Senator Josh Hawley suggests eye-popping tariff hike on Chinese-made electric cars to ward off ‘existential threat’

Senator Josh Hawley of Missouri.

Senator Josh Hawley of Missouri proposed a tariff increase that would more than double the price of imported Chinese EVs — but even that might not be enough to make American-made models the cheaper option. Tom Williams – CQ/Roll Call, Inc/Getty Images

After years of big EV investments by U.S. automakers, a drop in demand is forcing them to scale back production — and a potential tidal wave of competition from low-price Chinese imports threatens to decimate their businesses.

But Senator Josh Hawley of Missouri has a bizarre proposal to prevent Chinese manufacturers from capturing American market share: a 40-fold tariff increase that would more than double the base price of Chinese-made electric cars sold in the US.

The Protecting American Autoworkers From China Act, which Hawley introduced Wednesday, would increase base tariffs on imported Chinese vehicles from 2.5% to 100%. The Biden administration has already approved a policy that taxes certain Chinese EV imports at up to 27.5%, so Hawley’s proposal would result in a peak rate of as much as 125% of a vehicle’s value – by far the highest excise tax for any ordinary foreign product entering the world. country.

“If Joe Biden wants to support American auto workers, he must start protecting them from the existential threat of China,” Hawley said in a press release announcing the bill. “We must put American workers first, bring jobs back to American soil and reject radical climate mandates that make China rich and America poor.”

Even assuming the full cost of the Hawley tariff is passed on to consumers, Chinese electric vehicles could still be competitive in the US market because their base prices are so low. With major help from the Chinese government, Chinese automakers like BYD have been able to bring new electric vehicles to market at astonishingly low prices, largely because they have been able to fully integrate battery production into their supply chain.

BYD started selling an $11,000 model called the Seagull in China last year. Even under Hawley’s pricing schedule, that model would cost less than $25,000 for American buyers – still well below the average price of almost all American-made electric cars.

A yellow car called the Seagull, from the Chinese car manufacturer BYD
A BYD seagull on display at the Shanghai International Automobile Industry Exhibition last April. The model is currently on sale in China for $11,000.

VCG/Getty Images

The average selling price of an electric car in the US was $51,000 last December, and there are currently only two electric vehicles selling for less than $30,000: the Nissan Leaf and the Chevy Bolt. Other manufacturers have struggled to bring prices down to competitive levels. Mercedes’ CEO told Bloomberg TV earlier this month that full cost parity between electric cars and traditional gas-powered cars would be “many years away.” But that wasn’t a problem for Chinese companies.

“Our observation overall is that Chinese auto companies are the most competitive auto companies in the world,” Tesla CEO Elon Musk said in an earnings call last month. “If trade barriers aren’t put in place, they will virtually wipe out most of the world’s other auto companies.”

The only goods with tariffs close to those of Chinese EVs under Hawley’s plan are obscure gasoline additives like ethyl chloride and raw materials like loose peanut seeds (but only when imported from countries without normalized trade ties with the U.S.), according to 4,350 of the ITC. rate schedule page.

In particular, Hawley noted that Chinese electric vehicles built and imported from Mexico would not be excluded from the tariff proposal. Boosting production in Mexico is being floated as a potential tax loophole for Chinese manufacturers; Due to Mexico’s North American trading status, electric cars produced there would be exempt from import tariffs. The Alliance for American Manufacturing called this loophole an “existential threat” to the American auto industry in a report last week.

It’s uncertain whether Hawley’s proposal will pass as written by both Congress and the Biden administration — such a high and prominent tariff could trigger retaliation from China. But other officials from both sides of the aisle, including U.S. Trade Representative Katherine Tai and representatives from the Commerce Department, have announced plans to study the effects of Chinese EV imports and revise tariff schedules to protect U.S. companies.

“The U.S. response must work at all levels of the EV supply chain to defend American workers and businesses, correct distortions arising from China’s non-market policies and practices, and restore fair, competitive, market-oriented economic conditions,” Tai wrote in a letter to Congress last month.

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