In the latest chapter of the battle for America’s auto industry (and let’s be honest, the Oval Office), the Biden administration is expected to announce higher tariffs on Chinese-made electric vehicles this week, quadrupling the duty to roughly 100%. But even at double the price, they’d still be cheaper by far than the least expensive American EV. 

One for You, 100 for Me

The potential move comes as automakers in the US and around the world struggle to sell EVs. Ford’s EV unit said losses soared to $1.3 billion in the first quarter, meaning it lost $132,000 on each of the 10,000 vehicles it sold. Overall EV sales in the US in Q1 rose 2.6% year over year, but fell 15.2% compared to Q4 ‘23, according to Cox Automotive.

China-based BYD, on the other hand, is gaining a rep as a “Tesla killer,” reportedly selling more than 3 million vehicles (mostly in its home country) in 2023, a roughly 62% jump from the previous year. Considering that a “cheap” US-made Chevrolet Bolt costs around $27,000, and BYD offers an EV for less than $10,000, that can start to rankle automakers and a commander-in-chief who wants to be known for industrial supremacy:

• Chinese EVs are already nonexistent in the US, not because of outright bans but because of burdensome tariffs. Chinese EVs face a 25% tariff — plus a 2.5% tax on all cars imported into the US — but on Tuesday, the Biden administration will boost that tariff to roughly 100%, sources told The Wall Street Journal. 
• Biden’s hard stance on China is one of the few things he has in common with his expected election opponent, former President Donald Trump, who said if re-elected he would impose tariffs of 60% or more on all Chinese imports. Biden also set aside hundreds of billions of dollars for clean energy projects and green tech via the Inflation Reduction Act, so there’s an incentive to show he has the back of US industry.

While a 100% tariff sounds like it would keep out any foreign rival, it’s addressing only part of the problem. Carlos Tavares, CEO of Stellantis — which is based in the Netherlands but owns American brands like Chrysler and Dodge — told the WSJ that companies still need to look inward and drive down their own cost if they’re ever going to compete with China.

IPOs? They’re Fine: Interestingly, this ramped-up protectionist wave hasn’t extended to new shares of Chinese companies. EV maker Zeekr saw its shares leap by more than one-third last Friday after selling stock worth more than $441 million in its IPO, marking the biggest US listing by a Chinese company in almost three years. There’s nothing like “improved market conditions” to lift investors’ concerns above geopolitics. As the Financial Times noted, the Nasdaq’s Golden Dragon China Index, which tracks 69 US-listed Chinese companies, has jumped more than 20% from its January low. What’s more patriotic than letting US investors make a profit?

How’s this for entrepreneurial spirit?

After a slump through the latter half of the last decade, the US is experiencing a startup tsunami, according to an analysis published this weekend by The Economist. The trend may simultaneously be both a cause and effect of the country’s white-hot labor market.

If You Start Me Up

You’d be forgiven for thinking the ultra-low interest rates and endless cascade of venture capital cash in Silicon Valley created a startup-fueled economy in the 2010s. But startups made up less of the pre-pandemic American economy than they did during the Reagan administration; per The Economist, businesses younger than five years old — a proxy stat for startups — accounted for some 29% of US businesses in 2018, compared to almost 40% in 1982. According to researchers at the Fed and elsewhere, that’s largely because giant tech firms hoovered up all the best talent, dulling progress and success on Main Street (or its 21st century, mostly-digital equivalent).

But now, even as interest rates remain elevated and the VC cash spout slowing to a relative trickle, the American economy evidently remains ripe for new entrepreneurs. Historically low unemployment may be to thank: 

• Last year, a record 5.5 million startup founders filed applications to start a new business, according to Census Bureau data. And while the pace has slipped somewhat through the first four months of 2024, monthly applications still remain 80% higher than in the 2010s; in Europe, the rate is only 20% higher.
• One leading theory: a resilient labor market, backstopped by a historically low unemployment rate that’s hovered below 4% for months, has given founders the confidence to start a new business knowing their employment prospects will be rich even if they fail. Meanwhile, the proliferation of remote-working culture means founders can tap talent across the country — and the globe — rather than just where they live.

Easy as AI, B, C: Underpinning it all is the arrival of artificial intelligence technologies, with startups both feeding from and fueling the AI boom. According to a paper published by the Census Bureau in March, the number of business applications for firms producing goods or services centered on AI unsurprisingly surged in 2023. Meanwhile, another recent paper from the Census Bureau detailed how AI use within firms has, also unsurprisingly, surged — potentially giving small firms a much-needed productivity boost. Kenan Fikri, director of research at the think-tank Economic Innovation Group, told The Economist that the trend was reminiscent of the 1990s computer boom: “It feels like a step-change increase across the economy in entrepreneurial potential.” Of course, not every startup will survive — it’s up to investors to figure out which ones are real and which ones are mirages. May the odds be ever in your favor, entrepreneurs.

As the Venture Brothers of Cartoon Network fame put it, what goes down must come up. Underperformance is never the goal in financial markets. But do it long enough, and you might start looking like the best new place to invest.

UK stocks have been outperforming US stocks on a broad index-based level for the past seven weeks, with the FTSE 100 gaining about 9% since March 20, and the S&P 500 only rising 0.9% during that time. But this isn’t exactly a case of a sudden UK economic renaissance.

Been Down So Long

After both the UK and the US economies started to put the global pandemic behind them, their fortunes began to diverge. While the US steadily put up GDP annual growth rate numbers of roughly 2% to 3%, the UK has flatlined, with growth of less than 1% in every quarter since the fourth quarter of 2022, including negative growth in last year’s Q4. That’s a big reason the S&P 500 has risen 36% since the beginning of 2023, versus the FTSE 100’s increase of 13%.

But many investors worry that US stocks are now priced for perfection, and nobody’s perfect: 

• The S&P 500 is trading at 20 times expected 12-month earnings, above its 10-year average of 18 times. Plus, many of the big names that had driven US indices higher have had recent reality checks: Tesla (down 33% this year) has had production issues and a serious sales slump; Meta (down 8% in the past month) was punished for future AI expense projections, and Netflix (down 2% in a month) lost favor after a weak subscriber outlook.
• Meanwhile, the FTSE sits at a trailing price-to-earnings ratio of 14, one of the least expensive developed markets in the world, according to the Financial Times, which noted that Deutsche Bank calls the FTSE its “favorite index in Europe” and continues to prefer European stocks to the US.

Slow and Steady: As the FT’s Katie Martin noted, the lack of “exceptional” high flyers, particularly in the tech sector, which propeled US stocks, is now serving UK stocks well, as its middling economy. There’s growing confidence that the next interest rate cut will happen in the UK before the US, which could help close the economic growth gap. Oil prices loom large, too, with any future runups more favorable to the FTSE’s larger exposure to natural resources stocks.