Trump’s 93.5% Tariff on Chinese Graphite Could Inflate US EV Production Costs

The Trump administration has introduced a major tariff that could make it more expensive to build electric vehicles (EVs) in the United States. A 93.5% tariff has been placed on graphite imports from China, a raw material that is vital for making EV batteries. This decision could lead to higher costs for American automakers, especially as they rely heavily on Chinese graphite. 

The reason for this move, according to the U.S. Commerce Department, is that China has been “dumping” graphite into the U.S. market. This means selling it at prices lower than the market value, making it hard for local producers to compete. While the tariff is intended to protect and encourage American industries, it may cause short-term problems for EV makers. 

Graphite is an essential part of lithium-ion batteries, which are used in most electric vehicles. Although it is not very expensive, less than $2 per pound, Chinese graphite plays a huge role in the global supply chain. In 2023, U.S. imports of Chinese graphite reached $347 million. Yet, American companies still struggle to produce graphite that is pure enough for EV batteries. 

For example, Tesla told the government that U.S. companies cannot make graphite with 99.9% carbon purity, which is what EV battery makers need. This means American automakers will still have to buy graphite from China but now at a much higher price. 

Despite this challenge, some believe the tariff will help in the long run. Mike O’Kronley, CEO of U.S.-based graphite producer Novonix, said the move could be a turning point for the American graphite industry. He believes the tariff will push investors to support local production, even though it may take time before results are seen. 

However, the timing of this decision is important. The Trump administration is also reducing support for the EV industry. A new law signed this month ends the $7,500 tax credit for people buying electric cars and cuts government loans that helped build EV and battery factories. 

To make things more difficult, the U.S. doesn’t currently produce enough graphite to meet demand. So, until the local industry catches up, American EV manufacturers will have no choice but to import expensive graphite from China. 

In the end, while the tariff aims to boost American industry, it also risks slowing down EV production and increasing costs for both carmakers and consumers. Only time will tell if the benefits of protecting U.S. graphite producers will outweigh the immediate challenges for the growing electric vehicle market. 

In the meantime, entities like Mullen Automotive Inc. (NASDAQ: MULN) that focus on electric vehicle making have to contend with having the shorter end of the stick as trade tensions between America and China go through endless shifts. 

NOTE TO INVESTORS: The latest news and updates relating to Mullen Automotive Inc. (NASDAQ: MULN) are available in the company’s newsroom at https://ibn.fm/MULN 

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