Joe Biden plans sanctions on Chinese smart cars to protect data privacy

The Biden administration is considering restrictions on imports of Chinese “smart cars" and related components that would go beyond tariffs to address growing US concerns about data security, according to people familiar with the matter.

The measures would apply to electric vehicles and parts originating from China, no matter where they’re finally assembled, to prevent Chinese makers from moving cars and components into American markets through third countries like Mexico, the people said. The measures could also apply to other countries about which the US has data concerns, one of the people said. Tariffs alone, they added, won’t fully address this issue.

US officials are particularly concerned about the troves of data collected by so-called smart cars — which include EVs and other types of connected and autonomous vehicles — said the people, who were granted anonymity to discuss confidential conversations. Many of today’s cars, both gas and electric, are equipped with modems connecting them to the internet, making them potential targets for hacking.

The administration may try to address data security concerns using existing Commerce Department authorities to regulate some information and communications technology transactions, some of the people said, but no decision has been made as officials conduct a sweeping policy study.

A separate executive order intended to ensure data privacy in general is expected to be released as soon as next week, and officials are also weighing adjustments to a 27.5% tariff on Chinese EVs originally imposed by President Donald Trump.

The White House and Commerce Department declined to comment.

Electric vehicles collect vast amounts of information about their drivers and surroundings, and intense competition in the industry is pushing automakers to equip their cars with more and better sensors and driver assistance software. Chinese regulations require automobile companies to store and process much of that data within the country — a rule that could cover sensitive personal information collected by EVs, from license plates to facial characteristics.

Commerce Secretary Gina Raimondo worries that data could wind up in Beijing’s hands, she said last week, pointing to China’s ban on Tesla Inc. cars near government gatherings and for military use. “You can’t drive a Tesla on certain parts of Chinese roads, they say for national security reasons," she said at an Atlantic Council event. “Well, think about that. What are the national security concerns?"

Chinese automakers like BYD Co. have stayed out of American markets in part because of high tariffs, but US officials think they may eventually choose to swallow those costs. The retail price of EVs made in China is less than half that of those manufactured in the US, so a flood a Chinese cars could upend President Joe Biden’s efforts to turbocharge domestic EV production. There’s also worry in Congress that Chinese companies like Contemporary Amperex Technology Co., the world’s biggest EV battery maker, may try to take advantage of tax credits in the Inflation Reduction Act, Democrats’ signature climate law.

The Biden administration is considering increasing duties on Chinese EVs and other clean-energy goods in a long-awaited review of the Trump policy. But the broader effort — grounded in part on the data security concerns — goes beyond what was originally anticipated, aiming to counter potential attempts by Chinese companies to evade tariffs using third-country shipments.

Companies including BYD have been considering sites in Mexico for factory investments, and Treasury Secretary Janet Yellen said in December that the US intends to help Mexico beef up screening of foreign investments, including from China.

Trump, who has for years been vocal about Chinese EV firms’ ambitions in Mexico, has pledged to ratchet up tariffs on China if elected president in November, saying this month he may even go beyond a previously floated across-the-board figure of 60%.