The relationship between the United States and China has been crucial since 1949. This bilateral dynamic has played out over the decades, pushing both nations to experience not only peak periods of cooperation but those of tension as well. Trade, in particular, has grown enormous in recent decades, with the two countries emerging as prominent export markets for each other. However, recent developments have triggered a notable shift, affecting the economic and diplomatic ties between the two powers. The US has proposed a ban on hardware and software, in any car, that was manufactured in China.
The US government has decided to ban Chinese hardware and software in vehicles operating on US roads, citing national security risks. The proposed rule, led by the US Commerce Department, would require major automakers to phase out key software, originating from China, from vehicles sold in the United States.
The regulations limiting the import of car parts and their key Chinese software and hardware components are particularly targeted at Vehicle Connectivity Systems (VCS) and Automated Driving Systems (ADS). These systems include cameras, microphones, and GPS technologies that connect vehicles to the Internet, raising concerns about the possibility of Chinese surveillance or remote manipulation of American vehicles, particularly those connected to the Internet.
To strengthen protections for its key industries, the Biden administration has introduced significant tariff hikes on wide-ranging Chinese imports. The US Trade Representative’s office announced that many of these tariffs, including a 100% levy on Chinese electric vehicles, 50% on solar cells, and 25% on steel, aluminum, EV batteries, and critical minerals, will come into effect on September 27. This is a significant turn in US policy toward China, protecting from unfair practices.
If and when the regulations are finalized, they would essentially prevent all vehicles built in China from being sold in the US market. They would also extend to vehicle software and hardware developed by other nations deemed adversarial, including China and Russia.
“Malicious foreign adversaries build software code into vehicles, that can be used for surveillance, capturing the tracking data for their benefit, and ultimately threatening the privacy and safety of Americans on the road.”
– US Commerce Secretary Gina Raimondo
At its most extreme, Raimondo warned that hostile states might disable or take command of entire fleets of US-based vehicles.
These proposed regulations and hardware bans hint at the efforts to mitigate the risks posed by cyber hacking and data breaches. The Biden administration has been particularly vocal about the security threats posed by Chinese automakers, raising concerns over their ability to gather data on US drivers and infrastructure through connected vehicle technologies. The White House also issued a statement outlining how China’s actions, policies, and practices have enabled it to gain substantial control over the global production of critical inputs vital to US technologies, infrastructure, energy, and healthcare.
The White House, in February, ordered a broad investigation into these national security concerns, suggesting that the crackdown on foreign technology could be more widespread.
These new rules would not just keep China from testing self-driving cars in the United States but also prevent their components from winding up inside US-built vehicles. The rules will apply to all on-road vehicles except agricultural machinery, mining vehicles, drones, and trains, which are not used on public roads.
While Chinese-made cars account for a small portion of US vehicle imports, Raimondo emphasized that it was crucial to move fast before parts made in China—and potentially Russia—proliferate. Moreover, the Department of Commerce also said that Chinese automakers will be allowed to apply for individual waivers, though with how loose these provisions are, the waivers could remain a mystery.
This proposal follows similar actions taken against Chinese technology in other sectors. The US Government has long been concerned about the use of Chinese-made telecommunications and critical infrastructure equipment, and this latest move extends those worries to the automotive sector.
Topping the list, White House National Security Adviser Jake Sullivan stressed that China is preinstalling malware on critical infrastructure in the US where it poses a risk; this makes them much more vulnerable, further reinforcing the need for protective measures. On the other side, Chinese officials have pushed back against these accusations. Lin Jian, a spokesperson at China’s Ministry of Foreign Affairs, urged that the US government should “abide by market principles and create an open, fair and transparent business environment for Chinese companies.”
The Alliance for Automotive Innovation, which represents top automakers such as GM, Toyota, and Volkswagen, conceded it would be a heavy lift to meet the rules. Some automakers have claimed to need additional time to make necessary adjustments.
President Joe Biden has also stressed the wider ramifications of China’s automotive ambitions. “China is determined to dominate the future of the auto market, by using unfair practices,” Biden said in a recent statement. “I’m not going to let that happen on my watch.”
The potential for further restrictions in other countries, such as Canada, also looms large. It is also being said that Canada might be the next country lining up to protect its market, following close behind the US in imposing high taxes on Chinese electric vehicles.
A comprehensive report prepared by the US Trade Representative in coordination with the Section 301 Committee, titled “Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, (May 14, 2024), vividly states several key decisions that the US Trade Representative has made. The report is also available on the USTR website.
The announcements include modifying the current actions by imposing additional Section 301 tariffs or raising existing ones on selected Chinese products in strategic sectors. Proposed increases will target certain tungsten products, wafers, and polysilicon, with a public comment process to be outlined separately.
Tariffs on Chinese Goods
Based on the findings and recommendations outlined in the report, the president issued a memorandum, highlighting certain changes to the Section 301 tariffs on Chinese imports. The memorandum directed the US Trade Representative to maintain appropriate ad valorem duty rates on products, while also pushing China to eliminate the problematic practices at the heart of the trade dispute. To address these issues, the president ordered increases in Section 301 tariffs for certain Chinese goods.
The memorandum outlined specific products for proposed tariff hikes, including the following:
- Electric vehicles: 100% in 2024
- Facemasks: Minimum 25% in 2024
- Lithium-ion electric vehicle batteries: 25% in 2024
- Lithium-ion non-electric vehicle batteries: 25% in 2026
- Medical gloves: Minimum 25% in 2026
- Natural graphite: 25% in 2026
- Other critical minerals: 25% in 2024
- Permanent magnets: 25% in 2026
- Semiconductors: 50% in 2025
- Ship-to-shore cranes: 25% in 2024
- Solar cells: 50% in 2024
- Steel and aluminum products: 25% in 2024
- Syringes and needles: Minimum 50% in 2024
These increases explicitly undermine the US efforts to address and tackle the economic impact of China’s state-led economic model. The software ban is expected to start by model year 2027, and hardware restrictions are expected to take effect by 2029 or 2030.
While the US Commerce Department tweaks its revised rules, which may be final by June, the implications of this proposal could fundamentally alter how the auto industry and automakers move ahead in future years, strengthening new fetters that keep foreign technology restrained from connected cars and protecting infrastructure throughout the nation.
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Saba Ikram is an English Literature graduate with a love for writing, learning, and exploration.