The U.S. tariffs on Chinese electric vehicles (EVs) are backfiring.
On May 14, the U.S. raised the tariff on low-cost Chinese EVs from 25% to 100%. As a result, the stock prices of American EV companies rallied the next day. However, the U.S. didn’t stop at EVs; it also raised the tariff on Chinese-made batteries from 7.5% to 25%.
This increase leads to higher costs for American EV manufacturers, as some import and use batteries from China, the leading global producer of EV batteries.
CATL of China, the world’s largest EV battery company, supplies cost-effective batteries globally.
Tesla imports most of its EV batteries from CATL. The battery tariff increase for the Tesla Model 3 is expected to add approximately $1,000 per unit. Ford also imports batteries from China, which inevitably increases their costs.
As these facts became apparent on May 20, stocks of U.S. EV companies, except Lucid, fell sharply. Tesla’s stocks dropped by 1.41%, Rivian’s by 2.10%, and Nikola’s by 1.48%.
The U.S.’s imposition of tariffs has boomeranged back onto them.
The Wall Street Journal reported that the U.S.’s tariff policy on Chinese EVs is likely to significantly impact Tesla and Ford’s production of affordable electric vehicles.
