MW China EV makers under pressure after reports Biden aiming tariffs at the sector
By Barbara Kollmeyer
Knock-on effects for the global supply chain and companies could be seen, say some
Shares of NIO and Li Auto were falling in premarket trading on Friday, following a report that the U.S. administration plans to roll out fresh tariffs on several Chinese sectors, including electric vehicle makers.
The tariff updates appear to stem from an evaluation of Section 301 tariffs imposed in 2018 under former President Donald Trump, Bloomberg reported Friday, citing sources who said an announcement could come by Tuesday.
The Biden administration is expected to maintain existing levels on tariffs, but semiconductors, batteries, solar and EVs sectors in China could all be swept up, both Bloomberg and Reuters reported. The development comes after President Joe Biden last month pushed for higher Chinese steel and aluminum tariffs.
While China EV makers, such as $(LI)$ (HK:2015), BYD (CN:002594) (HK:1211) and Nio $(NIO)$ don't sell autos in the U.S., their New York-listed shares came under pressure on Friday, with NIO down 1.6% and Li Auto off 1.5%.
Those Chinese companies are part of the global supply automotive supply chain even if they don't have U.S. market share, Nigel Green, CEO of financial consulting firm deVere Group, said in emailed comments.
"Many of them rely on imported components, including batteries and semiconductors, which could be subject to tariffs if they are sourced from China or if they are affected by broader trade tensions between the U.S. and China," he said. "Any increase in production costs due to tariffs on these components could impact the profitability of Chinese EV makers and potentially weigh on their stock prices."
Any company that relies heavily on China imports for batteries and solar cells could see increased costs, hitting profit margins, Green said. "This uncertainty can be expected to lead to a knee-jerk selloff in stocks of companies directly involved in these industries, such as green-tech, as investors seek to mitigate risk."
In Shenzhen, shares of battery maker Contemporary Amperex Technology Co. $(CATC)$ (CN:300750) dropped 2.8% on Friday. CATC is considered one of the world's leading EV battery makers, whose customers include Tesla $(TSLA)$, whose shares rose 1.2% in premarket trading.
Robin Zeng, chairman of CATC, told Bloomberg in March that the company was working on batteries that will charge faster for Tesla, as well as supplying machinery to the EV maker's Nevada factory.
If fresh tariffs become reality, Green said Chinese companies could start looking for loopholes or workarounds such as exporting to third-party countries not affected by tariffs, then sending those goods onto the U.S. and a fresh trade war could be the ultimate outcome, he added.
Reports of fresh U.S. tariffs didn't dent the Hang Seng HK:HSI, however, which surged 2.3% after gaining 1.2% on Thursday.
-Barbara Kollmeyer
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 10, 2024 05:24 ET (09:24 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
