The Commerce Department plans to impose a 93.5 percent levy on Chinese graphite, an essential ingredient in the batteries that power electric vehicles.
The Commerce Department on Thursday imposed steep tariffs on an essential ingredient for batteries, imposing an additional cost on electric vehicle manufacturers and dealing another blow to an industry already suffering from significant policy changes.
China supplies almost all the refined graphite that Tesla and other car companies and suppliers use to make batteries. On Thursday, the Trump administration issued a preliminary ruling that Chinese suppliers were guilty of “dumping” and imposed tariffs of 93.5 percent. In trade law, dumping is the practice of selling goods in another country for a lower price than in its home market.
The decision will hurt many automakers like Ford Motor and suppliers like Panasonic and LG Energy Solution that have been setting up battery factories in the United States. The tariffs are likely to raise prices for electric cars at the same time that the federal government is eliminating tax credits of up to $7,500 for people who buy or lease the vehicles. That tax credit will end on Sept. 30 under a tax and policy bill President Trump signed this month.
This week Panasonic began producing battery cells at a new plant in De Soto, Kan., that will employ 4,000 people. LG manufactures batteries in Tennessee and other states. They are among numerous companies that invested in domestic manufacturing operations with financial support from the federal government that Republicans have sought to eliminate.
Graphite accounts for less than 8 percent of the cost of a battery, according to Panasonic. But batteries are the most expensive components in an electric car. Doubling the cost of graphite could easily add $1,000 or more to the price of a battery. The Trump administration has imposed other tariffs on imported auto parts and vehicles.
Tesla and other companies filed numerous objections to a petition for the tariffs submitted by the American Active Anode Material Producers, a group of graphite suppliers in the United States and Canada which sought the duties.
Tesla said in a letter to administration officials in February that it had already agreed to buy graphite from U.S. suppliers, but “they have not yet shown the technical ability to produce commercial quantities” of battery-grade graphite “at the quality and purity required by Tesla and other battery cell manufacturers.”
The automaker did not immediately reply to a request for comment Thursday. Elon Musk, the company’s chief executive, was one of Mr. Trump’s biggest supporters before a recent falling out.
The anode material producers group applauded Thursday’s decision. “Dumping is a malicious trade practice used by China to undercut competition and wield geopolitical influence,” the organization said in a statement.
The decision is preliminary, but companies must begin paying the duties immediately. They would receive refunds if a final decision, expected in December, reverses the preliminary finding.