May 14, 2024 - Business

Why Biden doesn't want Americans buying cheap Chinese EVs

Illustration of an EV charger cord making a "no" symbol.

Illustration: Allie Carl/Axios

President Biden is set to announce massive new tariff increases on $18 billion worth of Chinese imports — including a 100% tax on electric vehicles.

Why it matters: The administration wants to keep cheap Chinese EVs out of the U.S. market and prevent domestic automakers (and workers) from getting crushed by the competition.

  • "While there are essentially NO current Chinese EVs sold in the US … both parties want it to stay that way," Evercore ISI analyst Chris McNally wrote Monday in a research note.

Zoom out: Cheap EVs have proved popular in European markets and could be a big hit with Americans during high inflation while spurring automakers to race to come up with competitively priced products.

  • That would theoretically be a win for consumers — and for competitive markets, something the White House has actively promoted over the past few years, as this new paper from the progressive Roosevelt Institute lays out.

Yes, but: The administration argues that competition from Chinese carmakers is inherently unfair — they're buoyed by a heavily subsidized industry.

  • If Chinese EVs capture the market, that monopoly would threaten the country's economic security. "We need diversified, not concentrated, production of our most critical goods and technologies," a White House official said on a call with reporters Monday. "That was the lesson of the pandemic."
  • Meanwhile, progressives say that Chinese EVs are cheap because manufacturers there cut corners when it comes to labor and the environment.

The tariffs "level the playing field for U.S. automakers and U.S. autoworkers," said Lael Brainard, National Economic Council director, on the call with reporters.

  • Autoworkers make up a key constituency for the White House, and the United Autoworkers Union put out a statement on Tuesday morning applauding the move.

The big picture: Biden's protectionist moves signal just how far the U.S. has moved away from the kind of free market idealism blamed for what's known as "China Shock," or the cheap Chinese imports' negative effects on American workers and industries.

Between the lines: In some ways, the U.S. is now following the Chinese playbook of offering a big helping hand to a nascent industry.

  • The administration says it's spurred more than $860 billion in business investments into EVs, clean energy and semiconductors thanks to provisions in the Inflation Reduction Act, the CHIPS Act, and the bipartisan infrastructure law.
  • The tariffs "will make sure that historic investments in jobs spurred by President Biden's actions are not undercut by a flood of unfairly underpriced exports from China," Brainard said.
  • "There are few things that would decarbonize the U.S. faster than $20,000 EVs," David Autor, an economist at MIT who co-authored the original China-shock paper, told The Atlantic recently. "But there is probably nothing that would kill the U.S. auto industry faster, either."

What's next: The White House says it expects other countries to follow its lead. "Europe, Turkey, Brazil, India, many other countries are echoing our message and several may follow with actions that amplify the effect of what we're announcing," per a White House official on the call with reporters.

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