US-China Trade War: After AI And Semiconductors, US's 100% Tariff Could Escalate Tensions

US-China Trade War: After AI And Semiconductors, US's 100% Tariff Could Escalate Tensions

Amongst the products that are under the radar, EVs will bear the biggest brunt of all, as according to reports, the US may impose a cumbersome 100 per cent tariff on electric wagons from the Asian giants.

Juviraj AnchilUpdated: Sunday, May 12, 2024, 10:20 AM IST
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From semiconductors to 'advanced tech', now US policy aggression has reached the arena of electric vehicles. | PIC: XINHUA

The trade war with China that the Biden administration of the United States bequeathed from the Donald Trump administration has only grown to find newer dimensions under the current regime. The trade war that started with most goods, in general, has now transcended into the realms of specificities. From semiconductors to 'advanced tech', now US policy aggression has reached the arena of electric vehicles.

US May Impose a 100% Tariff

In a recent development in the matter, right at the back of Chinese President Xi Jinping's Europe tour, the US announced its intention to impose a staggering number of tariffs on solar equipment, medical supplies and most importantly, EVs that China exports to the US. Amongst the products that are under the radar, EVs will bear the biggest brunt of all, as according to reports, the US may impose a cumbersome 100 per cent tariff on electric wagons from the Asian giants.

In a recent development in the matter, right at the back of Chinese President Xi Jinping's Europe tour, the US announced its intention to impose a staggering number of tariffs on solar equipment, medical supplies and most importantly, EVs that China exports to the US.

In a recent development in the matter, right at the back of Chinese President Xi Jinping's Europe tour, the US announced its intention to impose a staggering number of tariffs on solar equipment, medical supplies and most importantly, EVs that China exports to the US. |

Tariffs broadly are the tax that is levied from the country that is importing products, from the companies, and, by extension, from the countries that are exporting the said products.

This move, essentially makes it difficult for Chinese manufacturers like BYD to sell their cars in the US markets. This could, in essence, end up removing cars from the US market. Some see this as a ban without a ban. These tariffs will be announced on May 14.

The Chinese have responded to these measures by saying that the tariff measures are 'counterproductive and inflict harm' on the global economy.

One of the biggest gainers, if this goes through as reported, would be Tesla, for two reasons. Firstly, it would be able to maintain an unequivocal dominance in the EV market and allay the fear of being overwhelmed by its biggest rival, BYD.

The Chinese have responded to these measures by saying that the tariff measures are 'counterproductive and inflict harm' on the global economy.

The Chinese have responded to these measures by saying that the tariff measures are 'counterproductive and inflict harm' on the global economy. | File

BYD, which sells one of the cheapest EV cars in the world, would find it excerbating to pay 100 per cent on the cars they sell in the US, it would result in gargantuan losses, or, if the company passes the price difference onto the end customer, it would result in BYD (or other Chinese cars) being almost as expensive as Tesla cars, making it later's car, thereby taking its edge away.

The Impact of Tariffs in US Market

Whether this would impact the US markets immediately or not is something that remains to be seen, because in the recent past, despite the presence of other companies, other than Tesla, EV sales have dropped, indicating a dwindling prospect of EV fever. In addition, if Tesla takes its peddle off the price war thanks to the potential absence of competitive players, it would not necessarily make EVs more attractive to price-sensitive markets.

Although US aggression against China, through its trade policies has only intensified in recent years, this could be the second biggest move from the US government in the recent past after the US Congress passed a bill essentially banning BytDance-owned TikTok from the 'Land of the Free'.

Chinese companies, including the likes of SAIC, Geely and BYD, would look to its government under Xi for assistance in this predicament, as one of the largest markets would almost vanish from before their eyes, almost overnight.

The Indian government and its policies may not come to its aid, as the two countries (China and India) do not have a free-flowing cordial bilateral equation.

The Indian government and its policies may not come to its aid, as the two countries (China and India) do not have a free-flowing cordial bilateral equation. |

Furthermore, these companies would also have to look east for better avenues, particularly in India. The Indian market has a potential to be the big market for EV cars, and BYD's price approach may help it.

Is India an Option?

But, even here, these Chinese companies have similar challenges to face, like in the US. The Indian government and its policies may not come to its aid, as the two countries (China and India) do not have a free-flowing cordial bilateral equation. In the past, this has resulted in a not-so-successful movement of some boycotting Chinese products altogether between 2021 and 2022. Despite that, the Chinese import and India's reliance on China have only grown in these years. Finally, one of the biggest impediments for Chinese EV manufacturers would be the indigenous challenge, from home-grown, established players like Maruti Suzuki, Tata and Mahindra, who have expanded into the EV game.

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