Media: Trump's tariffs on auto imports could hand China dominance in EV market

In a stark warning to those who hoped for a future where the global car industry wasn't dominated by China, former President Donald Trump's recent announcement of a 25% tariff on auto imports throws a wrench into the works of an emerging electric vehicle (EV) supply chain that wasn't yet fully under Beijing's control.

Set to take effect next week, this new trade measure threatens to cripple the competitors who had a fighting chance—South Korea and Japan—by targeting their presence in the U.S. market, according to Bloomberg.

The crux of the issue is that South Korea and Japan aren't just major players in traditional vehicle imports but also in the EV sector, particularly in the production of batteries, which are critical to the future of electric cars. Together, these two countries accounted for over 25% of all EV batteries produced last year. With U.S. and European manufacturers lagging, South Korean companies such as LG Energy Solution, Samsung SDI, and SK On have filled a vital gap in the U.S. market, attracting billions in investments and helping create tens of thousands of jobs in the U.S.

However, this tariff could lead to disastrous consequences. Not only do these companies provide the vital battery technology for American car manufacturers like General Motors, Ford, and Tesla, but they also support domestic car manufacturers in South Korea and Japan, whose businesses rely heavily on exports to the U.S. As their profits take a hit, battery makers, already dealing with razor-thin profit margins, will struggle to survive.

This trade war—against countries that are some of the biggest foreign investors in the U.S.—also undermines the effort to build a non-China-dependent clean energy supply chain. South Korean firms alone poured over $54 billion into U.S. battery factories in 2023. By raising tariffs, Trump risks destroying the fragile non-China supply chain, ultimately pushing the U.S. closer to China's overwhelming dominance in the EV market.

Critics argue that such tariffs, similar to those imposed on steel and aluminum in 2018, could backfire. Trump's tariffs on steel cost the U.S. billions in higher prices and tax losses, and the Obama-era tariffs on Chinese solar panels killed domestic solar production. If this tariff strategy goes unchecked, the U.S. might see a repeat of that scenario, where the long-term gains for domestic industries are wiped out by retaliatory actions or disrupted supply chains.

While the short-term effects might boost the profits of certain American businesses, this protectionist approach does little to promote long-term success for the U.S. auto industry. The reality is that to build an electric future, the U.S. needs to work with its allies, not against them. If Trump’s tariffs remain in place, they will likely cement China’s role as the uncontested leader of the global electric vehicle revolution, leaving the U.S. far behind in a race it once had the potential to win.

By Vugar Khalilov