Huge US trade barrier on Chinese EVs means more could more destined for Australia

A 100% tariff on Chinese EVs sold in the US may be the last line of defence for America's dinosaur fossil car makers, but could result in more affordable models for Australia.

US President Joe Biden is expected to announce a 100% tariff on imports of Chinese made EVs this week according to reports from Bloomberg over the weekend.

The current tariff of 27.5%, which was introduced by President Trump in 2018, will be increased to 100%, effectively doubling the cost of Chinese made EVs sold in the US.

In February Chinese EV giant BYD announced its plans to build a factory in Mexico, a member of NAFTA (North American Free Trade Agreement), giving it access to the 15 million vehicle per annum US car market.

Following the announcement former President Donald Trump warned of a “bloodbath” for the US auto industry and the country if cheap Chinese EVs had free trade access to the US car market.

“We’re going to put a 100% tariff on every single car that comes across the line, and you’re not going to be able to sell those guys if I get elected,” said Trump during a rally in Ohio in March.

“Now, if I don’t get elected, it’s going to be a bloodbath for the whole – that’s gonna be the least of it. It’s going to be a bloodbath for the country. That’ll be the least of it.”

However Trump won’t be able to campaign on the policy as the Biden administration signalled it’s prepared to ramp up measures to protect its dinosaur fossil car industry which is unable and unwilling to transition production lines to electric models.

The huge protection measures are the last line for defence for America’s fossil car makers. Last year GM announced it was pulling back on its plans to build 400,000 EVs in North America by mid-2024 and in January Ford reduced its production plans of the F150 Lightning by 50%.

US trade barriers could be good news for Australian EV buyers

While the 100% tariff will no doubt significantly slow the US transition to zero emission vehicles, the huge trade walls being put up around the US EV market may be good news for Australian EV buyers.

With affordable Chinese electric vehicles now effectively locked out of the second largest car market in the world, companies like BYD will no doubt be looking at other markets in Europe and South East Asia to take more volume. With booming EV sales, Australia will be a prime target.

In March BYD began production of right-hand drive EV models at its new factory in Thailand. The Indonesian government has also confirmed BYD will commence construction of another factory in in that country with production forecast to commence in early 2026.

News of BYD’s growing presence in Southeast Asia comes as the company’s founder predicted plug-in electrics would exceed 50% of all new car sales in China by June this year. A prediction that was proved accurate in April.

With booming EV production quickly filling up the China’s auto market bathtub and a 100% trade tariff blocking the US drainpipe, Australia might be one of the beneficiaries of the inevitable EV spillover.

Author
Daniel Bleakley
May 26, 2024
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