U.S. to hike tariffs on Chinese EVs and steel, benefiting Korea

Industry

Published: 14 May. 2024, 19:23 Updated: 15 May. 2024, 15:03

U.S. to hike tariffs on Chinese EVs and steel, benefiting Korea

President Joe Biden delivers remarks on the Chips and Science Act at the Milton J. Rubenstein Museum on April 25 in Syracuse, New York. [AFP/YONHAP]

The Biden administration's announcement of a massive tariff hike on $18 billion of clean-energy products from China has opened the door to a boost in exports for Korean car, steel and chip manufacturers.

The package, announced on Tuesday, includes an increase of as much as fourfold for tariffs on Chinese EVs, solar, steel and aluminum products seen as strategic to the U.S. economy, a sweeping restructuring of former President Donald Trump’s trademark tariffs ahead of the presidential election set for November.

The new tariff on EVs will quadruple from the existing 25 percent to 100 percent, according to the White House, as part of efforts to "protect American manufacturers from China’s unfair trade practices."

"China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy, and health care — creating unacceptable risks to America’s supply chains and economic security," the White House said.

Stricter tariffs on Chinese EVs will benefit Korea with an expansion of exports, a U.S. government trade agency estimated.

If other major countries including Europe and Korea raise tariffs on Chinese EVs and hybrid cars by 20 percent, the country's exports will plunge by around 60 percent, according to a recent report by the United States International Trade Commission.

The block on China will in turn help boost Korea's EV exports by 10 percent, the largest increase after the United States with a 13.6 percent jump in outbound shipments. Exports from the European Union will likely increase by 7.8 percent and from Japan, by 4.6 percent, the report said.

The combined share of Hyundai Motor and Kia in the U.S. EV market reached 8 percent as of last year, No. 2 right after Tesla.

Tesla CEO Elon Musk also said Chinese car companies are the "most competitive car companies in the world," adding that "if there are no trade barriers established, they will pretty much demolish most other car companies in the world."

Biden's new tariff package will also hit the battery sector, with the tax set to increase to 25 percent from the existing 7.5 percent, targeting the two biggest Chinese players, CATL and BYD. Of the world's 10 biggest battery makers, six are Chinese, while three are Korean.

Biden is also tripling import fees on Chinese steel and aluminum from the current 7.5 percent to 25 percent in a bid to establish "fair competition with China."

Shares of Korean steelmaking companies closed bullish on Tuesday ahead of the U.S. government's announcement, with the Korea Exchange's steel index comprising 20 local steel industry stocks rising 1 percent compared to the Kospi, which only inched up 0.12 percent.

Shares of steelmaker Dongkuk CM surged 12.2 percent to close at 7,610 won ($5.56) on Tuesday, while SeAH Besteel closed up 8.2 percent at 23,850 won.

Hyundai Steel rose 1.6 percent to 32,050 won while Histeel, a steel pipe manufacturer, closed at 4,105 won, up 4.7 percent from the previous trading session.

The tariff on solar cells and modules from China will double to 50 percent from the current 25 percent in 2024, while that of semiconductors will increase by the same amount by 2025.

Medical needles and syringes from China will also be subject to a tariff for the first time, with a 50 percent rate applied within the year.

BY SARAH CHEA [chea.sarah@joongang.co.kr]