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What America’s 100% tax on Chinese EVs could mean for PH

Things could become more expensive—or stay exactly the same

It seems that the United States is waging economic war against China with new tariffs. PHOTO BY SAM SURLA

The White House under United States president Joe Biden has announced a raft of new tariffs on Chinese imports into the country. Among them is a hefty import tax on electric vehicles, a measure that could change the market drastically for Chinese carmakers.

The measures are meant to level the industrial playing field in the States, as the Chinese government has been actively subsidizing many areas of manufacturing for years, making it harder for American firms to compete.

The 100% tariff is meant to protect US automakers from Chinese EV imports. PHOTO BY SAM SURLA

The headline measure is without a doubt a hefty 100% tariff on Chinese EVs, a move that is meant to protect US automakers and predictably went down like a lead balloon with communist party leadership. In total, the following tariffs are going to be implemented:

  • Semiconductors: from 25% to 50% by 2025
  • Certain steel and aluminum products: from 7.5% to 25% in 2024
  • Electric vehicles: from 25% to 100% in 2024
  • Lithium batteries for EVs and critical minerals: from 7.5% to 25% in 2024
  • Solar cells: from 25% to 50% in 2024
  • Ship-to-shore cranes: from 0% to 25% in 2024
  • Rubber medical and surgical gloves: from 7.5% to 25% in 2026
This might end up hurting companies such as Tesla that use Chinese-sourced components. IMAGE FROM TESLA

While these new taxes are meant to keep cheap Chinese EVs and other products out, they will also hit firms like Tesla in the US. The Model 3 uses Chinese-made batteries, and its price will almost inevitably go up as a result of Biden’s latest anti-China move.

Next to the USA, the measures will also have an impact elsewhere. For Asia and the Philippines, these steps could mean a number of things.

Losing one of the biggest potential markets in the world might motivate Chinese car brands to peddle their wares even more aggressively (and cheaper) around here in the hope of making up for losses elsewhere.

Chinese manufacturers are looking to set up plants in Mexico to get around tariffs. PHOTO BY SAM SURLA

It could also mean the opposite and see Chinese cars get more expensive as future sales predictions for the American market just went out of the window and firms try to increase revenues from other markets.

There’s also a good chance that these tariffs will have very little real impact on Chinese firms in the long run, as there are always ways around these things. Just like German carmakers build vehicles in China to circumvent high import taxes in the Philippines and elsewhere, Chinese car companies are seemingly preparing to use the same kind of tactic.

BYD is said to be looking for plant locations in Mexico, and the giant automaker isn’t just there for the weather or the tequila. The 100% tariff only applies to cars brought to the US from China, but not to cars built with Chinese parts in Mexico.

Those vehicles only attract a 2.5% duty thanks to the US-Mexico-Canada Agreement, a trade agreement signed in 2020 designed to stimulate mutually beneficial trade and economic growth in North America. This could mean cheap Chinese EVs might still flood into the United States, assuming American consumers actually want them.

Should the Philippines follow suit? PHOTO BY SAM SURLA

Closer to home, Malacañang might feel tempted to take inspiration from across the pond and impose its own import tariffs on Chinese wares. After all, what better signal to send to the country that keeps bullying the Philippines in the West Philippine Sea than to hit them where it hurts?

VISOR readers know that Chinese carmakers are targeting the Philippines quite enthusiastically, and hitting their sales figures by doubling the prices of their products could have quite an effect on Chinese leadership.

As increasing tariffs on other Chinese-made products to discourage their import and use, there is always a risk that these measures could hit Filipino consumers as well, especially as so many things are made in China these days.

But careful consideration and sourcing from nations more friendly to the Philippines could fix any supply gaps. Bringing in such tariffs is a purely political position made at the highest level, and one that could be implemented with the stroke of a pen. The question that needs answering is: Should we do it or not?

Frank Schuengel

Frank is a German e-commerce executive who loves his wife, a Filipina, so much he decided to base himself in Manila. He has interesting thoughts on Philippine motoring. He writes the aptly named ‘Frankly’ column.