US Seeks To Deter Use of Chinese EV Batteries

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Beijing has criticized as “protectionist” the December 2023 US decision to deny tax credits to electric vehicles equipped with battery minerals or components originating from “Foreign Entities of Concern”; designated countries are China, Russia, Iran, and North Korea. Effective 1 January, the US government dropped the number of EV models eligible for tax credits from 35 to 14. Beijing called the move “harmful to global efforts to deal with climate change.”  

• The US currently is the largest export market for Chinese EV batteries. Chinese industry experts noted that from January to October 2023, EV sales in the United States jumped 54% and accounted for 11.1% of global EV sales.

Some Chinese experts believe the restrictions will not greatly affect China’s dominance in global EV battery production. Citing data from Visual Capitalist, they point out that in 2022 China commanded 77% of global lithium-ion battery production capacity, followed by Poland (6%) and the US (6%). By 2027, the US share of global battery production capacity is expected to increase to 10%, while China is likely to still control 69%. In addition to the battery itself, most battery components also are made in China.

On 5 January the Biden administration is considering the continuation of nearly all Trump-era tariffs on China. The Biden administration may also impose additional tariffs on the imports of Chinese EVs and key minerals used in batteries like lithium and cobalt. A decision is expected in the next few weeks.

Tariffs on Non-EV Products. On 26 December the Office of the US Trade Representative (USTR) announced extension until 31 May of “Section 301” tariff exclusions for 352 Chinese products and other China-made Covid-19-related medical products. These products constitute a small segment of the $300 billion in US imports from China.

• USTR said, “The extension will enable the orderly sunsetting of the exclusions [and] enable shifts in sourcing to the US or third countries.”

The Chinese government also announced in December of last year an extension on tariff exclusions for 95 categories of US imports that include mechanical, medical, chemical, and timber products.