US President Joe Biden drastically increased tariffs on a number of Chinese imports yesterday, Tuesday. The affected products include electric cars and electric car batteries. The measure is generally seen as an attempt to secure a better starting position in the US election campaign against Donald Trump. China has announced countermeasures to protect its interests, reports Reuters.

The tariffs on electric cars will rise from 25 to 100 per cent, and those on electric car batteries from 7.5 to 25 per cent. From 2025/2026, tariffs of 25 per cent are also to be introduced on permanent magnets, the anode material graphite and other battery raw materials.

The White House cited "unacceptable risks" to the economic security of the USA as justification. China is flooding the world with cheap goods. These are entering the market because China is continuing to invest in the affected sectors despite existing overcapacity. The powerful United Auto Workers union praised the measures. The tariffs would ensure that "the transition to electric vehicles is a just transition."

The measures are targeted and coordinated with close allies, the White House said. Despite low unemployment and good economic growth, Biden's economic policy is viewed less favourably by voters than Trump's. 

Analysts had warned in advance that a trade war with China would increase the cost of electric cars and harm Biden's climate goals.

The United States imported goods worth $427 billion from China last year, but only exported products worth 148 billion. This trade deficit is being viewed increasingly critically in the USA. However, the new measures only affect imports worth 18 billion dollars.

Only a few electric cars manufactured in China are currently sold in the USA, analysts said. The direct impact on car prices would therefore be minimal. The tariffs on magnets and battery materials planned for 2025 and 2026, on the other hand, could affect more vehicles.

US car manufacturers exported around 155,000 vehicles worth 6.3 billion dollars to China in 2021, while only around 64,000 vehicles worth 1.5 billion came to the US from there. Most Chinese imports also belong to US brands, especially Buick.

Biden wants to increase the share of electric cars in the overall US car market from 8 per cent last year to up to 56 per cent in 2032. This is to be achieved with fleet emission limits and tax credits for customers. However, this excludes cars that contain too many parts from China. Without low-cost batteries and battery materials from China, electric cars would be too expensive for US customers, say car manufacturers.

The bottom line

The Biden administration is also introducing drastic tariffs on Chinese electric cars, although they have hardly been sold in the USA so far, and it is probably not yet certain that the tariffs on permanent magnets and battery materials planned for 2025 and 2026 will materialise. Overall, the action seems to be mainly election campaign bluster.