Chinese automakers like BYD (BYDDY) and XPeng (XPEV) make electric vehicles that are far cheaper than the ones made in the USA. But they’re hard to find in the US and, if politicians and domestic automakers (F, GM, TSLA) have their way, that’s how it’s going to stay.
Yahoo Finance’s Pras Subramanian and Rick Newman explain why in the video above.
For more expert insight and the latest market action, click here to watch this full episode.
This post was written by Stephanie Mikulich.
Video Transcript
[AUDIO LOGO]
JOSH LIPTON: The Biden administration’s 2024 trade agenda pulled into focus as US trade chief Katherine Tai testifies before Congress this week. Among the trade topics on the table are US restrictions on Chinese electric vehicles. Here with more on where the US-China EV competition stands, let’s get to Yahoo Finance’s Pras Subramanian and Rick Newman.
Pras, I’ll start with you. So possibility maybe of new tariffs on Chinese EV makers. Where would that sort of lead the auto space?
PRAS SUBRAMANIAN: So currently, there’s a 27.5% tariff on Chinese vehicles. And there’s talk of reducing it or expanding it or who knows what will happen through these negotiations. But if it stays the same, it’s good for domestic automakers. It’s protecting them right now from potential Chinese competition.
But right now, we haven’t seen the Chinese automakers here yet. They’re not– they’re not talking about that. I think Akiko Fujita spoke to BYD US head, and they said they were not planning at all to come to the US commercial– sorry, the regular traditional consumer market. They do have some industrial vehicles.
So they’re not going to do that just quite yet. If they do, a number of automakers have told me, tariffs aren’t going to help because they’re already so cheap. Even with a 30% tariff, the car is still competitively priced. If and when they do come, it’s going to be a problem. Like you said before, is there an optics issue? Can they– would Americans not necessarily buy–
JOSH LIPTON: Yeah, yeah. I was interested just because your take on that, Pras. Even if American consumers had the choice to buy a Chinese EV, would they? I mean–
PRAS SUBRAMANIAN: I think they might given a competitive feature set good price availability. I think that cheap thing is really a big, big driver there.
JOSH LIPTON: Yeah. Cheap beats geopolitics.
PRAS SUBRAMANIAN: Yeah, I think so. And Rick can talk about this. But legacy automakers, I think, they know they’ve got to change. If they don’t, they can’t be competitive with their second gen vehicles. It’s going to be a problem.
JULIE HYMAN: So Rick, I’m curious how a presidency under Biden or Trump would affect trade restrictions on the Chinese electric vehicles. As we mentioned, there’s already a tariff. It doesn’t seem like, I mean, obviously, it hasn’t gone anywhere under President Biden.
RICK NEWMAN: Right. So Biden left all of the Trump tariffs in place. Notably, he repealed a lot of the Trump tariffs on other countries, including Europe, Canada, things like that. But he has left literally all of Trump’s tariffs on China in place. And I mean, this– I think this is an issue that is going to arrive sooner or later. I think this is inevitable.
And I’m not sure it’s even just electric vehicles. It’s all automobiles. I mean, remember, the price of cars skyrocketed during COVID, and it’s still up there. It’s around $48,000 what people pay for a new car on average. And we don’t have enough cheap electric vehicles. But we don’t have enough cheap vehicles, period.
I mean, we saw this during COVID when everybody moved into the used car market. And those cars skyrocketed because people couldn’t afford a new car. So what’s going to happen here? I mean, we learned from the Trump presidency that a president can unilaterally impose tariffs. There has to be some procedures. You have to have certain findings at the Department of Commerce or other parts of the government. But a president can do it.
And given everything we have done to support the automobile industry in the United States, I mean, don’t forget it, you could say it actually started with the bailouts for General Motors and Chrysler all the way back in 2008 and 2009. Those companies were too big to fail and too essential to the economy. And then Biden of course sided with the autoworkers during the strike last year. One way or another, the gates are going to go up to make sure these cheap Chinese imports don’t get here.