• The 100% tariff on Chinese EVs, up from a current import tax of about 25%, could still leave room for the often-cheaper Chinese models, like the Seagull from BYD, to undercut domestic prices.
• It also leaves loopholes for imports made by Chinese automakers in other countries, like neighboring Mexico.
• Automotive and trade experts say the increased tariffs are a near-term protectionism act that may delay but won't stop Chinese automakers' EVs from coming to the U.S.

DETROIT — President Joe Biden's plan to quadruple tariffs on China-made electric vehicles is unlikely to stave off the threat of more Chinese cars on the auto sales market in the U.S.

The 100% tariff announced Tuesday, up from a current import tax of about 25%, covers EVs imported from China but could still leave room for the often-cheap Chinese models to undercut domestic prices and leaves loopholes for imports made by Chinese automakers in other countries, like neighboring Mexico. It also does nothing to address current or future gas-powered vehicles imported from the Communist country to the U.S.

Automotive and trade experts say the increased tariffs are a near-term protectionism act that may delay but won't stop Chinese automakers from coming to the U.S. with EVs.

"They're going to be here. It's inevitable. It's just a matter of time," said Dan Hearsch, Americas co-leader of automotive and industrial practice at consulting firm AlixPartners. "Western automakers, Western suppliers really ought to be upping their game and preparing to take this on or play with them. It's one or the other."

The EV tariffs, including other increases regarding battery materials, were among new tariff rates on $18 billion worth of Chinese imports.

Chinese competition

For decades, Chinese auto companies have said they will begin selling vehicles in the U.S. under their own brands, but none have succeeded.

The quality of Chinese automakers' vehicles has gotten significantly better in recent years, as Beijing has helped by subsidizing their operations to grow domestic production. The increase in domestic automakers has led to a rapid deterioration of market share in the country for global automakers such as General Motors.

Global players have made more inroads in the U.S. market in recent years. The so-called Big Three U.S. automakers — GM, Ford Motor and Chrysler, now owned by Stellantis — have watched their market share in the country deteriorate from 75% in 1984 to about 40% in 2023, according to industry data.

GM and others have found it hard to compete against budget and mainstream Chinese vehicles, including EVs. For example, a small EV from Warren Buffett-backed BYD called the Seagull starts at around $10,000 and reportedly banks a profit for the increasingly influential Chinese automaker.

Though the Seagull isn't yet sold on U.S. soil, BYD is expanding its vehicles globally, and some believe it's only a matter of time before more China-made vehicles arrive in the U.S.

Even with the new 100% tariff, its pricing would likely be in line with or better than many EVs currently on sale in the U.S.

"Ultimately, we think protectionism from the West could remain a near-term overhang for Chinese EV/parts makers aiming for rapid global expansion, but we think it is unlikely to halt China's EV push in the long run," Morgan Stanley analyst Tim Hsiao said in an investor note this week.

Though some automakers currently import gas-powered vehicles from China into the U.S., the numbers are small. Wall Street analysts, citing the China Association of Automobile Manufacturers, report fewer than 75,000 vehicles were imported into the U.S. last year.

Vehicles made in China and currently sold in the U.S. include GM's gas-powered Buick Envision, Ford's Lincoln Nautilus and two all-electric vehicles from Geely-owned Volvo and its spinoff EV startup Polestar.

Polestar, with a small lineup of vehicles, is notably reliant on its Chinese imports. The company, in a statement, said it is "currently evaluating the announcement of tariff increases from the Biden Administration," saying it believes "free trade is essential to speed up the transition to more sustainable mobility through increased EV adoption."

Green goals

Biden's focus on China-made EVs — and the exclusion of gas-powered vehicles in the higher levies — fits with the White House's clean energy agenda, which has emphasized electric vehicle production and adoption as well as enhanced U.S. charging infrastructure.

"EVs are where we're focused in terms of placing tariffs, because that's where we've made hundreds of billions of dollars of public investments. We've made those investments to build resilience in our clean technology supply chains. And so that's our focus here," a senior administration official told reporters this week.

It's possible U.S. officials are taking a warning sign from Europe, where Chinese automakers have quickly flooded markets with gas-saving EVs and undercut domestic automakers.

Chinese companies accounted for 8% of Europe's all-electric vehicle sales as of September and could increase their share to 15% by 2025, the European Union said in October 2023. The EU believes Chinese EVs are undercutting the prices of local models by about 20%.

The Biden administration's new EV tariffs could have a ripple effect on other countries, including in Europe, if they're successful in stemming Chinese exports, according to Coco Zhang, vice president of ESG research at ING Group.

She said similar tariffs elsewhere could force Chinese companies to move more quickly to establish local production operations or joint ventures with other companies in an attempt to lower export costs.

"From China's perspective, if there can be supply or other sorts of partnerships, they can still find their way going into the U.S. market," Zhang said.

Such moves would be reminiscent of how Japanese automakers such as Toyota Motor and Nissan Motor as well as South Korea's Hyundai Motor, including Kia Motors, entered the U.S. market in recent decades.

– CNBC's Rebecca Picciotto and Michael Bloom contributed to this report.