How will US tariff hike affect China's clean energy industry?

Peng Chen, DIGITIMES Asia, Taipei 0

China exports many lithium-ion batteries to the US annually. Credit: AFP

US President Joe Biden announced sweeping tariffs on multiple Chinese goods on May 14. Industry experts said China's lithium-ion battery exports will likely take a significant hit while the solar sector is less unlikely to be disrupted.

Biden said on Tuesday that the US will quadruple tariffs to 100% on China-made EVs and raise levies on EV batteries from a single-digit rate to 25%. Solar cells, whether or not assembled into modules, will see their tariffs increase to 50%.

The measures will likely impact China's lithium-ion battery exports, experts said. According to China's customs data, the US has become the largest destination for China's battery exports since 2020.

In 2023, China exported almost US$13.55 billion of lithium-ion batteries to the US, accounting for 20.8% of China's total exports. In the first quarter of 2024, China exported over US$2.9 billion of batteries to America.

Liu Yanlong, former secretary-general of the China Chemical and Physical Power Industry Association, told China-based Jiemian that the additional tariffs are expected to affect China's battery exports.

Under the US Inflation Reduction Act (IRA), an EV will not be eligible for tax credits if it uses Chinese batteries or materials. Liu said the restriction has driven down China's battery export value to the US by 11.2% year-on-year. Falling material prices were another factor. The export volume also decreased by 55.6%.

According to the US International Trade Commission (USITC), the US imported more than US$12 million of solar cells, modules, and panels from China in 2023. The value was about US$34.8 million in 2022.

China-based Yicai reported that leading Chinese solar manufacturers, including Longi and JA Solar, said the new US tariff will not impact their business. Many of these companies export their products to the US from production facilities in Southeast Asia.

One of the manufacturers told Yicai that the US clearly understands that its solar production lags and will always lag far behind the needs.

Biden said the Chinese government has poured state money into several industries for years. At a press conference at the White House on Tuesday, US Trade Representative Katherine Tai said the difference between the Chinese and US governments subsidizing industries is that the former is "a system of state support built to dominate and take over entire industries."

She said China takes up 55% of the world's steel capacity, 60% of EVs, and 80% of solar products. In contrast, the US supports its industries to create space for them to compete and thrive, she added.

The US aims to increase tariffs on Chinese steel and aluminum products to 25%. Chinese analysts told Yicai that China's steel exports to the US have been falling in recent years due to some restrictions and anti-dumping duties.

Analysts said the tariff raise will likely affect China's indirect steel exports more than direct exports because EVs and ship-to-shore cranes, which are also targeted, require a tremendous amount of steel.

Jingyue Hsiao contributed to this story.