A few weeks ago, Biden announced a 100% tariff on Chinese EVs to attack the subsidized Chinese EV industry and protect American industry as a part of the larger US-China trade war that has been on and off for the last few years. Echoing this sentiment, the EU has also announced Chinese EV tariffs of 17.4% to 38.1%.
To give some background, the EU is an important market for Chinese automakers because it can tolerate higher prices than the highly saturated and less wealthy Chinese markets, becoming the number 1 export market for Chinese automakers and granting them a major opportunity to make profits. However, this new tariff will restrict the ability of Chinese automakers to expand in the EU.
However, despite some minor effects like the withdrawal of some Chinese automakers like Great Wall Motor, the effectiveness of such tariffs is uncertain. Companies like BYD, a major Chinese automaker that temporarily overtook Tesla in EVs sold in Q4 2023, have factories in Europe and plans to build more, which would allow them to avoid the tariff. Additionally, other Chinese automakers could simply build EVs in other countries, such as Thailand, to skirt the tariff.
A side effect of these tariffs is the impact they have on European automakers. For example, BMW produces iX3 EVs in China and then exports them to Europe, which means BMW would face the new Chinese EV tariffs. Similarly, Tesla’s Shanghai built EVs would also be tariffed.
With this in mind, it seems evident that these tariffs are not so business related as they are politics related since EU politicians seem to be seeking self-sufficient industries