The Impact of Trade Friction on the Electric Vehicle Industry in

China and the United States

Yihan Sun

Wujinglian School of Economics, Changzhou University, Changzhou, China

Keywords: Tariff Policy, Supply Chain, Market Competition, International Cooperation.

Abstract: Against intensified competition between China and the United States, the electric vehicle industry faces

unprecedented challenges and opportunities. Relying on strong policy support and huge market size, China

rapidly rises to become the world's largest electric vehicle market, with representative companies such as

BYD and NIO emerging. However, with the gradual decline of subsidy policies, these companies need to pay

more attention to improving product quality and enhancing market competitiveness. At the same time, the

United States is in a leading position in electric vehicle technology innovation, and companies such as Tesla

have promoted the development of the industry. However, the Sino-US trade friction has brought high tariff

barriers to China's electric vehicle exports, making Chinese and American companies face pressure in the

competition. In the future, the competition between the Chinese and American electric vehicle industries will

continue to evolve, and the dynamic changes in policies, technologies, and market development between the

two sides will affect the development of the sector. Companies need to flexibly respond to policy changes,

strengthen technological innovation, actively explore emerging markets, and improve the security of the

supply chain to achieve sustainable growth.

1 INTRODUCTION

In recent decades, China has achieved rapid economic

growth by relying on its open economy and foreign

trade and has become the world's second-largest

economy, surpassing Japan. The expansion of the U.S.

trade deficit with China has exacerbated tensions

between the world's two largest economies (Sukar &

Ahmed, 2019). Behind this phenomenon, there are

multi-dimensional motivations, among which

competition in the technology field is particularly

significant, especially in high-tech sectors such as

semiconductors and artificial intelligence. Both

China and the United States want to gain an

advantage in the global technological competition,

which has led to sanctions and restrictions on each

other. In addition, geopolitical factors cannot be

ignored. As China's influence on the international

stage increases, the United States feels its status and

potential threats and then takes a series of measures

to contain China's rise.

As the world pays more attention to

environmental protection and sustainable

development, the electric vehicle industry has quickly

become an important future industry. China and the

United States have important market shares and

technological competitiveness in this field, and their

trade has gradually become the focus of the trade

relationship between the two countries. In the Sino-

US trade relationship, the electric vehicle industry has

become increasingly prominent.

China is the world's largest electric vehicle

market, and the government has introduced a large

number of policies to support the development of

electric vehicles, including subsidy policies, tax

incentives, and infrastructure construction. Chinese

electric vehicle companies such as BYD, NIO, and

Xpeng have risen rapidly and become important

competitors in the global electric vehicle industry

(Danilovic, M. et al. 2021). China not only dominates

the domestic market but also excels in the export of

electric vehicles, especially to Europe and other

developing countries. The United States is a pioneer

in global electric vehicle technology innovation. As

the world's most valuable electric vehicle company,

Tesla has promoted the development of global

electric vehicle technology. The US government has

also gradually increased its support for the electric

vehicle industry. The US market started slowly with

the popularization of electric vehicles, but with the

582

Sun, Y.

The Impact of Trade Friction on the Electric Vehicle Industry in China and the United States.

DOI: 10.5220/0013996300004916

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 2nd International Conference on Public Relations and Media Communication (PRMC 2025), pages 582-586

ISBN: 978-989-758-778-8

rise of companies such as Tesla, the acceptance of

electric vehicles in the US market has gradually

increased.

The electric vehicle industry has not been

completely immune to the Sino-US trade friction. The

United States imposes high tariffs on Chinese-made

electric vehicles and related parts, which increases the

export costs of Chinese electric vehicle

manufacturers and affects their competitiveness in the

US market. Conversely, China has also imposed

certain restrictions or increased tariffs on electric

vehicles and technology products exported from the

United States (Belton, et al. 2020). With the

development of Chinese domestic electric vehicle

companies, their dependence on the US market has

gradually decreased, and they have instead reduced

their dependence on the US market by actively

exploring other international markets.

