago, both Democrats and Republicans vocally endorsed free trade, denouncing trade barriers as obstacles to prosperity and government support for specific industries as "picking winners and losers." These days, there's bipartisan support for tariffs. Subsidies for certain types of manufacturing are more commonly (and approvingly) called industrial policy.
U.S.-made EVs, in particular, have lots of boosters. The auto industry has embraced Biden's subsidies. Powerful labor groups see a chance to bring jobs back to the States. Climate groups see an opportunity to get automakers to clean up their supply chains, among other changes. And some Republican-led states see massive investments on the line.
And car buyers? Even some who would love to buy a cheap Chinese EV believe it's in the best interest of the U.S. to keep them out.
Not everyone is on board with Biden's vision of a world-leading made-in-America EV supply chain, from lithium mine to finished vehicles. The oil industry and Trump are vocal critics.
But between the coalition supporting U.S. clean manufacturing, and a broad political antagonism toward China, these tariffs have widespread support.
Trump and Biden both like tariffs, but there are differences
As he increased tariffs on EVs, semiconductors and other specific technologies, Biden left the other tariffs imposed by Trump untouched. (That's true even though the White House acknowledged the tariffs had not achieved the stated goals of increasing U.S. exports or stopping theft of intellectual property.)
In some respects, Trump's policy toward China is now Biden's policy toward China. But there are differences, as the two presidential candidates themselves point out.
Trump, speaking to reporters outside of his criminal trial in New York, responded to the tariff hikes on Tuesday by saying Biden needs to go even further. "They've also got to do it on other vehicles and they have to do it on a lot of other products," Trump said. He has floated ideas for across-the-board tariffs on all imports, regardless of country.
Biden, meanwhile, describes his approach as "strategic and targeted" and says across-the-board tariffs would cost American households $1,500 a year. In another difference, Biden's tariffs are also paired with those massive subsidies for domestic production of EVs, semiconductors and other technologies — subsidies Trump has denounced.
Higher tariffs aren't the end of the story
Now, it's China's move. How will it retaliate against these tariffs — or evade them?
Chinese automakers may choose to escape the tariff by building plants in Mexico to make cars bound for the U.S. If that happens, the U.S. might persuade Mexico to renegotiate trade agreements, institute a ban on vehicles made by Chinese companies, or find another approach to box China out.
Meanwhile, there might still be paths to bring Chinese-made EVs to the U.S. Volvo Cars is planning to bring a hotly anticipated small SUV to the states this summer; its spinoff Polestar sells made-in-China EVs in the U.S. now. In statements, both companies say they are evaluating the impact of the tariff hikes. They may have workarounds to reduce the impact. They also both express support for free trade — and emphasize they are investing in manufacturing in South Carolina.
The auto industry is global. Swedish automakers owned by a Chinese company building cars in South Carolina is par for the course. And it's one sign of why higher tariffs aren't the final word on Chinese EVs and the U.S. auto market. China is reshaping the auto industry; the question is how.
