De facto bans on Chinese electric vehicles (EVs) cost Americans $41.2B on comparable EVs in 2023. This follows rapid price cuts by Chinese EV companies, which now undercut comparable American EVs by more than 25%.

Adjusting for market size and inflation from the 2023 paper, the present cost of these policies is estimated to be $43.12B for 2025.

Consumer welfare cost, 2023–2025

2023–2025 consumer welfare cost under constant 2023 tariff conditions A line shows the estimated consumer welfare cost rising from 41.19 billion dollars in 2023 to 42.12 billion in 2024 and 43.12 billion in 2025. $40bn$41bn$42bn$43bn$44bn $41.19bn$42.12bn$43.12bn 202320242025

These policies gained widespread support after US politicians, automakers, and special-interest groups promoted the viral theory that Chinese automakers were “dumping” EVs in the US market – selling them below market value primarily due to CCP subsidies.

RoleActorClaimSource
PresidentJoe Biden“China heavily subsidized all these products, pushing Chinese companies to produce far more than the rest of the world can absorb.”1
PresidentDonald Trump“Meanwhile, foreign automotive industries, propelled by unfair subsidies and aggressive industrial policies, have grown substantially.”2
US SenatorSherrod Brown“American automakers and autoworkers need a level playing field – they cannot, and should not be expected to, compete with these heavily subsidized Chinese EVs.”3
US RepresentativesMike Gallagher and Raja Krishnamoorthi“electric vehicles (EV), propped up by massive subsidies and long-standing localization and other discriminatory policies employed by the PRC.”4
AutomakerFord Motor Company“the need to protect our home market from a flood of subsidized vehicles built in China”5
US auto industry groupAlliance for Automotive Innovation“We need to make sure we’re all playing by the same rules, but Chinese automakers are flooding markets around the world with cut-rate vehicles.”6
US auto industry groupAlliance for American Manufacturing“China is unleashing a torrent of heavily subsidized cars upon the world, and America’s auto industry stands squarely in the path of devastation.”7

Proponents of the dumping theory claimed that reducing domestic competition for American manufacturers would enable them to develop and compete globally. With their support, American presidents enacted tariffs on foreign EVs reaching up to 127.5%.

Chinese EVs now dominate multiple global markets and continue to gain ground1.

In European markets, Chinese EVs have increased their market share despite heavy tariffs and regulations. Despite prior tariffs and subsidies in the US, subsequent administrations have had to enact de facto bans on Chinese EVs to prevent them from competing in the American market.

Chinese EV sales and market share across global markets

Wall Street Journal chart showing annual EV sales and Chinese automakers’ market shares in North America, Europe, China, South America, other markets and Asia-Pacific in 2024.
Source: The Wall Street Journal

A key premise supporting these policies is almost entirely false. Claims of EV dumping were spread with no evidence that subsidies were the primary reason for Chinese competitiveness. Now, there is strong evidence against this theory.

EV Price Comparison

Tesla Model 3 price compared with the stacked BYD Seal price and gap components A Tesla Model 3 price of 32,409 dollars is compared with a BYD Seal price of 24,190 dollars plus six identified cost advantages totaling 4,703 dollars and 3,516 dollars of product differentiation and residual differences. Tesla Model 3BYD Seal $32,409 $24,190$3,516 $4,703 identified advantage $568 subsidies, financing and lower margins $0$10k$20k$30k
Source: Rhodium Group

Less than 7% of the difference between Chinese and American EV prices is the result of government subsidies, loans, or lower profit margins. The vast majority of identifiable price differences are due to differences in supply chain and R&D structure.

Price Gap Breakdown

Breakdown of the full 8,219 dollar price gap between the Tesla Model 3 and BYD Seal A horizontal stacked bar divides the full price gap into 2,369 dollars from vertical integration, 1,766 dollars from lower overhead and research and development, 292 dollars from subsidies, 12 dollars from preferential financing, 214 dollars from supplier-payment float, 50 dollars from licensing, and 3,516 dollars in unidentified comparisons and product differences. Vertical integration$2,369 · 29% Overhead + R&D$1,766 · 21% Unidentified / product differences$3,516 · 43% Subsidies $292 · 3.6% Preferential financing $12 · 0.1% Supplier-payment float $214 · 2.6% Licensing $50 · 0.6% $0$2k$4k$6k$8k
Source: Rhodium Group

The price gap is wider for EVs than for comparable non-EV cars, in both absolute and percentage terms. This suggests that Chinese advances in EV-specific optimization are responsible for a significant portion of the price gap.

Non-EV price comparisons4

Four China-market gasoline-car price comparisons from entry-level through high-end sedans Four horizontal comparisons pair a non-Chinese-brand gasoline sedan with a Chinese-brand gasoline sedan on a shared dollar axis from zero to eighty thousand dollars. Thin bracket markers identify the sticker-price gaps of 2,222, 4,181, 6,931, and 9,722 dollars. COMPACTMID-SIZEUPPER-MIDEXECUTIVE Chevrolet Monza 1.5L ATGeely Emgrand 1.5L CVTBuick Regal 1.5T ATGeely Preface 2.0T ATCadillac CT5 2.0T ATHongqi H6 2.0T ATMercedes-Benz E 300 L 2.0THongqi H9 3.0T AT $13,181$10,958$2,222 $22,194$18,014$4,181 $40,236$33,306$6,931 $73,583$63,861$9,722 $0$20k$40k$60k$80k

The de facto ban on Chinese EVs reduces the number of EV purchases by an estimated 1.61 million, according to the same paper2. The paper estimates that the gap in adoption forfeits 89.34 million metric tons of lifetime CO₂ reductions, the same as taking 266 million one-way flights or driving 227 billion miles in the average gas-powered car.

Despite the most powerful men in America repeating these false dumping claims, America’s political, judicial, and journalistic institutions failed to question them. Special interests and politicians succeeded into turning their fabricated myth into policy, directly tying false dumping claims to the announcement of new tariffs. Until recently, a politically convenient lie triumped over the uncomfortable truth.

Footnotes

1 Global-market sales source: The Wall Street Journal.

2 Table 2 reports modeled 2023 total EV sales of 1.380 million under the ban and 2.990 million after introducing the top ten Chinese EV models at the 2.5% baseline tariff. The implied difference is 1.610 million EVs. Column 3 separately reports 89.34 million tons of lifetime CO₂ reduction.

3 Model Year 2027 is a manufacturer's designation for a model developed for 2027. Production for these models typically begins a year earlier.

4 Conversion note. We use a fixed exchange rate of RMB 7.2 per USD 1 for data aggregated across model years 2024 and 2025. This fixed rate may differ slightly from the rate at any particular point during that period.

Models used in the comparison:

ModelSource
Chevrolet Monza 1.5L JoyChevrolet China
Geely Emgrand 1.5L CVT DragonAutohome
Buick Regal 25T EnjoyZOL
Geely Preface 2.0TD StarlightGeely
Cadillac CT5 28T LuxuryZOL
Hongqi H6 2.0T ZhizhenZOL
Mercedes-Benz E 300 L LuxuryAutohome
Hongqi H9 3.0T Qichang Luxury BusinessZOL