This article aims to analyze the impact of trade

frictions on the Sino-US electric vehicle industry,

propose solutions to the market turmoil caused by

Sino-US frictions, and make development

suggestions for Chinese and American electric

vehicle companies.

2 ANALYSIS

Since the outbreak of the Sino-US trade friction in

2018, it has become an important issue in the global

economy. With the rapid development of the electric

vehicle industry, the electric vehicle industry has also

become an important part of the Sino-U.S. trade

friction that cannot be ignored.

2.1 Tariff and Policy Impact

Since 2018, trade frictions have led to the United

States imposing high tariffs on Chinese electric

vehicles and parts. By 2019, the tariff rate had

reached 25%. This move has caused Chinese

manufacturers such as BYD, NIO, and Xiaopeng to

increase their costs in the United States, lose their

price advantage, and find it difficult to build a stable

sales network, which has impacted their market share.

China has retaliated against American products by

imposing tariffs on American electric vehicles and

key parts, raising the costs of American companies,

such as Tesla, which has affected its sales in China.

For this reason, American companies such as Tesla

have set up factories in China, such as the Shanghai

"Super Factory", to reduce tariff costs and enjoy

policy benefits (Yu, J, 2023).

Under the pressure of external trade frictions,

China has introduced a series of support policies such

as fiscal subsidies, tax exemptions, and infrastructure

construction to promote the development of the

electric vehicle industry. In particular, between 2015

and 2020, thanks to government support, China's

electric vehicle market expanded rapidly. After the

Biden administration came to power, the United

States supported the electric vehicle industry, put

forward the goal of "green electric vehicles",

enhanced the independence of its industry, and

introduced preferential policies such as subsidies,

battery and charging facility investment to help the

recovery of the US electric vehicle industry. Local

companies such as Tesla have expanded their market

share after receiving subsidies (Sherilyn. et al. 2021).

2.2 Technical Cooperation and Market

Competition

Battery technology is the core of electric vehicles.

The development of lithium batteries and solid-state

batteries affects vehicle range, charging speed, and

cost. As the world's largest battery manufacturer,

China's CATL occupies an important position in the

field of battery technology. Tesla in the United States

has significant advantages in both battery technology

and autonomous driving technology. The competition

between enterprises of the two countries around these

core technologies has greatly promoted the pace of

technological innovation.

Tesla in the United States has achieved

remarkable results in the field of autonomous driving,

and its system leads the world (Chai, Z. et al. 2021).

However, Chinese companies such as NIO, Xpeng,

and Ideal are also actively investing, and some have

launched autonomous driving systems based on

LIDAR technology. The competition between the two

parties in this field is fierce, with rapid technology

iteration and high corporate investment in R&D,

which has effectively promoted the development of

the overall technology of electric vehicles.

In terms of cooperation, Tesla and China are

becoming increasingly close. The production base

established by Tesla in Shanghai has not only broken

through the tariff barriers but also enjoyed

preferential policy support. It has joined hands with

CATL to consolidate its advantages in battery

technology and has also established cooperation with

local governments in China and upstream and

downstream enterprises in the industrial chain to

jointly promote technological innovation in electric

vehicles.

However, in the context of trade frictions,

technology transfer has become a sensitive issue. The

The Impact of Trade Friction on the Electric Vehicle Industry in China and the United States

583

United States restricts high-tech exports to China,

especially key electric vehicles and autonomous

driving technologies. Although China and the United

States have cooperation in some areas, as trade

frictions intensify, technological barriers continue to

rise, and the transfer and cooperation of some

technologies are suppressed, limiting the space for

cooperation in the electric vehicle industry. This

complex situation of technological cooperation and

competition has profoundly affected the development

direction of the electric vehicle industry in China and

the United States. It has not only promoted the

acceleration of innovation in their respective areas of

strength but also hindered technological exchanges

and industrial collaboration to a certain extent,

bringing many variables to the industry's

globalization process (Cerruti, et al. 2019).

