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President Biden Could Impose Tariffs on Chinese EVs
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President Biden Could Impose Tariffs on Chinese EVs

Story Highlights

According to a Bloomberg report, President Biden could impose tariffs on Chinese EVs, batteries and other strategic sectors.

Chinese EV majors, including Li Auto (NASDAQ:LI), NIO (NYSE:NIO) and XPeng (NYSE:XPEV), trended lower in pre-market trading on Friday following a Bloomberg report that President Biden’s administration could impose tariffs on Chinese EVs, among other strategic sectors.

It is expected that these tariffs could be imposed next week. The decision by the Biden administration follows a review of the Section 301 tariffs first put in place by former President Trump in 2018. Section 301 of the Trade Act of 1974 authorizes the President to impose tariffs or retaliate against any unfair policy or act by a foreign government.

The new tariffs will likely target batteries and solar cells, in addition to EVs, while current levies will mostly remain in place. However, these tariffs are unlikely to have a significant impact on Chinese EV manufacturers, who have avoided the U.S. market due to tariffs. On the other hand, Chinese solar companies largely export their products to the U.S. from third-world countries to avoid any restrictions.

Trade War Between the U.S. and China Intensifies

The geopolitical trade war between the U.S. and China is intensifying. Recently, chip majors like Intel (NASDAQ:INTC) and Qualcomm (NASDAQ:QCOM) had their chip export licenses to a customer in China, reportedly Huawei, revoked by the U.S.

If Biden imposes tariffs on Chinese EVs, it would be one of the largest actions by the U.S. administration regarding economic competition with China. This move follows Biden’s recent push to increase tariffs on Chinese steel and aluminum and the launch of a new investigation into China’s shipbuilding sector.

Last month, Biden commented that the U.S. is challenging China’s “unfair economic practices and industrial overcapacity,” emphasizing a desire for fair competition over conflict.

What Companies Are in MCHI?

Some of the top 10 holdings for the iShares MSCI China ETF (NASDAQ:MCHI) include Alibaba (NYSE:BABA) and PDD (NASDAQ:PDD). Analysts remain cautiously optimistic about MCHI, with a Moderate Buy consensus rating based on 132 Buys, 517 Holds, and eight Sells. Year-to-date, MCHI has increased by more than 8%, and the average MCHI price target of $52.64 implies an upside potential of 17.3% from current levels.

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