Trump's Tariffs on Chinese Electric Cars Seen Likely to Last

(Bloomberg) -- With China bent on dominating the future of electric vehicles, President Donald Trump is likely to erect trade barriers targeting that technology in the form of stiff new tariffs that will have staying power, according to a consultant on the country's auto market.

“I expect that President Trump will keep tariffs on electric cars as high as he possibly can,” Michael Dunne, chief executive officer of consultancy ZoZo Go, said Monday in a speech to the Automotive Press Association in Detroit. “He can see all this capacity gathering in China, and they're bound to want to export to the U.S., so ‘let's not make that easy.'”

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China's government is pouring $100 billion into becoming the global leader in electric vehicles, Dunne said. Last year, Chinese consumers purchased 1.2 million battery-powered autos, compared with about 350,000 in the U.S. Trump's tough tariff talk, which has unsettled the Chinese government as much as it has rattled markets, is aimed at protecting technological innovation in the U.S., Dunne said.

Trump “believes that by threatening tariffs, this really puts a scare into the Chinese, and it seems to have gotten their attention,” Dunne said. “The tariffs are almost a psychological tactic to undercut the confidence of the average Chinese businessman and consumer. But the real story remains technology. Tariffs are almost a decoy -- technology is what the trade negotiators are working on.”

On the back of China's booming electric-vehicle industry, global automakers have drawn up plans to step up EV production in the country, with a view of exporting those to other markets. BMW AG said last year it plans to sell its first all-electric sport utility vehicle, dubbed the iX3, around the world including in North America after production starts next year.

Local Chinese brands also have U.S. ambitions. Electric-car startup Byton plans to begin selling its $45,000 M-Byte sport utility vehicle in the U.S. in 2020, while the maker of the petite Pickman electric pickup truck is targeting to sell as many as 10,000 units in the country this year.

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For now, China's car exports have been modest. While more than 28 million autos are sold in China each year, the country only exported 1.2 million vehicles in 2018, including 147,000 new-energy vehicles, according to the China Passenger Car Association. Exports of new-energy vehicles to the U.S. were less than 10,000 units last year, according to an estimate by Cui Dongshu, secretary general of the car-industry body.

Trade tensions between the U.S. and China flared after Trump's surprise announcement over Twitter on May 5 that he planned to raise tariffs on $200 billion of Chinese goods to 25 percent from 10 percent because talks were moving too slowly. The president said he may also impose duties “shortly” on $325 billion of Chinese goods that aren't currently covered, a move that would hit virtually all imports from the Asian nation.

Trump's top trade negotiator said the U.S. plans to raise tariffs on Chinese goods on Friday, accusing Beijing of backpedaling on commitments it made during negotiations.

--With assistance from Tian Ying.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson, Ville Heiskanen

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