China Tariffs: Tesla and Ford Most Impacted in the Short-Term

Earlier this week, the Biden administration said it plans to increase tariffs on electric vehicles (EVs) and related components sourced from China.

While the proposed measures are broader than initial reports indicated, analysts at Wolfe Research see the short-term impact on U.S.-based manufacturers and suppliers as limited.

Analysts emphasized that the new proposed tariffs are not final and still have to go through a public comment and review process, which is expected to take several months.

A key highlight of the proposed measures is a significant increase in tariffs on Chinese-made EVs, which will rise from 25% to 100% in 2024. This does not include the global tariff rate of 2.5%, so the new tariff rate will be 102.5%.

The electric vehicle battery tariff will increase from 7.5% to 25% in 2024, and the same tax rate will be applied to energy storage batteries from 2026.

Additionally, tariffs on natural graphite will increase from 0% to 25% by 2026, impacting the cost of U.S. batteries by approximately $50-$60.

However, synthetic graphite, which accounts for 70% of global battery usage, is not included in the tariff list.

Tariffs on certain critical minerals are expected to rise from 0% to 25% in 2024, but details are not yet available.

“Among the major OEMs, Tesla (NASDAQ:) and Ford (NYSE:) appear to be most affected in the near term,” said analysts at Wolfe Research.

“Ford recently converted the standard range version of the Mach-E to LFP cells (supplied by CATL in China). Meanwhile, TSLA is also using CATL for Standard-Range Model 3,” he added.

Rivian (NASDAQ:), on the other hand, sources its cells and battery components primarily from Korea and North America, while GM manufactures all of its cells in the U.S. and sources key materials outside of China, putting it in a good position to reduce the impact of tariffs .