Why the Biden China EV Tariffs Will Slow the Mass Adoption of EVs in the U.S.

Jeff Siegel

Written By Jeff Siegel

Posted May 14, 2024

The Biden China EV Tariffs are, for lack of a better word, stupid.  And I’ll tell you why in just a moment.  But first, let’s back up a bit and take a look at why these tariffs even exist. And more importantly, why both candidates are actively attempting to slow the mass adoption of EVs in the U.S.  

Biden China EV Tariffs

Last week, The Washington Post reported that Donald Trump asked the oil and gas industry to pony up $1 billion for his campaign.  In return, he promised to put the kibosh on efforts to promote the sale of electric vehicles.

To be fair, the oil and gas industry doesn’t have it so bad under Biden. Despite the president’s pause on new LNG export approvals, the oil and gas industry has enjoyed record profits over the past few years.  

Still, I found it quite telling how the media reacted to Trump’s offer.

Conservative media was mostly quiet, while left-leaning, mainstream media shouted it from the rooftops.  As if no politician has ever offered a reach-around for a little filthy oil and gas lucre.  While I’m certainly no cheerleader for Donald Trump, to make this out to be a thing only Trump would do is incredibly dishonest. 

Indeed, the GOP tends to be the recipient of most of that oil and gas money these days. But Democrats aren’t allergic to it, either.  In fact, as of April 22nd, the oil and gas industry has ponied up more than a half million dollars to support Biden’s re-election campaign.  A far cry from the $7.3 million Trump’s campaign has received, but still not trivial. 

The truth is, if it weren’t for both parties enjoying billions of dollars in campaign donations over the years, we’d probably be a lot further along in terms of alternative transportation technologies.  But that’s another rant for another day.

Point is, Trump’s $1 billion request is a bit aggressive. Although nothing out of the ordinary in terms of how politicians hustle cash.  

In any event, no one should be surprised by this.  And I’m not even sure it matters anymore, anyway. After all, there’s no denying that the world is transitioning away from internal combustion and towards vehicle electrification. Even with recent dips in EV sales, the long-term trend remains solid.  And that trend will continue to favor electric vehicles over internal combustion.  

Bloomberg’s most recent Electric Vehicle Outlook came out last month, and highlighted both of these realities.  Here are a few highlights …

  • The passenger EV market in China grew 44% year-on-year in Q4 2023, with nearly 2.9 million cars sold. The year as a whole saw a growth rate that was almost as impressive, with a 35% rise from 2022 to close to 8.2 million EVs. Still, a slowdown is approaching. BNEF anticipates EV sales in China will climb by just 21%, to 9.9 million units, this year. Dragged down by weaker regulations, market saturation and a tough economic outlook.
  • EV sales in Europe fell 11% in 4Q 2023, marking the first year-on-year decline since 2016. Diminished pressure from fuel-economy targets and subsidy changes in markets like France and Germany will keep growth in the region muted in 2024. Sales are expected to reach 3.4 million cars this year – just 10% more than in 2023.
  • In North America, EV sales rose 37% in 4Q 2023. Some 1.6 million EVs were sold across the US and Canada in 2023 as a whole. Up 49% from the year before. In 2024, BNEF forecasts a further 31% growth, to hit 1.9 million units sold in the US and 230,000 in Canada. Still, for that total to be reached, the Big Three automakers – GM (NYSE: GM), Ford (NYSE: F) and Stellantis (NASDAQ: STLA) – need to step up their efforts.

Interestingly, if the U.S. wasn’t so keen on these Biden China EV tariffs, North America EV sales would easily exceed that 31% growth target.  Perhaps even doubling it, because some of those Chinese electric cars are insanely cheap. 

BYD (OTCBB: BYDDY) is producing a small EV that would sell for less than $15k if it could get into the U.S.   Some have suggested it could go for as low as $12,000.

To put that in perspective, imagine how many Americans would jump at the chance to buy a $12,000 car. Better yet, a $12,000 car that would never need gas or an oil change.  Over the course of 8 years (which is how long most Americans keep their new cars before buying a new one), a driver could save a small fortune.

The average U.S. driver spends about $2,100 a year on gas, and about $200 per year on oil changes.  Over the course of 8 years, that’s around $18,400.  Or $6,400 more than the price of the actual car.  

Of course, electricity isn’t free. Depending upon where you live, “fueling” your electric car could cost anywhere from $600 to $1,000 a year.  But that’s still a hell of a lot cheaper than gasoline or diesel.  And of course, gas prices are far more volatile than electricity prices. 

So if we figure both gas savings and oil change savings into the equation, while acknowledging $1,000 per year on electricity used to charge your car, you’re still looking at a savings of around $10,400 – on a $12,000 car!

It’s no wonder the special interests that finance the campaigns of both Trump and Biden want to keep these cars off U.S. roads.  Yet if history has taught us anything, it’s that tariffs oftentimes have unintended consequences.  In fact, after President Trump first imposed tariffs on China, we saw how bad of an idea tariffs can be. 

Biden China EV Tariffs Won’t Stop China’s EV Dominance

Earlier this year, the National Bureau of Economic Research released a working paper about those tariffs.  Here’s the abstract from that paper …

We study the economic and political consequences of the 2018-2019 trade war between the United States, China and other US trade partners at the detailed geographic level, exploiting measures of local exposure to US import tariffs, foreign retaliatory tariffs, and US compensation programs. The trade-war has not to date provided economic help to the US heartland: import tariffs on foreign goods neither raised nor lowered US employment in newly-protected sectors; retaliatory tariffs had clear negative employment impacts, primarily in agriculture; and these harms were only partly mitigated by compensatory US agricultural subsidies.

Despite the very real harms of such tariffs, President Biden is expected to quadruple tariffs on Chinese EVs from 27.5% to 102.5%.  Pretty much guaranteeing a Chinese EV never lands on American soil.  Ironically, this comes from a president who claims he wants us all driving electric cars.  

Irony aside, these Biden China EV tariffs will absolutely ensure that non-Chinese car makers won’t have an opportunity to compete in the U.S.  And of course lack of competition always breeds complacency.  

Fortunately, the EV sector is still quite young, and every year we do see progress on range, quality, and affordability.  But I maintain that if Chinese EV makers could sell their cars here, EV adoption rates would absolutely soar past even the most optimistic scenarios. 

Indeed, this is not going to happen, though.  But make no mistake: Chinese EVs are not going to stay solely in the Middle Kingdom.  They’re already being sold throughout Asia, South America and even Europe.  And this growth will continue for the foreseeable future.  

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