China is the world leader in EV production and innovation.  Chinese EVs are now better and cheaper than their Western counterparts.  Biden’s intention is to stave off Chinese competition while stimulating domestic EV supply.  But China’s EV imports are only 2% of the US market.  And all the goods that these new tariffs were slapped on constitute only about 7% of US-China trade.  What this shows is that, even the US government recognizes that the US still relies heavily on Chinese goods imports and cannot cut them all dead.

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To avoid the impact of previous US measures, Chinese firms have been rerouting their supply chains through third countries with pre-existing Free Trade Agreements with the US—Morocco, Mexico and Korea chief among them. This has enabled ‘backdoor’ access to the American market. Over 80% of solar cells imported into the US now come via Vietnam, Malaysia, Thailand and Cambodia.

The US is now trying to break this back-door move.  In its “Foreign Entity of Concern” ruling, US automakers won’t be able to receive government tax credits if any company in their battery supply chain has 25% or more of its equity, voting rights or board seats owned by a Chinese government-linked.