China EV stocks sink on reports of US tariffs

Investing.com– Shares of major Chinese electric vehicle makers fell on Friday, after multiple reports said that the U.S. was preparing more tariffs against Chinese companies, specifically aimed at EVs and other key sectors.

Li Auto Inc (HK:) (NASDAQ:), NIO Inc (HK:) (NYSE:), BYD (HK:) and Geely Automobile (HK:) fell between 1% and 4% in Hong Kong trade, lagging a 1.5% jump in the index.

Xiaomi (OTC:) Corp (HK:), which recently entered the EV sector with its SU7 model, fell 0.9%, while battery making giant Contemporary Amperex Technology (SZ:) fell 2.2% as the reports said China’s battery industry will also be targeted. 

Reports from Bloomberg and Reuters said U.S. President Joe Biden could announce new tariffs on China as soon as next week, extending certain levies that were imposed by former President Donald Trump. 

But the new tariffs will be far more targeted than the Trump-era levies, and will focus on key strategic sectors such as EVs, batteries, and solar energy equipment. 

Any U.S. tariffs on Chinese EV makers are widely expected to quash their plans for international expansion. But fears of cheap Chinese EVs dominating U.S. and European markets have also been a point of concern for other major automakers.

Tariffs on China’s battery industry could also provide headwinds to U.S. EV makers, given their reliance on China for battery technology. CATL, for instance, has multiple partnerships with Tesla Inc (NASDAQ:) and Ford Motor Company (NYSE:) to supply battery technology for their vehicles.

Any more trade tariffs also threaten retaliatory measures from China, given that relations between the world’s two biggest economies are already frayed.

But the actual impact of tariffs on Chinese EV makers remains unclear, given that they still sell most of their cars in the domestic market. Chinese EV demand has remained a key bright spot in an otherwise weak global automobile market.