Op-Ed: Biden’s 100% tariffs: Unfair or just balancing the scales?

The views expressed in this article are solely those of the independent contributor and do not reflect the opinions of Car Dealership Guy, CDG Media, its partners, or affiliates.

By David Reunert, Western Region Manager for Putnam Leasing Co. and automotive FinTech entrepreneur

Top line: Recently, news broke of the Biden administration raising import tariffs from 25% to 100% for Chinese-manufactured EVs.

The supposed goal: Once the competition is eliminated (and some form of a monopoly is secured), introduce a new pricing strategy without subsidies. 

Is that overly assumptive? I don’t think so.

Key background: A few decades ago, the Chinese government invited automakers from around the world to set up joint ventures in China to develop and manufacture cars for distribution and sale around the surrounding region. 

• Today, regulations have changed, and many of these joint ventures that were set up are either teetering on the brink of collapse or have already announced their closure.

• China invited these joint ventures so that its government-backed car makers could access the knowledge and trade secrets of the world’s most dominant car companies—who were all hungry for a piece of the new burgeoning marketplace: Asia Pacific. 

POV: Having run an automotive distributorship in Southeast Asia and witnessed firsthand the dramatic tariffs in the region (on cars imported from Western OEMs). I see these newly announced import duties not as unfair or retaliatory but rather as a balancing of the scales. 

Big picture: Countries in the region, such as China, Taiwan, Vietnam, Cambodia, Malaysia, Thailand, and Singapore, have relied on tariffs that range from 100-150% for years to generate additional tax revenue for their respective countries.

The one universal truth: As middle and upper-income classes develop, they’ll likely spend discretionary income on cars. In some of these countries, the gray market or parallel import of cars from both Europe and the United States has created immense wealth and businesses on a tremendous scale. 

• But the OEMs dislike gray market or parallel importers with a passion, so their attention has turned to keeping hold and growing their market share through authorized importers, distributors and dealers in the region. But it is easier said than done. 

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 64,000 others now, it's free:

Zoom in: Western carmakers have already become incredibly competitive with their cost strategy in China. 

• Look at Tesla, and the price cutting that has taken place at Chevrolet and Ford. 

• Keep in mind that China’s import tariffs on imported cars can be up to 47% of the vehicle value plus a 17% value-added tax (VAT). 

• In 2018 and 2019 (preparing for market entry to the United States), Guangzhou Automobile Group Co., Ltd. (GAC) was accepting dealer applications for new franchise appointments in the lower 48 states. 

I know because I completed one. 

But why? We know that opening a dealership for a new brand in a new market is a huge risk. You’ll spend millions on facility investment for the dealership itself. Then, there is staffing, advertising, and community development – on top of trying to gain market acceptance for a Chinese-made car.

• GAC has joint ventures in China with Toyota, Honda, and Mitsubishi. 

• They had a very compelling model line-up with segment-leading pricing. 

• The thinking at the time was that if there was a Chinese OEM that you’d be willing to take such a big chance on, this might be the way to go. 

After not hearing much for a few weeks and seeing the news on the Trump administration’s moves towards Chinese-built cars, I sent a follow-up note to the GAC Market Representation team. 

Their reply? Due to the changing trade environment between the USA and China, GAC suspended plans to bring its cars to the country.

• We would have captured some market share, but no — at least not in the foreseeable future. 

• It is worth noting that we already have an APAC OEM importing and delivering their cars here in America: VinFast. 

• Vietnam’s flag-carrying EV OEM is retailing cars now in the United States.

• In November 2023, they announced they are looking to add 125 locations nationwide through a franchised dealer network—a substantial change from the direct-to-consumer model they’d aimed for upon their arrival. 

What about Europe? They don’t just have VinFast, but they already have Geely-backed ZEEKR selling cars in the EU. 

• Remember, Geely is also the parent company of Volvo, and its EV sub-brand is Polestar. 

• The first ZEEKRs sold in Europe were delivered through the Polestar retailers. 

• However, in March 2024, Alessandro Massimino, ZEEKR Europe’s head of product and connectivity, reaffirmed, “There will be no dealers or distributors. The first thing we need to offer the customer is value, even if we are a premium brand, and direct sales allow us to have transparent pricing.”

• I fully support the notion that everyone should play by the same set of rules. 

• Unfortunately, the Chinese government's highly successful strategy of draining talent, knowledge, and proprietary information from Western OEMs and then going to war with them hasn’t earned them the most important thing when it comes to launching something new in a new market: trust. 

Think we’ll see a Chinese-manufactured car sold through a franchised dealer in the United States before 2030? Your guess is as good as mine.

David Reunert started in the car business at 13, brokering cars to family and friends through word of mouth. He then worked at a local BMW dealer throughout high school and college. After raising $3 million and starting a tech business in the IoT space for dealers, he went back to retail. He held roles in sales management and executive management and ran a distributor/importer in Southeast Asia. He was also a Platform GM for a group in Southern California.