2.3 Changes in the Industrial Chain

and Supply Chain

On the Chinese side, the intensification of trade

frictions has promoted the vigorous development of

the battery industry, making China's position in the

global electric vehicle industry chain more prominent.

China has a dominant position in the production of

key materials such as lithium batteries, cobalt, and

nickel (Sun, X. et al. 2021), and has supported related

enterprises through policies to ensure the global

competitiveness of production, reduce dependence on

external supply, and consolidate its dominant position

in key links in the industry chain.

In the United States, the electric vehicle industry

is moving towards autonomy, focusing on areas such

as chips, batteries, and rare earth materials.

Manufacturers such as Tesla are promoting localized

production and strengthening collaboration with

domestic suppliers, aiming to reduce supply chain

dependence on China and other countries, reduce the

impact of external risks on domestic industries, and

reshape their layout in the global electric vehicle

industry supply chain.

The electric vehicle industry chain is highly

dependent on the global supply chain, especially in

the fields of chips, sensors, and autonomous driving

hardware (Bathla, G. et al. 2022). However, the

escalation of Sino-U.S. trade frictions has dealt a

heavy blow to the stability of the supply chain. For

example, Chinese companies are restricted in their

access to American chips and software and have to

look for alternatives or increase their independent

research and development efforts to ensure their

production operations. To buffer the impact of trade

frictions on the supply chain, many companies are

actively exploring diversified paths. Chinese electric

vehicle manufacturers are turning their attention to

suppliers in Southeast Asia, Europe, and other places

to reduce their dependence on the United States and

Japan. American companies such as Tesla have

increased their dependence on local suppliers and

accelerated the process of autonomy in the American

electric vehicle industry to cope with the turbulent

changes in the global supply chain structure and

ensure the sustainable development of the industry.

3 RESPONSE STRATEGIES

The electric vehicle industry faces complex

challenges and opportunities amid intensifying

competition between China and the United States. As

the world's largest economy, the competition between

China and the United States involves multiple

dimensions, including trade policies, market access,

technological innovation, brand building, and market

expansion. The electric vehicle industry has become

a key area of future transportation and an important

battlefield for competition between the two countries.

To gain a foothold in this competition, major

companies need to formulate effective response

strategies to enhance their market competitiveness.

3.1 Supply Chain Diversification

The stability and flexibility of the supply chain are

crucial to the survival of enterprises. The

characteristics of the supply chains in China and the

United States are different. China's electric vehicle

industry relies on a mature manufacturing base and a

sound supply chain to quickly respond to market

demand and reduce costs (Rajaeifar, MA et al. 2022).

However, over-reliance on a single market exposes

companies to policy risks, especially when

international trade is unstable. American companies

have advantages in technology research and

development and innovation, especially software and

autonomous driving technology, but their production

capacity is weak and they need to rely on external

supply chains.

To cope with supply chain risks, companies

should reduce their dependence on a single country,

actively seek suppliers from other countries, and

establish production bases in Mexico or Southeast

Asia to enhance flexibility and resilience. At the same

time, they should increase efforts to develop local

suppliers and improve supply chain security. The

introduction of advanced management technologies

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such as blockchain and the Internet of Things can

improve transparency and efficiency, help companies

better manage risks, and reduce potential losses

(Viriyasitavat, W. et al. 2019).

3.2 Technological Innovation

Technological innovation is the core of competition

in the electric vehicle industry. China and the United

States have gradually increased their R&D

investment in battery technology, autonomous

driving, and intelligent networking. The Chinese

government supports the electric vehicle industry and

encourages companies such as CATL to take the lead

in battery technology (Fichtner, M. 2022). At the

same time, Chinese start-ups are active and promote

technological progress. The United States has

advantages in software and autonomous driving.

Tesla occupies an important position in the market

but faces challenges from traditional car companies

and emerging electric vehicle companies.

Companies should increase investment in

technology research and development, especially in

the fields of batteries and autonomous driving,

cooperate with universities and research institutions,

form technology alliances, and accelerate innovation.

