Here's what we know about Biden's tariffs on Chinese EVs, solar products and more

By Victor Reklaitis

Investors in Zeekr shrug off the news, sending the Chinese EV maker's stock higher in its first couple of sessions of trading on Wall Street

President Joe Biden on Tuesday is widely expected to roll out new tariffs targeting Chinese electric vehicles and other products, with the move coming as he faces a tight White House race against former President Donald Trump, who was known for his trade fights with Beijing.

Besides taking aim at China's inexpensive EVs, which have spooked Western automakers, Biden's new levies will focus on that country's batteries, critical minerals, solar products, steel and aluminum, according to multiple published reports.

Biden said a month ago that his administration could triple the tariffs on Chinese steel and aluminum from their current level of 7.5% on average. Critics have characterized such a move as largely "political symbolism," because the U.S. doesn't rely on China for those metals.

Biden's increased tariff on Chinese EVs (NIO) (LI) - which is expected to amount to 102.5%, up from the current level of 27.5% - is getting a similar reaction. The higher rate will have "minimal near-term economic impact" because of the "extremely low penetration of Chinese EVs in the U.S. market today," Evercore ISI analysts Sarah Bianchi and Matthew Aks, both of whom previously served in the Biden administration, said in a note Monday.

Underscoring that point, Chinese EV maker Zeekr Intelligent Technology Holding Ltd. has been receiving a warm reception on Wall Street, with the company's stock (ZK) rising in its first couple sessions of trading despite the news about U.S. tariffs.

Biden's tariffs on Chinese batteries could have "more of a near-term impact given the current level of U.S. imports ($13 billion), as could critical minerals given China's continued dominance in processing," Bianchi and Aks said.

Chinese machinery used to make solar-panel components won't face new tariffs, according to a Bloomberg News report about Tuesday's rollout.

Trump now floats a 200% tariff

The higher tariffs on Chinese products are stemming from U.S. Trade Representative Katherine Tai's long-awaited review of Section 301 duties, which are named after a part of the Trade Act of 1974.

Tai said last month that her team was "very close" to concluding that review of the Section 301 tariffs, which were imposed in 2018 by the Trump administration. The Biden administration won't announce any tariff rate reductions, according to Bloomberg's report.

Trump, the presumptive 2024 Republican presidential nominee, called for a 100% tariff on Chinese vehicles back in March while warning about Chinese car manufacturing in Mexico, and a range of Democratic and GOP politicians have also pushed for a tough stance toward Chinese automakers.

On Saturday, Trump took credit for Biden's upcoming tariff announcement.

"He listens to me," Trump said during a campaign rally in New Jersey. "He says he's going to put a 100% tariff on all Chinese electric vehicles. Isn't that nice? Should have done this four years ago."

The former president also upped the ante in his speech Saturday, suggesting he would see seek a 200% tariff on any Chinese vehicles made in Mexican factories.

"I will put a 200% tax on every car that comes in from those plants, and they're not going to do that because they'll destroy our automobile business," he said.

Chinese EV juggernaut BYD Co. (CN:002594) has said it's looking for a factory location in Mexico but that it's not planning to export to the U.S. and instead will focus on the Mexican market.

A poll released Monday found 43% of voters preferred Trump's handling of the economy to Biden's approach, while 35% backed Biden's approach over Trump's. Some 16% of voters said they trusted neither candidate, according to the poll, which came from the Financial Times and the University of Michigan's Ross School of Business.

What will the effects be?

U.S. automakers (GM) (F) (STLA) (TSLA), also known as original equipment manufacturers or OEMs, could benefit from Biden's much-anticipated move, according to Stifel analysts.

"While the devil is in the details, this could be a plus for domestic EV OEMs and legacy OEMs who are entrenched in the U.S. market. In our universe, Lucid (LCID) and Rivian (RIVN) both would likely benefit," they wrote.

Chris Low, chief economist at FHN Financial, highlighted that the new tariffs will be aimed at areas essential to Beijing's plans for its own economic recovery. "In other words, China does not sell many electric cars in the U.S., but up until these tariffs were announced, it intended to," Low wrote in a note.

Related: China's economy is slowing. But its old-age market is booming.

Owen Tedford, senior research analyst at Beacon Policy Advisors, stressed that Biden's upcoming move appears mostly focused on his getting re-elected in a period when protectionism is popular.

"For Biden, the tariff announcement is all about the election as it supports his industrial policy agenda and further builds his tough-on-China resume," Tedford said in a note.

"The bipartisan support for the duties also reflects the new Washington consensus on trade," the Beacon analysts added. "There is still a gradient, as shown by the gap between Biden and Trump, but free-trade advocates are now decidedly in the minority on both sides of the aisle."

-Victor Reklaitis

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05-13-24 1324ET

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