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The US government is increasing its scrutiny over imports of Chinese-made motor vehicles, especially electric variants, joining Europe in jousting with China over suspected breaches of labour laws – all while working overtime to protect domestic industries, analysts said.

Washington’s concern became evident on Wednesday when, according to the Financial Times, US customs offices impounded thousands of European cars because of the inclusion of a Chinese subcomponent, which authorities said was a violation of its laws against forced labour.

The action by US customs complements federal and state subsidies for electric vehicles (EVs) made in North America and probably foreshadows further measures in this vein, said Yan Liang, chair of economics at Willamette University in the United States.

US tariffs on automotive imports from China remain “high”, she added, with EVs levied at 25 per cent.

This is only going to increase, both in Europe and the US … this is just the beginning

Alicia Garcia-Herrero, Natixis

Washington and Beijing have sparred over trade and technology for the past six years, raising tariffs on a wide range of goods.

US Commerce Secretary Gina Raimondo said last month that China’s EVs could create risks because they collect information about the drivers.

The US measures create “a way to favour domestically produced EVs [and] make it harder for US companies to source parts in China or use Chinese imported components,” Liang said.

The European Union, China’s largest export market for EVs, announced last year that it would carry out an anti-subsidy investigation.


China’s BYD overtakes Tesla as world’s largest EV maker

China’s BYD overtakes Tesla as world’s largest EV maker

“This is only going to increase, both in Europe and the US,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at French investment bank Natixis.

“This is just the beginning, and it will affect Chinese autos and other green tech industries.”

American and European officials are probably coordinating their resistance to Chinese automotive imports, said Chen Zhiwu, chair professor of finance at the University of Hong Kong.

“It [cannot] be a random accident when both the EU and US now pay a lot of attention to cars coming out of China,” he said.

It is unclear, however, how heavily “forced labour” weighed on the actions by US customs reported by the Financial Times, Liang added.

She said claims of forced labour usually apply to less value-added goods, such as clothing, which go through fewer steps in the transformation from raw material to finished product.

US government references to “forced labour” often concern the Xinjiang Uygur autonomous region. Beijing has repeatedly denied the allegations.

The 2021 Uygur Forced Labour Prevention Act effectively blocks American imports of all goods wholly or partially sourced from Xinjiang due to the law’s establishment of a “rebuttable presumption” which presumes forced labour was used in their production.

EU climate demands set to erode Chinese EV makers’ export edge: expert

Volkswagen has operated a factory in the regional capital of Urumqi since 2013. Its chief executive announced last year the company would pursue an “independent audit” of the plant, the US-based advocacy group Human Rights Watch said.

The German carmaker said in statement emailed to the Post on Thursday it was “working to rectify” a US customs issue, which it described as a “delay”.

“This relates to a small electronic component – part of a larger control unit – which is in the process of being replaced as parts arrive,” the statement said, adding Volkswagen is taking “very seriously” allegations of forced labour violations in-house and in the supply chain.

Volkswagen has been “investigating” a sub-supplier and eyeing the “termination of a supplier relationship if our investigations confirm serious violations”.

The whole rationale … is as political as it can be

Zha Daojiong, Peking University

Forced labour may have been used to build a test track in 2019, Agence France-Presse reported, citing a German business newspaper.

American and European officials may be targeting China to protect automotive sectors at home, analysts said. The top Chinese official for European affairs had previously called the European Union’s move to investigate EV subsidies “sheer protectionism”.

“The whole rationale behind US ‘forced labour’ legislation is as political as it can be,” said Zha Daojiong, a Peking University international studies professor.

“Instead of doing anything to positively contribute to improvement in [global] labour conditions, it forces all businesses on a supply chain to respond to an accusation that has little if anything to do with the specific product being traded.”

China’s EV exports made up 35 per cent of the world total in 2022, according to the Harvard Business Review.

Production of new energy vehicles in China increased by 7.5 million units to 8.3 million from 2017 to 2023, while exports expanded by 3.8 million units to 4.9 million, Bill Russo, CEO of the Shanghai-based consultancy Automobility, said in a state of industry review for last month.

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