At the same time, they should enhance their

competitiveness by acquiring start-ups, attach

importance to intellectual property protection, and

ensure that technological achievements are not

imitated, so as to maintain their market advantages.

3.3 Market Development

With the rapid growth of the global electric vehicle

market, market development has become an

important goal for corporate development. The

market characteristics and consumer preferences of

China and the United States are different, and

companies need to formulate corresponding

strategies. The Chinese market has strong demand,

and policy support has increased consumer

acceptance of electric vehicles, and sales have ranked

first in the world for many years. However,

competition is fierce, and emerging brands are

emerging in an endless stream. The US market is

relatively mature, and Tesla is dominant, but it also

faces challenges from traditional car companies.

Consumers pay more attention to performance, brand

reputation, and after-sales service (Ingram, N.2018).

Companies should actively explore emerging

markets such as Europe and Southeast Asia to

diversify risks. When entering new markets, they

should adjust their products and marketing strategies

according to local needs and policies, such as

launching models that comply with environmental

regulations in Europe. At the same time, they should

use digital means to interact with consumers, and

accurately position and personalize marketing to

better meet consumer expectations.

3.4 Policy Response

The policy environment is crucial to the development

of the electric vehicle industry. The policy differences

between China and the United States directly affect

the strategic choices of enterprises. The Chinese

government promotes the development of electric

vehicles through subsidies and policy support. The

market prospects are broad, but policy changes may

bring uncertainty. Enterprises need to pay attention to

dynamics. As subsidies gradually decline, companies

need to pay more attention to product quality and

competitiveness.

The U.S. policy environment is complex, with

significant differences among states. Although

federal support has increased, local policies may lead

to different market access thresholds. Companies

need to be flexible and adjust their strategies to adapt

to changes. Establish a dedicated policy research

team to keep abreast of developments and look for

policy support opportunities. At the same time,

people actively participate in industry associations,

influence policy formulation, create a favorable

market environment, strengthen communication with

the government, and participate in policy consultation

and pilot projects to obtain support and market

opportunities.

Competition in the electric vehicle industry

between China and the United States will continue to

evolve, and there may be more policy adjustments,

technological breakthroughs, and market

development in the future. China has unique

advantages in policy support and market size, while

the United States has certain advantages in innovation

and technological leadership. Competition in the

electric vehicle industry between China and the

United States will continue to evolve, and companies

need to maintain flexibility and innovation

capabilities to remain invincible in the fierce market.

Only by working together from multiple dimensions

such as technology, market, and policy can

companies occupy a place in the global electric

vehicle industry.

The Impact of Trade Friction on the Electric Vehicle Industry in China and the United States

585

4 CONCLUSION

First of all, as the above shows, with the growing

development of China and the United States, frictions

and disputes between China and the United States

continue. In recent years, the electric vehicle industry

has gradually occupied an important position in the

market. Therefore, it is very important to study the

electric vehicle industry in the Sino-US trade friction.

Secondly, when studying the factors that affect

the electric vehicle industry due to Sino-US trade

frictions, it can find that tariff policies, cooperation

and competition, and industrial chain and supply

chain are three important factors. Whether the

country supports the formulation of policies

determines the vitality of the electric vehicle industry.

Tariff policies affect the transaction status of electric

vehicles under international trade. Cooperation and

competition promote and restrict the technological

progress of enterprises. Whether the industrial chain

and supply chain is complete determines whether the

lifeline of the enterprise will be strangled during its

development. Therefore, enterprises need to flexibly

respond to policy changes, increase technological

innovation, and actively explore emerging markets to

diversify risks.

Finally, in the future, the competition between

China and the United States in the electric vehicle

industry will continue to evolve. As the competition

between China and the United States in the field of

electric vehicles continues to intensify, there may be

more policy adjustments, technological

breakthroughs, and market development in the future.

China has unique advantages in policy support and

market size, while the United States has certain

advantages in innovation and technological

leadership. As an important part of the global green

transportation revolution, electric vehicles may

become a key area of cooperation and competition

between China and the United States in the future.

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