U.S. and EU Tariffs and the Restructuring of the Global New Energy Vehicle Supply Chain

China is the world's largest producer and market for new energy vehicles and has the most complete new energy vehicle industrial system. The additional tariffs imposed by the United States and the European Union on China will not only affect the development of the new energy vehicle industries of the parties concerned but also deal a substantial blow to the global new energy vehicle supply chain. This paper develops a multi-country, multi-sector general equilibrium model that incorporates a new energy vehicle supply chain comprising three major stages—critical minerals, lithium-ion batteries, and new energy vehicles—and quantitatively evaluates the economic effects of the additional U.S. and EU tariffs on China's new energy vehicle industry, using consumer subsidies as an example to analyze China's response measures. The study yields the following findings. (1) The additional U.S. tariffs harm every key stage of China's new energy vehicle industry, with the upstream and midstream stages of the supply chain suffering the most severe losses. Although the U.S. lithium-ion battery segment benefits, the competitiveness of U.S. new energy vehicles declines owing to the increased cost of lithium-ion batteries. (2) Although the EU's additional tariffs apply only to downstream products and are imposed at rates far below those of the United States, they cause markedly greater harm to China's new energy vehicle industry, mainly because the EU is the major export market for Chinese new energy vehicles. (3) The additional U.S. and EU tariffs on China will both restructure the global new energy vehicle supply chain, with China's export share partially replaced by the rest of the world; the shock to lithium-ion batteries is significantly greater than that to other stages of the supply chain. (4) Expanding domestic demand can effectively counter the tariff shock from the United States and the EU: a 4.5% increase in domestic consumer subsidies for new energy vehicles is sufficient to offset the adverse effects of these tariffs on China's new energy vehicle industry.