On May 14, President Biden announced a major escalation of the country’s emerging climate trade war with China, raising existing tariffs on Chinese electric vehicles to 100 percent — a unilateral quadrupling. A few days earlier, responding to reports of Biden’s plans, Donald Trump outdid him, promising tariffs of 200 percent should he win the 2024 election.
It’s not just E.V.s. Five years after blasting Trump for imposing tariffs on Chinese exports, Biden raised them — on aluminum, steel, lithium batteries, solar cells and semiconductors, among other products. Trade protections of this scope would have been almost unthinkable even half a generation ago, when free markets were largely seen by leaders of both parties as opportunities to exploit and tariffs were regarded as an expression of hostile desperation by weak, developingnations. And tariffs would have been perhaps even harder to imagine then in pursuit of global climate goals, which had always called to mind not zero-sum economic competition but virtuous visions of “Kumbaya” cooperation and even global governance in the name of Gaia.
But since Trump’s election in 2016, chastened Democratic policymakers have come to see green industrial policy as a kind of one-size-fits-all, policy-and-politics tool — a recipe for addressing the climate crisis, yes, but also for the postindustrial “secular stagnation” of the U.S. economy, for the domestic manufacturing decline, for white working-class resentment and for the geopolitical challenge posed by China. Trade protectionism is now perhaps the closest thing we have to a bipartisan consensus in Washington, but sometimes all those goals sit at cross purposes. “There are few things that would decarbonize the U.S. faster than $20,000 E.V.s,” the M.I.T. economics professor David Autor recently said. “But there is probably nothing that would kill the U.S. auto industry faster, either.” And BYD, a Chinese automaker, just rolled out a model priced under $10,000.
Play a word-association game for “E.V.,” and an American is most likely to say “Tesla” first, but these days it would be better to say “China,” so astonishing has been the growth of the country’s electric-vehicle sector. In 2019, Chinese E.V. exports totaled $400 million; by 2023, they had reached $34 billion, a precipitous 85-fold increase and enough to help make the country, as recently as five years ago an afterthought in global auto exports, today the world’s top exporter of all cars. Nearly 60 percent of all the world’s E.V.s are now sold in China, which is home to three of the world’s four biggest E.V. manufacturers. In late 2023, BYD moved briefly into the top spot, shortly before Tesla issued a mass recall of its Cybertruck and reportedly canceled its plans for an affordable sedan.
At present, there are hardly any Chinese-manufactured E.V.s even available for sale in the United States, which makes the back and forth over tariffs look pretty performative in the short term. (Symbolically, it has got to be reassuring to American autoworkers, a key swing-state constituency.) But cast your eyes a little deeper into the future, and E.V. protectionism looks less like a market tweak, designed to even the playing field for American automakers, than a market wall. It’s designed to keep Chinese exports entirely out of the United States, at least while the huge industrial stimulus of the Inflation Reduction Act kicks in, and to protect domestic manufacturers from the competition of cars that might be half as expensive or twice as appealing through years in which the country is meant to be transitioning rapidly. (E.V.s are supposed to be half of all new car sales by 2030, according to the White House, up from 7.6 percent last year.)
Biden wagered an awful lot of first-term political capital on a new green industrial policy, which allocated more than $2 trillion in spending on the climate-focused I.R.A. and the climate-inflected infrastructure law and CHIPS Act. Now, toward the end of his term, he is trying to build a protective moat around America’s budding green industries. From the outside, it looks like a genuine climate trade war. Can it even be won?
You have probably heard about the miraculous growth of green energy around the world in recent years — in 2023, renewables for the first time provided 30 percent of all global electricity, and last month, in another first, fossil fuels provided less than a quarter of European Union power.
But though the carbon reductions are most impressive in Europe, the green boom is overwhelmingly a Chinese story. More than half of all new solar power installed in the world last year was installed inside China. For wind power, the share was even larger: China was responsible for 60 percent of all new global capacity. In just three years, the country has more than doubled the total amount of solar and wind power installed within its borders; in the United States, what looks like a breakneck build-out over the same period has pushed capacity up by less than 50 percent. Batteries, too: Last year China manufactured storage capacity equal to total global demand.
When you move upstream from final products into the green-tech supply chain, China dominates even more. It produces 84 percent of the world’s solar modules, according to a recent report by BloombergNEF. It produces 89 percent of the world’s solar cells and 97 percent of its solar wafers and ingots, 86 percent each of its polysilicon and battery cells, 87 percent of its battery cathodes, 96 percent of its battery anodes, 91 percent of its battery electrodes and 85 percent of its battery separators. The list goes on.
It is in this context that the United States is undertaking its clean-tech trade war — not from a position of strength or even parity. When the Soviet Union launched Sputnik in 1957, it was in response to plans for an American satellite, which made it into orbit just three months after the Russian launch; later in the Cold War, when American hawks lamented the “missile gap,” they were referring to a fiction, because the Russians had no advantage. Today, China controls more than 80 percent of many essential aspects of the global clean-energy supply chain; the United States controls almost none of it.
Does it matter? To hear Democratic policymakers from Biden and Janet Yellen on down tell it, the answer is yes. To navigate the green transition smoothly, they say, the country needs to avoid growing entirely dependent on China for clean energy in the way we previously relied so heavily on autocratic gulf states for dirty energy. They also want to avoid a replay of the “China shock” of the early 2000s, which decimated manufacturing labor across the industrial Midwest especially, and to combat the problem of “oversupply” from China on American businesses and workers. In a best-case scenario, subsidies and tariffs would together help American companies ramp up E.V. production so rapidly that U.S. manufacturers become a driving force behind the decarbonization of global transportation.
But there are risks. To begin with, industrial policy isn’t guaranteed to work, and no tariff is large enough to really reduce China’s global green-tech dominance, because the U.S. market isn’t all that significant to the Chinese. Green self-sufficiency is more achievable, and tariff defenders suggest they are meant to be temporary, allowing the American E.V. industry merely to find its footing. But for how long should we baby domestic industry when it means higher prices on so much of the good green stuff? “A glut in renewables and green products is precisely what the climate doctor ordered,” Dani Rodrik of Harvard wrote this month. As Bloomberg’s David Fickling has pointed out, Trump’s imposition of tariffs on Chinese solar-panel exports in 2018 may have meaningfully slowed American renewable rollout. Will American E.V.s fare any better?
A few weeks ago, the electric-vehicle analyst Kevin Williams took a trip to Beijing to take the measure of the competition. Williams had gone to the city’s big annual automotive show to test one American perspective on China’s E.V. boom — that it was something between a state-sponsored boondoggle and a mirage of pointless overproduction.
After test-driving a dozen vehicles, Williams thought he had his answer: Chinese E.V.s were simply better and more compelling than their European and American counterparts, he said. “Now that I’ve seen a glimpse of what’s going on in China,” he wrote, “the Western manufacturers, particularly the American ones, don’t seem like they’re trying at all.”
Further reading
"trade" - Google News
May 22, 2024 at 11:06PM
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Opinion | Can Biden Win America’s Green Tech Trade War With China? - The New York Times
"trade" - Google News
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