Are tariffs a protection or a punishment? The latest move to blacklist Contemporary Amperex Technology Co., Limited (CATL)—the world’s largest manufacturer of EV batteries —perfectly encapsulates the question. CATL was designated as a “Chinese Military Company” on Monday by the US Department of Defense (DOD). Business Insider says that the blacklist serves as a warning for domestic businesses that “their association with the companies may bar them from future defense contracts”. The announcement creates a tangled web for those who rely on CATL products – and a portent of tariff troubles ahead.
Following the announcement, CATL’s stock price dipped by about 3%, and the company bristled at the decision – threatening legal action. Representatives said CATL “has never engaged in any military-related business or activities.” CATL went further, calling the blacklisting a “mistake” by the DOD. But is it? Are tariffs and blacklists a necessary protection against foreign threats – or (in this case) an unneeded punishment for consumers and manufacturers?
CATL: A Titan of the EV Industry
CATL powers more than a third of the world’s electric vehicles, according to Electrek. Its clients include global giants like Elon Musk’s Tesla, GM and Ford, making it an indispensable player in the EV ecosystem. The company’s dominance stems from its unique blend of government support, economies of scale, and innovation. It produces batteries with cutting-edge chemistry and efficiency, enabling EV manufacturers to reduce costs and improve vehicle performance. So where’s the threat?
With the U.S. aiming for 50% of all new car sales to be electric by 2030, a reliable battery supply is critical. The blacklisting of CATL pulls the plug on these ambitions. Alternative suppliers like LG Energy Solution or Panasonic could struggle to fill the void, leading to higher costs, delayed EV rollouts, and a significant blow to U.S. climate initiatives.
Everyone wants American manufacturing to thrive and grow. But CATL exists within a Chinese ecosystem that can’t be duplicated with investment. Alternative solutions just don’t fit the bill. How can America protect its manufacturing interests, and its people, inside an economy that is global, interconnected and multi-national?
The Blacklisting Is a Tariff Warning for Automakers
General Motors’ Ultium battery platform, which underpins its future EV lineup, depends heavily on CATL’s technology. Tesla’s expansion plans, particularly for its affordable EVs, also hinge on CATL’s ability to deliver cost-effective batteries.
Europe offers a cautionary example. When the EU restricted Chinese battery imports in 2023, automakers faced higher costs and supply shortages, slowing EV sales growth. The U.S. risks repeating Europe’s mistakes if it fails to approach the CATL issue strategically.
The Complexity of CATL’s Success Goes Beyond Tariffs
Love it or hate it, CATL thrives within a Chinese ecosystem of robust government support, a competitive domestic EV market, and economies of scale that few countries can replicate. For example:
- Stacking the Deck, Socialist Style: Generous subsidies for Chinese EV manufacturers have created a thriving domestic market, driving demand for CATL’s products – and pointing 1.4 billion consumers towards electrics and hybrids.
- Innovation: CATL leads the industry in developing advanced battery technologies, such as lithium iron phosphate (LFP) batteries, which are safer and more cost-effective than traditional lithium-ion batteries. CATL has developed an entire supply chain solution, from mining rare earth mineralls to manufacturing to distribution.
- Market Conditions: With hundreds of EV brands in China, CATL benefits from a vast, competitive ecosystem that is more sophisticated than what we see in the US or Europe.
Balancing National Security with Economic Realities: Tariffs Inside a Global Economy
Not everything from China is a threat, but distinguishing between genuine security risks and economic necessities is crucial. CATL is a battery manufacturer. Its blacklisting reflects broader geopolitical tensions rather than concrete evidence of security concerns. While vigilance is essential, blanket policies that disrupt key supply chains can harm the very industries they aim to protect.
Guardrails, rather than outright bans, offer a more balanced approach. For example, the U.S. could:
- Mandate localized production for sensitive components.
- Establish strict rules around data sharing and intellectual property.
- Foster partnerships between U.S. automakers and global suppliers to ensure transparency and security.
- Invite joint ventures that would utilize US manufacturing and employ US workers
These measures would allow the U.S. to mitigate risks while maintaining access to essential technologies. But there’s one thing missing: trust.
The EV revolution is a race, and losing access to CATL’s batteries could put U.S. automakers at a severe disadvantage. The cascading effect means consumer pricing for EVs will escalate. At the heart of the matter is this looming question:
Is everything from China a bad thing?
Please put your answer on TikTok, and let’s discuss with Kevin O’Leary, as he plans on buying the platform. Unless it’s banned. The point here is: risks need to be evaluated on a case-by-case basis.
To be sure, threats from Chinese businesses need to be addressed and neutralized. Policies to protect domestic business are policies that are in the best interests of the country. But is there really a threat here, from CATL? Or is this a case of mistaken identity, blacklisting a business unnecessarily? Only the DOD can answer that right now.
While there are valid concerns about intellectual property, national security, and predatory trade practices from China, upcoming tariff issues require nuanced solutions that don’t punish US industry. Or consumers. This blacklisting is a cautionary tale that shows it’s really important that we get this right, regarding tariffs on China.