The United States imposed 100% tariffs on China, with an effect of 1.08%?

Yuyuan Tan Tian

2024-05-15 14:27Published in Beijing, senior political and economic reporter

On May 14, the U.S. released the results of the four-year review of the additional Section 301 tariffs imposed on China, announcing that it would further increase tariffs on electric vehicles, lithium batteries, photovoltaic cells, critical minerals, semiconductors, steel and aluminum, port cranes, personal protective equipment and other products imported from China on the basis of the original Section 301 tariffs on China.

After the Biden administration took office, some cabinet officials said that the tariffs imposed by the previous administration on China harmed the interests of the United States. Because of this, after taking office, the Biden administration began to review the tariffs imposed by the previous administration on China.

Now, the results are in, and the Biden administration has not only retained the tariffs imposed on China by the previous administration, but also imposed new tariffs on China.

What does such a move mean?

Among the new tariffs imposed on China, the largest and most concerned adjustment is in the field of electric vehicles, after which the US import tariffs on Chinese electric vehicles will rise from 27.5% to 102.5%.

102.5%, what does this number mean?

According to WTO statistics, the average tariff level of imports in developed countries is about 5 percent, that of developing countries is about 10 percent, and that of China is about 7 percent.

When the last U.S. administration took the initiative to provoke trade frictions with China, the average tariff on U.S. imports from China rose to about 21%.

102.5 per cent, a staggering figure.

But from the perspective of the industry itself, at present, the actual impact of the US tariffs on Chinese electric vehicles is almost non-existent.

In fact, Americans are well aware of this. According to the Atlantic Council, China's total EV exports increased by 70% year-on-year to $34.1 billion in 2023. Of this, the United States is $368 million - accounting for 1.08%.

In other words, the U.S. market is tiny for Chinese EV brands.

For this phenomenon, Tan Zhu made statistics on the relevant reports of the American media, most of which mentioned that this is because the original 27.5% tariff made China's new energy vehicles "prohibitive" to the American market.

Is this true? Or is this the whole truth?

After further analysis of these reports, Tan Zhu made some new discoveries.

Recently, the U.S. media has frequently reported on an electric car produced by a Chinese new energy vehicle company.

It all started when an American company bought the electric car and disassembled it. The electric car costs about $12,000 in China. Automotive engineers in the U.S. have found that an American electric car with performance comparable to that of the Chinese electric car is costing more than $30,000.

Tan Zhu has previously mentioned that the United States has a subsidy of up to $7,500 per electric vehicle for its own electric vehicles. This subsidy is discriminatory and is not available for electric vehicles produced in China.

But even so, after removing subsidies and 27.5 percent tariffs, the car is still more competitive than the same performance American electric car.

So why haven't Chinese EV brands entered the U.S. market on a large scale?

Professionals who have long been concerned about China's new energy vehicle sector told Tan that Chinese automakers are more worried about the business environment in the United States than tariff barriers.

For some time, a number of U.S. politicians have used "national security" as an excuse to exaggerate the "risk" of China's electric vehicles and push the Biden administration to introduce restrictions on China's electric vehicles.

If an auto brand wants to enter a country's market, it needs to build its own distribution channels and after-sales channels simultaneously, which means huge investment. In the current situation of such high political risks in the United States, Chinese car companies will naturally not explore the American market.

In other words, the U.S. market will continue to exist for some time as a result of the negligible status quo for Chinese automakers.

Under such circumstances, the Biden administration has introduced a policy of imposing tariffs on Chinese electric vehicles.

As a matter of fact, the new tariffs imposed by the United States on China basically have such problems.

Take solar energy as an example, there are reports that in 2023, China exported about $3.3 million of solar cells to the United States, less than 0.1% of China's total exports. Meanwhile, in 2023, China exported $13.15 million of finished solar panels to the United States, accounting for 0.03% of China's solar panel exports.

Such an act is not a punch on the cotton, but a punch in the air.

So why does the Biden administration still have such a policy?

In addition to tariffs, the U.S. government has recently stepped up efforts to introduce discriminatory subsidy policies and conduct national security risk reviews for foreign vehicles. As can be seen from the US government's explanation of these measures, they all ultimately point to one goal:

The U.S. government wants to exclude Chinese electric vehicles from the U.S. market in order to "cultivate" new energy vehicles in the U.S. and even the new energy industry in the U.S.

