Charts of the Day: New Round of U.S. Tariffs to Hit Chinese Battery-Makers Hardest

The latest U.S. tariff hikes primarily target lithium-ion batteries, electric vehicles (EVs), semiconductors, and medical devices from China. These measures are part of the Biden administration’s response to what it describes as China’s unfair trade practices that undermine American businesses and workers [para. 1][para. 2]. The tariffs have been significantly increased: quadrupling the rate on Chinese EVs to 100%, doubling it on solar cells to 50%, and more than tripling the tariffs on lithium-ion EV batteries to 25% [para. 3].

Lithium-ion batteries, a critical component for EVs and other technologies, are expected to be the most affected sector. This impact is underscored by the fact that China supplied 71.5% of the U.S.’s lithium-ion battery imports by value in the first quarter of 2024, according to data from S&P Global Market Intelligence [para. 4]. Analysts predict that the hikes could exacerbate difficulties for Chinese lithium-ion battery exporters already facing challenges from U.S. subsidy policies. This scenario may potentially benefit Japanese and South Korean battery manufacturers, providing them with a competitive edge in the U.S. market [para. 6].

Medical devices, another focal point of the new tariffs, represent significant imports from China, contributing nearly 20% of total U.S. imports in the sector in the first quarter of the year [para. 7]. However, the impact on Chinese companies might be modest. Many Chinese manufacturers have already diversified their product lines, especially following the pandemic, which saw fluctuating demand for items like face masks [para. 8].

Interestingly, despite the highest tariff increase imposed on EVs, the impact on Chinese EV exports to the U.S. might be minimal. S&P data reveals that only 0.3% of EVs and plug-in hybrids imported into the U.S. in the first quarter of the year came from China. Nonetheless, analysts from Nomura Holdings Inc. caution that the situation could worsen for Chinese EV-makers if other key markets, including the EU and the U.K., adopt similar tariff measures [para. 9][para. 10].

In sum, the recent U.S. tariff hikes signify a steep escalation in trade tensions between the U.S. and China. Among the various sectors affected, lithium-ion batteries and medical devices stand out due to their significant import volumes from China. However, diversifying strategies and market dynamics might mitigate the extent of the impact on Chinese manufacturers. Nonetheless, the broader ramifications of such trade policies will unfold over time, especially if additional economies join the U.S. in applying similar tariffs on Chinese goods [para. 1][para. 2][para. 3][para. 4][para. 6][para. 7][para. 8][para. 9][para. 10].

AI generated, for reference only