The United States announced stiff hikes in tariffs on solar cells, electric vehicles, batteries, and critical minerals originating from China.

This decision follows a review of the findings of a Section 301 investigation, which examined China’s unfair trade practices, including technology transfer, intellectual property violations, and innovation infringements.

Next week, the Office of the U.S. Trade Representative (USTR) will release a Federal Register notice detailing procedures for interested parties to provide feedback on the proposed modifications and information about the exclusion process for machinery used in domestic manufacturing.

Solar Cells

The tariff rate on solar cells (whether assembled into modules or not) will be subject to a tariff hike from 25% to 50% in 2024.

This tariff increase aims to counter China’s policy-driven overcapacity, which depresses prices and impedes solar capacity development outside China.

A White House statement said American workers and businesses can outcompete anyone with fair competition. But for too long, China’s government has used unfair, non-market practices. China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90% of global production for the critical inputs necessary for the US’ technologies, infrastructure, energy, and health care—creating unacceptable risks to America’s supply chains and economic security.

These same non-market policies and practices contribute to China’s growing overcapacity and export surges that significantly threaten American workers, businesses, and communities.

In August 2023, a U.S. Department of Commerce investigation found that some solar cells and modules exported from Cambodia, Thailand, Malaysia, and Vietnam incorporated wafers that originated in China, enabling Chinese solar manufacturers to evade antidumping duty and countervailing duty regulations.

Electric Vehicles

The tariff rate on electric vehicles under Section 301 is set to rise from 25% to 100% in 2024. With substantial subsidies and non-market interventions exacerbating the risk of oversupply, China witnessed a 70% surge in its exports of electric vehicles from 2022 to 2023, posing a significant threat to productive investments in other regions.

Batteries and Critical Minerals

In 2024, the tariff rate on lithium-ion EV batteries will escalate from 7.5% to 25%, while lithium-ion non-EV batteries will increase from 7.5% to 25% by 2026. Simultaneously, the tariff rate on battery parts will transition from 7.5% to 25% in 2024.

Moreover, the tariff rate on natural graphite and permanent magnets will shift from zero to 25% in 2026. Similarly, the tariff rate for specific other critical minerals will move from zero to 25% in 2024.

The White House statement said that despite recent strides in U.S. onshoring efforts, China dominates over 80% of particular EV battery supply chain segments, notably upstream nodes like critical minerals mining, processing, and refining. “This concentration of critical minerals mining and refining capacity in China renders U.S. supply chains vulnerable and jeopardizes national security and clean energy objectives.”

The U.S. has infused over $860 billion in business investments focused on industries critical for the future, such as EVs, clean energy, and semiconductors. However, the investigation found that China’s persistent engagement in unfair, non-market practices, including forced technology transfers and intellectual property theft, has allowed it to dominate global production in critical sectors.

U.S. Trade Representative Katherine Tai stated that President Biden had directed her to take further action to encourage the elimination of China’s technology transfer-related policies and practices.

Biden has instructed the USTR to establish an exclusion process for domestic manufacturing machinery, prioritizing specific solar manufacturing equipment.

In November, the U.S. Federal Circuit overturned a Court of International Trade decision to allow the White House to expand safeguard tariffs on solar equipment. The decision by a three-judge panel directed the CIT to affirm the President’s authority under the Trade Act of 1974 to increase safeguard duties.