Chinese EV stocks drop on expectations Biden could hit sector with 100% tariff next week

By Barbara KollmeyerVictor Reklaitis

Trump, the presumptive 2024 Republican presidential nominee, called for a 100% tariff on Chinese EVs in March

Shares of Nio, Li Auto and other Chinese electric-vehicle makers were falling Friday, following multiple published reports that the Biden administration could roll out much-anticipated new tariffs next week that target those companies as well as other Chinese industries.

The higher tariffs could come as soon as Tuesday, according to reports from Bloomberg News and Reuters, while the Wall Street Journal said the tariff rate on Chinese EVs is expected to roughly quadruple to 100% from 25%. There's also an additional 2.5% duty for all automobiles imported into the U.S.

The higher tariffs would stem 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 former President Donald Trump's administration.

Trump, the presumptive 2024 Republican presidential nominee, has called for a 100% tariff on Chinese EVs, and a range of Democratic and GOP politicians have pushed for a tough stance toward such vehicles, which typically sell for much less than American and European EVs. Trump's proposal was floated in a March speech in which he warned about a possible "bloodbath" for the U.S. car industry.

See: One thing Biden and Trump agree on: Keeping this $10,000 Chinese EV out of the U.S.

Besides EVs, the semiconductor, battery and solar sectors in China look set to face additional tariffs. The development comes after President Joe Biden last month pushed for higher tariffs on Chinese steel and aluminum.

While China EV makers such as Li (LI) (HK:2015), BYD (CN:002594) (HK:1211) and Nio (NIO) don't sell autos in the U.S., their New York-listed shares came under pressure on Friday, with Li down about 2% and Nio off 3%.

Those Chinese companies are part of the global automotive supply chain even if they don't have U.S. market share, Nigel Green, CEO of financial consulting firm deVere Group, said in emailed comments.

Any company that relies heavily on Chinese batteries or solar cells could see increased costs, Green said. "This uncertainty can be expected to lead to a knee-jerk selloff in stocks of companies directly involved in these industries, such as green-tech, as investors seek to mitigate risk," he said.

In Shenzhen, shares of battery maker Contemporary Amperex Technology Co. (CATC) (CN:300750) dropped 2.8% on Friday. CATC is considered one of the world's leading EV battery makers, and its customers include Tesla (TSLA), whose shares were down about 2%.

Robin Zeng, chairman of CATC, told Bloomberg in March that the company was working on batteries that will charge faster for Tesla, as well as supplying machinery to the EV maker's Nevada factory.

If fresh tariffs become a reality, Chinese companies could start looking for loopholes or workarounds such as exporting to third-party countries not affected by tariffs, deVere Group's Green said. Those goods could then be sent to the U.S. and a fresh trade war could be the ultimate outcome.

Other analysts said Beijing is likely to respond to increased U.S. levies with its own new trade restrictions on American products.

Reports of fresh U.S. tariffs didn't dent the Hang Seng HK:HSI, however, which surged 2.3% after gaining 1.2% on Thursday.

Now read: Zeekr to go public, with China-based EV maker valued at more than $5 billion

-Barbara Kollmeyer -Victor Reklaitis

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05-11-24 0625ET

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