US Trade Representative Calls For Additional Steps To Counter China’s Efforts to Dominate The Electric Vehicle Supply Chain

In a January 4th letter to the House Select Committee on the Chinese Communist Party, Ambassador Katherine Thai of the United States Trade Representative (“USTR”) responded to the Committee’s concerns regarding the practices of the People’s Republic of China (“PRC”) in the electric vehicle (EV) sector.¹

The Letter stresses that the Office of the USTR shares many of the concerns expressed by the Committee. According to the Letter, the USTR is focused on addressing the threats posed to the EV sector by PRC practices and policies, “includ[ing] state-led industrial plans, use of massive subsidies and financial support, control of the raw materials necessary for the production of EV batteries, and other state-directed support that favor PRC-made EVs and disadvantage EVs made in the U.S. and elsewhere.”²

The Letter highlights several key steps taken by the Biden Administration to Counter the PRC’s “developed and implemented plan to target the EV sector for dominance through a wide and evolving range of non-market based policies and practices applied across the entire EV supply chain.”³ These steps include:

• The Inflation Reduction Act (“IRA”), which is a key tool used by the US to “increase critical investments necessary in clean energy technologies and to promote the domestic adoption of electric transport and EVs while also promoting supply chain diversification away from the PRC.”⁴
• The USTR’s four-year statutory review of tariff actions in the Section 301 investigation of China’s unfair policies and practices relating to technology transfers, intellectual policies, and innovations. This review will provide “an opportunity for USTR to make a full assessment of the Section 301 tariffs, and their effectiveness in changing China’s behavior and counteracting China’s unfair policies and practices” as well as provide the USTR with an opportunity to consider the effects of the tariffs on the US economy. The Letter notes that the USTR must also consider incentives created by the tariffs, such as their encouragement of Chinese firms to set up operations outside of China.⁵

The Letter states that, in addition to the IRA and Section 301 tariffs, the Administration must work with US companies and unions “to identify and deploy additional responses” to help counter the PRC’s “state-directed industrial targeting” of the EV Sector.⁶ The Letter also emphasizes the Administration’s efforts to work with international allies and partners to develop more resilient supply chains.⁷

The rise of China’s EV sector, making the country the world’s largest auto exporter in 2023, and the related overcapacity issue are catching worldwide attention. The specific measures the United States would take to address the issue remain to be seen, but Ambassador Thai’s letter demonstrates that the EV sector and its supply chain are viewed by the United States as strategically important where “diversification away from the PRC” needs to be addressed with concrete measures. This is also an area where the United States is likely to find common ground with its allies. Thus, interested parties should closely monitor relevant developments.

¹ https://subscriber.politicopro.com/f/?id=0000018d-1903-dc2e-a3ad-79c31af10004 [hereinafter the Letter].

² Id.

³ Id.

⁴ Id.

⁵ Id.

⁶ Id.

⁷ Id.

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