An article at The Center Square goes into more detail on Rubio’s proposal.
For some background, we need to consider that there are already tariffs on EVs made in China and they’re also not eligible for consumer tax credits, putting them at a double disadvantage. But, BYD is considering opening a factory in Mexico, which would put them into the jurisdiction of the USMCA, the agreement that replaced NAFTA. This means tariffs go from 27.5% down to only 2.5%. When we consider that BYD is offering EVs at prices that would seriously undercut expensive U.S.-made EVs, even after tax credits, this presents a serious problem.
To combat this, Rubio wants to both subject existing tariffs on all Chinese companies, regardless of whether they build the vehicles elsewhere (the Closing Auto Tariffs Loopholes Act) and add a new flat $20,000 tariff on all Chinese vehicles (Strengthening Tariffs on Chinese Autos Act). Finally, the American Subsidies for American Autos Act would require compliance with USMCA for any Mexican-made vehicle to be eligible for tax credits.
I agree with Rubio that these tariffs are necessary, or at least some of them. United States automakers are simply not delivering EVs cheap enough to compete, and geopolitical realities dictate that we don’t let the United States become dependent on China for EVs. It’s also true that without more export markets for their cars, Chinese industry is in trouble, and we’d be better off to let them experience trouble right now, because sending even more U.S. money to China while its government spends money preparing to go to war with us is suicidal.
So, it’s not an exaggeration to say that the future of the free world is at stake here.
Tariffs Aren’t Enough, Though
But, doing tariffs alone would be bad for automakers. Giving them some breathing room while most of them do the wrong thing means we can expect them to double down on bad behavior. The fact is that they’ve spent decades getting to this point, and we simply don’t have decades for them to turn around.
The biggest problem is that almost nobody is offering affordable EVs right now. Nissan has the very-substandard LEAF, and that’s going to be discontinued soon. GM had the Bolt and Bolt EUV, but those went out of production a few months ago. Basically everything else is priced at around $50,000 and up.
In theory, the idea of starting a new technology at the top of the market works. Automakers did this for decades with everything from power windows to dual overhead cams. A new, expensive technology goes to Lincoln and Cadillac first, gets paid for, and then trickles down to Ford and Chevy later as the price drops and mass production becomes possible. So, this strategy of starting out with $100,000 pickup trucks (Silverado EV) and $60,000 luxury EVs does make sense.
In practice, though, automakers missed the boat on that strategy. The right time to be offering expensive EVs with a plan to trickle the technology down into lower markets was a decade ago, when Tesla was doing that. Now, expensive EVs have to compete with the $39,000 Model 3, and that’s before the point-of-sale tax credit that works like a discount now, so the actual price a buyer pays is around $31,500, and it’s cheaper in states with their own state-level rebates.