Shares of Nio, Li Auto, and other Chinese electric-vehicle makers experienced a decline on Friday. This drop came in response to several published reports suggesting that the Biden administration may introduce new tariffs next week, which could impact these companies along with other Chinese industries.
Reports from Bloomberg News and Reuters suggest that higher tariffs may be implemented as early as Tuesday. The Wall Street Journal has indicated that the tariff rate on Chinese EVs is expected to increase significantly, potentially quadrupling from 25% to 100%. In addition, there is a 2.5% duty imposed on all automobiles imported into the United States.
Higher tariffs are expected to result from the review conducted by U.S. Trade Representative Katherine Tai. This review is long-awaited and focuses on Section 301 duties, which are named after a part of the Trade Act of 1974. Tai mentioned in the previous month that her team was on the verge of completing the review of the Section 301 tariffs, which were implemented in 2018 during the previous administration.
Trump, the likely Republican candidate for the 2024 presidential election, has proposed a 100% tariff on Chinese EVs. Both Democratic and GOP politicians have expressed support for a strong approach towards these vehicles, as they are generally priced lower than American and European EVs. In a speech given in March, Trump raised concerns about the potential consequences for the U.S. car industry, cautioning about a potential “bloodbath.”
In addition to electric vehicles, it appears that the semiconductor, battery, and solar sectors in China may be subject to additional tariffs. The development follows President Joe Biden’s recent push for increased tariffs on Chinese steel and aluminium.
China’s electric vehicle manufacturers, including Li, BYD, and Nio, experienced a decline in their New York-listed shares on Friday. Li’s shares dropped by approximately 2%, while Nio’s shares fell by 3%.
According to Nigel Green, CEO of financial consulting firm deVere Group, Chinese companies play a significant role in the global automotive supply chain, regardless of their lack of U.S. market share. Green shared this insight in emailed comments.
According to Green, companies that heavily depend on Chinese batteries or solar cells may experience higher costs. According to the expert, the current uncertainty is likely to result in a sudden decline in the stock prices of companies operating in industries like green-tech. This is because investors will be looking to minimise their risks.
Shares of battery maker Contemporary Amperex Technology Co. (CATC) 300750, -2.82% experienced a 2.8% decline on Friday in Shenzhen. CATC is widely recognised as a top-tier EV battery manufacturer, serving notable customers such as Tesla. Unfortunately, Tesla’s shares experienced a decline of approximately 2%.
According to Bloomberg, in March, Robin Zeng, the chairman of CATC, mentioned that the company is currently developing batteries that will have faster charging capabilities for Tesla. Additionally, CATC will also be providing machinery to support Tesla’s Nevada factory.
According to deVere Group’s Green, in the event that new tariffs are implemented, Chinese companies may begin searching for alternative methods or strategies, such as exporting to countries that are not impacted by the tariffs. Those goods could then be sent to the U.S. and a potential trade conflict could be the ultimate result.
According to other analysts, it is expected that Beijing will react to the higher U.S. levies by implementing its own trade restrictions on American products.
The Hang Seng HK:HSI remained resilient despite the recent reports of new U.S. tariffs. In fact, it surged 2.3% following a 1.2% gain on Thursday.