According to the Alliance for Automotive Innovation, China has established a 10- to 15-year lead in the new energy vehicle industry. China's leadership has also become a reason for several U.S. industry associations and the Office of the U.S. Trade Representative to demand that China be suppressed.

But the question is, can suppressing China's new energy vehicles make the development of the new energy vehicle industry in the United States?

After collecting reports from the US media analyzing the slow development of new energy vehicles in the United States, Tan Zhu found that "user experience" is an important reference for American consumers to choose new energy vehicles.

It sounds like a very subjective dimension, but behind this indicator is a deep-seated objective reality.

Tan Zhu found a leading car blogger on an overseas social media platform, and through his recent personal experience of driving in California, he can get a glimpse of what American consumers are hesitating.

At present, California is at the forefront of the development of new energy vehicles in the United States, it is not only the first state in the United States in terms of new energy vehicle sales, but also the first state in the United States to plan to fully switch to new energy vehicles.

But the blogger said that in practice, the most difficult problem is that almost all public charging stations in California are destroyed and cannot be used.

Statistics support this sentiment – according to California's local government, the destruction rate of public charging stations in some cities is as high as nearly 70%.

Nationally, the equipment of the major public charging station companies such as ChargePoint, Electrify America, Blink, and EVgo is out of work for up to 30 percent of the time.

In this case, none of the U.S. government or the companies that contract the construction of public charging piles have stepped forward to take responsibility.

The reason for such problems is that we must start with the policy of the United States.

It is mentioned in the relevant policy that subsidies will be provided for the construction of charging piles. However, in the process of subsidy landing, the US government has not made provisions on the supervision and punishment of the reliability of charging piles.

Behind this, there is the "effort" of American companies - according to relevant disclosures, the relevant authorities in California had planned to investigate and tighten supervision of the largest fast charging company in the United States, "American Power", and "American Power" used a settlement of 200 million US dollars to persuade the US government to remove the penalty clause.

But more importantly, there is a practical problem:

The federal government does not have the capacity to adequately regulate charging stations across the country. More than 10 years after the development of public charging stations in the United States, the administration still says that there is "insufficient data to assess the reliability of the charging network in the United States".

In some states, federal and local governments can't even agree on how many chargers there are.

The deployment of charging piles requires a strong power network support. On this issue, the United States is still divided within itself.

In 2018, engineers at the National Renewable Energy Laboratory shared his research in an academic lecture on a plan to connect the eastern and western power grids of the United States, which, according to his research, would not only lead to significant emissions reductions in the United States, but also maintain a high level of $3.6 billion in annual consumer savings beyond 2038.

At the time, the head of the U.S. Department of Energy's power office was sitting in the audience, and her first reaction to the plan was to write an email to other officials at the Department of Energy. Subsequently, the research was halted, the results of the research were not allowed to be displayed, and the engineer was suspended.

U.S. officials are so disgusted with the plan because it harms the U.S. coal industry.

In many parts of the United States, the grid is not connected, and when coal states were asked to promote new energy generation, officials in those states refused to phase out coal plants, citing "the risk of blindly phasing out coal power without credible alternatives and infrastructure support will only increase the risk." And when the national grid is connected, this excuse is not valid - when there is a shortage of electricity in a certain place, it can be deployed through the power grid.

That's why this research is being hidden.

Each state has its own agenda, and this lack of systematic planning has also made it difficult for the United States to develop clean energy.

In other words, the backwardness of the United States in new energy vehicles is not only the backwardness of the industry, but the lack of a country's ability to solve problems.

And American politicians are selectively ignoring this fact.

Earlier, Trump said in Ohio that if he was elected, he would impose 100 percent tariffs on certain cars entering the United States.

Mr. Trump said it would save the jobs of the state's auto workers and the state's auto industry.

Ohio is an important automobile-producing state in the United States. Similar to it, there is the state of Michigan. And these two states are key swing states in the U.S. election.

Mei Xinyu of the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce said that when Trump has already made statements about imposing tariffs on Chinese electric vehicles, the Biden administration has an incentive to impose additional tariffs on Chinese electric vehicles that are quite high to curry favor with voters. The Biden administration wants to use the last time of the administration to do what Trump wants to do first, follow the path that Trump has taken, and use all the tools of Trump's policy toolbox.

However, such an approach will not help the U.S. new energy vehicle industry or the development of clean energy in the United States.

What the Biden administration needs to think more about is how to solve America's systemic problems. This problem cannot be solved by imposing tariffs.

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