May 27, 2024

China Economic Update – 27 May 2024

Tariffs on China’s EV exports could spark another trade war

While American manufacturer Tesla is largely synonymous with electric vehicles (EV) to most consumers in advanced economies, it is in fact Chinese firms that have become increasingly dominant in global EV manufacturing, particularly when viewed across the entire value chain. However, this market position – and the role of government subsidies in its acquisition – has raised trade tensions in both the United States and Europe. In mid-May, the Biden Administration announced tariff increases on a range of imports from China, with the most notable being a quadrupling of the tariff on electric vehicles (from 25% to 100%), while an EU investigation into China’s EV subsidies is due to be completed by early July – with countervailing duties of some degree widely expected.

The increase in US tariffs on EVs was eye catching but not particularly significant, given that China’s EV exports to the US were negligible to begin with. In contrast, just over 54% of China’s EV exports (in US dollar terms) were delivered to Europe in 2023, and the likely tariff increase come July could result in retaliation from China, sparking a similar trade war to the one between the US and China starting in 2018.

For further details, please see the China Economic Update (27 May 2024)