The US government ponders new penalties for Chinese electric automakers that attempt to bypass the high tariffs by moving production to Mexico, Bloomberg reports, citing President Biden’s top trade negotiator.
Biden to avoid potential loophole in new tariff hikes
The Biden Administration is closely monitoring any attempts by Chinese companies to use Mexico to export electric vehicles into the United States, a potential loophole in the newly announced tariff hikes.
According to US Trade Representative Katherine Tai, the US government would need to take a different route to introduce penalties on Chinese-made EVs built in Mexico.
The significant increase in import tariffs for electric vehicles from China is estimated to affect $18 billion in key products, with EVs getting the highest hike.
“We’re not going to let China flood our market making it impossible for American auto—auto manufacturers to compete fairly. I will do it by following international trade laws.”
President Joe Biden
Chinese EVs face 100% tariff in the US
On Tuesday, President Joe Biden announced major tariff hikes on Chinese-made electric vehicles and other key sectors. The move is part of the US government’s wider effort to protect American workers and companies against cheap Chinese imports.
Under Section 301 of the Trade Act of 1974, import tariffs on Chinese-made EVs increased from 25% to 100% in 2024. Other affected sectors include steel and aluminum, semiconductors, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products, with varying tariff rates and imposition years. Refer to the table below:
| Prior Import Tariff Rate | New Import Tariff Rate | Year of Imposition | |
| Steel and Aluminum | 0–7.5% | 25% | 2024 |
| Semiconductors | 25% | 50% | 2025 |
| Electric Vehicles | 25% | 100% | 2024 |
| Batteries, Battery Components and Parts, and Critical Minerals | Prior Import Tariff Rate | New Import Tariff Rate | Year of Imposition |
| Lithium-ion EV batteries | 7.5% | 25% | 2024 |
| Lithium-ion non-EV batteries | 7.5% | 25% | 2026 |
| Battery parts | 7.5% | 25% | 2024 |
| Natural graphite and permanent magnets | 0% | 25% | 2026 |
| Other critical minerals | 0% | 25% | 2024 |
| Solar Cells | 25% | 50% | 2024 |
| Ship-to-Shore Cranes | 0% | 25% | 2024 |
| Medical Products | Prior Import Tariff Rate | New Import Tariff Rate | Year of Imposition |
| Syringes and needles | 0% | 50% | 2024 |
| Personal protective equipment (PPE) (respirators and face masks) | 0–7.5% | 25% | 2024 |
| Rubber medical and surgical gloves | 7.5% | 25% | 2026 |
“To encourage China to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation, the President is directing increases in tariffs across strategic sectors such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products.”
White House
US’ warning
US Trade Representative Katherine Tai asserted that any penalties if Chinese companies should follow through on factories would demand a “separate pathway” from the Section 301 review of the Trade Act of 1974.
For context, the four-year review resulted in new tariffs on an estimated $18 billion worth of Chinese imports.
Representative Tai warned that Chinese companies leveraging Mexico as a loophole was “something we are talking to our industry, our workers and our partners about.” She further noted that the iniative could include other measures beyond tariffs, citing the provisions within the US-Mexico-Canada Agreement aimed at preventing unfair subsidies and attempts to avoid import duties.
