Amidst reports of the United States preparing retaliatory tariffs on Chinese electric vehicles, a recent analysis suggests that Korean exports of electric and hybrid vehicles could rise by 10 percent if global tariffs on Chinese electric and hybrid vehicles increase by 20 percent.
The U.S. International Trade Commission (ITC) released a report indicating that if the U.S., the European Union (EU), Japan, Korea, and other nations raise tariffs on Chinese electric and hybrid vehicles by 20 percent, China’s exports could plummet by at least 50 percent. Specifically, imports of Chinese vehicles to the United States could drop by 62.9 percent, while even the EU, where the impact would be least severe, could see a 53.4 percent decrease.
While this tariff shift could benefit the Korean economy, analysts caution that future tariff hikes targeting auto parts could have detrimental effects.
The USITC’s analysis further predicts that a 20 percent increase in tariffs on Chinese electric and hybrid vehicles globally would lead to the United States experiencing the largest increase in exports (13.6 percent), followed by Korea (10.0 percent), the EU (7.8 percent), and Japan (4.6 percent). This surge in exports could also result in a 4 to 8 percent increase in electric and hybrid vehicle production in these regions.
Conversely, a 20 percent tariff increase on EV parts could decrease China’s EV parts exports by 23.9 percent and Korea’s EV production by 4.1 percent. However, Japan and the United States could see their EV production increase by 2.7 percent and 1.9 percent, respectively.
The Chinese auto industry could benefit from these changes, as parts blocked from export could be redirected to domestic consumption, potentially lowering prices of Chinese-made parts and vehicles. This, in turn, could impact the competitiveness of automotive industries in other countries that would need to purchase parts at higher prices.
The Biden administration is expected to raise tariffs on Chinese electric vehicles from 25 percent to 100 percent as early as May 14, along with significant tariff hikes on other clean energy industries like solar cells and batteries. The EU is also expected to impose preliminary tariffs on Chinese electric vehicles as early as June, potentially raising tariffs to 15 to 30 percent from the current 10 percent. Additionally, the EU is investigating whether Chinese solar panels and wind turbines violate its Foreign Subsidies Regulation.
