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Brian Rhoads

With US President Donald Trump levying extra 145 per cent tariffs on China this year, and Beijing responding nearly in kind, it would be easy to assume Chinese green technology companies would be facing a reckoning after losing the vital US export market.
After all, China is the world’s top producer of electric vehicles, photovoltaic cells for solar panels and lithium-ion batteries.
Indeed, China is the second-largest EV exporter after Germany, and the largest exporter of solar photovoltaic cells and lithium batteries in the world – all of which topped the list of complaints by the European Union and United States in recent years as evidence of the country’s manufacturing overcapacity and dumping.
Yet interestingly, Chinese EV and solar panel firms, and to a limited extent even the lithium battery makers, appear insulated from the fallout from the latest tariff war.
This is partly because they’ve been embroiled in a trade war with the United States for some time, and have already sought other markets to gird themselves for a lengthy conflict.
China ships few electric vehicles to the US. China customs data shows US exports made up less than 1 per cent of total EV exports in 2023, even before the Biden administration slapped 100 per cent tariffs on Chinese EVs in 2024.
Its carmakers found other markets – China passed Japan as the biggest auto exporter in 2023. The EU levied tariffs on its electric vehicles last year.
The same story can be told of Chinese makers of photovoltaic cells and solar panels. Their share of the US market was a tiny fraction of other countries, deterred by Biden-era tariffs that were doubled to 50 per cent in December.
Ironically, 80 per cent of US solar imports come from Southeast Asia, including Cambodia, Malaysia, Thailand and Vietnam. Some of those exports were from Chinese firms that had set up shop in Southeast Asia after the trade war from the first Trump administration.
The same Southeast Asian countries found themselves targets of Trump’s “reciprocal” tariffs ranging from 24 to 49 per cent this month, though he later announced a 90-day “pause” for trade negotiations after a global markets rout and a chorus of concern from US hi-tech, industry and banking leaders.
Yet solar imports from the four nations last year became subject to US Commerce Department anti-dumping rates of 21.3 per cent on Malaysia, to 77.85 per cent and 271.3 per cent on the remaining three. Profit margins on their exports to the US were already eroding.
China’s lithium-ion battery makers face the most exposure in a prolonged tariff war. But again, the Biden administration had already levied 25 per cent tariffs on lithium-ion EV batteries, while a 25 per cent levy on non-EV batteries is due to kick in next year.
The pain from the Trump tariffs is expected to bite the US consumer soon in the form of inflation, with some economists warning of a possible recession.
The United States imports nearly 70 per cent of its lithium batteries from China. And while the US is the world’s second-biggest exporter of lithium-ion batteries, its producers rely heavily on imports of rare earths and other components to build them. Its main supplier of those materials? China.
To be sure, the tariff war has no doubt triggered reviews of strategy, rejigs of supply chains, and searches for more diverse markets across China’s green energy industry.
But with their reliance on the US market already limited, China’s battle-worn EV makers and solar panel producers are better equipped to weather the coming storm of decoupling.
Lithium battery makers are in for choppy waters, but given US manufacturers may need help from Chinese imports to meaningfully ramp up production, perhaps operators in that sector will find themselves with an unlikely reprieve.
After the markets rout, Trump exempted smartphones, laptops and chipmaking equipment from so-called reciprocal tariffs to the relief of Apple and Dell, which rely heavily on manufacturing in China.
US consumers also face sharply higher automobile and auto parts prices from the trade tariffs. With the battery making up 30-40 per cent of the cost of a new electric vehicle, perhaps the US will blink again.


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Opinion

With their reliance on the US market already limited, these battle-worn companies are better equipped to weather the coming decoupling storm


With their reliance on the US market already limited, these battle-worn companies are better equipped to weather the coming decoupling storm.


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My Take

China’s green tech firms largely insulated from latest tariff war

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}With their reliance on the US market already limited, these battle-worn companies are better equipped to weather the coming decoupling storm

With their reliance on the US market already limited, these battle-worn companies are better equipped to weather the coming decoupling storm