U.S. tariffs on Chinese EVs are anti-EV, anti-climate

Tariffs on Chinese electric vehicles (EVs) have reached a pivotal moment over the past month. Following months of misleading overcapacity claims, the United States announced a sharp increase in its Section 301 tariffs on Chinese EVs from 25 percent to 100 percent. Within a month, the EU also revealed a plan to impose tariffs on Chinese EVs, albeit through a more tailored approach.

The debate between China and the West over alleged overcapacity and unfair trade practices will continue in the foreseeable future as the West refuses to accept China’s repeated explanation that the dominant EV power’s competitiveness stems from its “unique comparative advantage” — its large domestic EV market that enables scaled production. It has almost become a cliche to compare China’s EV adoption rate with that of the West to highlight their differing development stages, a view the West, especially the United States, refuses to accept. The White House claims that the tariffs are necessary measures to protect and develop a “robust” U.S. EV market, if that exists in the first place.

But is that really the case?

For the United States, the decision to impose a universal 100-percent tariff on all Chinese EVs does not belong to a larger plan to develop the U.S. EV industry. Quite the opposite: Although the Biden administration claims that the EV tariffs aim to support the American EV industry, the tariffs build on the rationale that is fundamentally anti-competition and anti-EV industry.

The Biden administration claims to incentivize the development of the U.S. EV market. From an industry perspective, however, there is no substantial U.S. EV market to protect in the first place. Blocking Chinese EVs will further isolate U.S. customers from the globally popular EV concept, counteracting the administration’s stated objectives.

The U.S. EV adoption rate is less than 10 percent, despite the Biden administration’s ambitious target for EVs to make up half of the new cars in the United States by 2030. Tesla, the world’s best-selling EV manufacturer, sells more EVs abroad than domestically. Unlike other auto markets, the U.S. market prefers pickup trucks and CR-Vs, which are technically difficult to convert to electric power. Traditional American automakers such as General Motors and Ford are struggling to develop mature EV models for U.S. consumers. Recent reports suggest they are pulling back from EV development to explore hybrid CR-Vs and pickup trucks instead.

Even though the United States leads in AI research that would be critical to the next-generation model of smart cars, a small domestic EV market and the counterproductive China tariffs would prevent the United States from converting that technological leadership into industrial competitiveness. Without Chinese competitors in the U.S. market, there will be less incentive to innovate, further delaying efforts to advance the U.S. EV industry.

Moreover, the 100-percent EV tariffs against China will make it even harder for the United States to achieve its green agenda. The transportation sector constitutes 36 percent of the entire U.S. energy consumption. For the United States to shift towards renewable energy, changes must begin in the transportation sector. By blocking Chinese EV imports through 100-percent universal EV tariffs, the Biden administration also misses an opportunity to use market forces to reform American energy consumption by adopting more affordable EVs.

Despite the Biden administration’s repeated calls to transform the U.S. automobile industry towards a cleaner future, the country continues to lack definitive motivation for a costly transition. The U.S. energy landscape remains diverse, with significant reliance on fossil fuels. Since 2019, when U.S. energy production exceeded its consumption, Texas, New Mexico, and North Dakota have remained major producers of oil and natural gas, granting traditional energy groups strong lobbying power over U.S. energy policies. As of 2023, petroleum and natural gas together accounted for over 60 percent of the country’s total energy consumption, with renewables, including electricity, making up a modest 12 percent. Given that the U.S. energy strategy still primarily favors fossil fuels, the development of the EV industry is more a matter of jobs and taxes than energy security or climate change. With domestic politics and a partisan divide on climate issues, developing the EV industry in the United States faces numerous obstacles, regardless of the White House’s ambition.

Politics, both domestic and international, further complicate the impact of the 100-percent EV tariffs. The Biden administration must prioritize job creation promises, a matter closely tied to the U.S. presidential election, where blue-collar auto workers’ votes are crucial. While the 100-percent EV tariffs may protect some less competitive U.S. auto jobs, the harsh stance towards Chinese EV makers, coupled with intensifying U.S.-China relations, makes it very difficult for Chinese EV makers to help build U.S. EV capacity through investments and building plants in the United States. Unlike Japanese automakers in the 1980s, Chinese EV makers will be extremely discouraged. The tariffs, coupled with increasing regulatory scrutiny and a Congress increasingly obsessed with Chinese economic influence, create an unprecedentedly high barrier.

The 100-percent tariffs on Chinese EVs are a product of a complex interplay of economic, political, and environmental considerations. Beyond their immediate economic impact, these tariffs reflect a broader ambivalence towards developing the EV industry within the Biden administration. While rhetoric may emphasize support for U.S. jobs and a “cleaner future,” such punitive, rash, and untailored tariffs reveal Washington’s lack of confidence about the future of the American EV industry and the U.S. energy transition. This disconnect undermines not only U.S. leadership in global climate cooperation but also the efforts to build strength in the U.S. domestic industries. Through the 100-percent EV tariffs, the Biden administration is, in fact, betraying the U.S. auto industry and its own commitment to “worker-centric” trade policy.

The original article was published by the Xinhua on June 30, 2024