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    13 Ways of Looking at Biden’s New China Tariffs

    By Robinson Meyer,

    2024-05-14
    https://img.particlenews.com/image.php?url=24IilJ_0t24fy4r00

    Heatmap Illustration/Getty Images

    The United States raised tariffs on a range of Chinese-made climate technologies on Tuesday, including electric vehicles, solar panels, and battery components.

    Inspired by the poet Wallace Stevens , here are 13 ways of looking at them:

    1.

    The biggest tariffs in the bunch are for Chinese-made electric vehicles. The Biden administration has more than quadrupled them, imposing a 100% tariff on all vehicle imports. That means that Chinese-made EVs now face higher tariff levels than any other imported goods.

    Right now, the U.S. imports relatively few electric vehicles from China, and the few vehicles that we do import — which are made by the Chinese-owned brands Volvo and Polestar — may not be affected by these levies because of how imports are counted under tariff law . (Neither Volvo nor Polestar has commented on the new rates.)

    What’s more, the White House suggested in February that it would use national security law to prevent EVs from Chinese companies from coming into the United States at all — even if the cars were made in a country with which the U.S. has a free trade agreement, such as Mexico. So despite the eye-popping headline figure, the tariffs on Chinese EVs do relatively little to change the decarbonization calculus in the United States. America wasn’t going to import Chinese-made EVs before, and it’s not going to do so now.

    2.

    While these EV tariffs may be more for show than anything else, that is not true for the other tariffs on clean technologies. Many of these categories already faced trade levies imposed by the Trump administration, and Biden has now raised them, effectively doubling down on his electoral rival’s policy.

    Starting immediately:

    • For lithium-ion EV batteries , tariffs rise from 7.5% to 25%.
    • For EV battery parts , tariffs rise from 7.5% to 25%. (This closes a loophole in the Trump levies in which completed EV batteries faced a much lower tariff rate than battery components, encouraging automakers to import finished batteries.)
    • For many critical minerals , tariffs rise from zero to 25%.
    • For solar cells , tariffs rise from 25% to 50%.

    The solar cell figure looks impressive — and has been the source of wrangling in the solar industry — but it matters less than it looks. The United States already imports more than 80% of its solar panels from Chinese companies operating in other Asian countries.

    A second round of tariffs is scheduled to kick in in 2026. Even though these hikes won’t take effect immediately, they may counterintuitively matter more , because they affect sectors where China now dominates the global industry. The longer timeline suggests that the White House is trying not to disrupt the near-term market too much; in effect, it’s giving companies a deadline to diversify their supply chains. This second round includes:

    • For non-EV lithium-ion batteries , such as the type you’d need for grid-scale batteries , tariffs rise from 7.5% to 25% in 2026. These batteries are already changing how the power grid works and the White House may be loath to stop the progress.
    • For natural graphite and permanent magnets , tariffs will rise to 25% in 2026. China refines 90% of the world’s graphite , and it has already tried to use this as leverage in a trade dispute with the U.S., imposing export restrictions on three high-purity grades of graphite last year.

    3.

    Whether you love them or hate them, you shouldn’t see these tariffs as a standalone measure. They complement the aggressive subsidies that the Biden administration has already passed on EVs, batteries, and critical minerals in the Inflation Reduction Act. It’s often lost that the IRA subsidizes EVs and their constituent parts in two ways — not only with the somewhat convoluted $7,500 personal vehicle tax credit , but with the more important 45X production tax credit , which pays companies $35 for each kilowatt-hour of EV batteries that they produce in the United States. (There are similar 45X bounties for other manufactured goods, including solar panels.)

    4.

    These policies now add up to classic industrial policy in the mold of Alexander Hamilton : The U.S. is hiking tariffs on high-value imports while subsidizing their domestic production, while also providing cheap credit via the Department of Energy to companies that want to participate in these new industries. The Environmental Protection Agency has also issued new rules that will encourage U.S. consumers to buy from these new domestic producers. The one element of the classic model the U.S. has not yet adopted — except in some states — is provisioning cheap land and easy permitting for new factories.

    5.

    China, it should be said, followed a similar playbook to develop its own electric vehicle industry. That should let us dispel with one foolish idea right away: the premise that tariffs never work. On the contrary, tariffs sometimes do work; as the economist Brad Setser pointed out on the social network X, America only finds itself in its current position because of how well tariffs worked. Through a range of policies including tariffs and joint ventures, China walled off its domestic market and encouraged domestic industry. That industry has now grown to challenge the world.

    6.

    But they do not always work. Another important aspect of Hamiltonian industrial policy is certainty: To make forward-looking investment decisions, companies need to know policies that exist today will still be around when the production line starts whirring. This China has in gobs, and the United States lacks. You may have noticed that the front-runner in this year’s presidential election is promising to repeal many of these policies that are now rolling out — just about everything but the tariffs.

    7.

    These tariff rates are unlikely to go down anytime soon. There is no party in American politics advocating for free trade with China. The choice, in the near-term, is between Biden’s vision of free trade with democracies and developing countries, plus climate and defense-driven industrial policy at the margins, versus Trump’s vision of fossil-fueled populism that aspires to autarky.

    There are forces within the country that wouldn’t hate to see a return of more open trade relations with China — you can see factions within the environmental movement, the Chamber of Commerce, and Big Tech pushing for it, to name a few — but they do not control a partisan coalition.

    8.

    There is no equivalence between what the Biden administration announced today and the 10% across the board tariff on all imported goods from all countries that Donald Trump has proposed. Biden’s new tariffs focus on certain strategic sectors that American officials believe the country must cultivate to stay at the technological frontier, coupled with pre-existing subsidies meant to spur domestic production of those goods. Some of the tariffs only kick in beginning in 2026 — far enough in the future, policymakers hope, for the market to prepare. Trump’s tariffs, meanwhile, would intentionally and chaotically hike prices.

    9.

    We’re only here because China has won Round 1 on electric vehicles. It has created a thriving, competitive domestic EV industry that includes the BYD Seagull, an $11,000 hatchback that gets up to 250 miles of range; the Zeekr 009, a $70,000 minivan with more than 500 miles of range; and the Xiaomi SU7, a sleek $29,000 coupe. As the car journalist Kevin Williams has written , China’s EV market is far deeper, more varied, and more sophisticated than many realize. Beijing has built a Silicon Valley-style industrial cluster that produces cheap electric vehicles for the domestic market and the world — and the Biden administration can do almost nothing about that.

    This dominance has emerged out of China’s economic agglomeration and its successful climb up the technological value chain. As I’ve written , China once made textiles and toys; then it made smartphones and computers; now it makes EVs and commercial jetliners. This agglomeration of economic complexity is not an academic observation; in many cases, the companies now producing China’s most competitive EVs emerged directly from its electronics industry. Xiaomi, after all, makes 15% of the world’s smartphones. CATL — now widely seen as the world’s best EV battery maker — began as a spin-off of Amperex Technology Limited, or ATL, which makes smartphone batteries. The iPhone is, in a sense, the younger sister of the Chinese-made Volvo EX30: Both are Western-designed consumer electronics that are made in Chinese factories, through Chinese engineering expertise.

    10.

    Does one need to spell out precisely why American officials might care about staying even vaguely competitive with China in the EV industry? Do I need to mention the role that American-made motor vehicles have played in world history? But the motorization of war — which has now gone on for nearly a century — requires getting fossil fuels to the front lines in dangerous convoys; by one estimate, more than half of the 36,000 casualties suffered by American troops in Iraq were on fuel or water resupply missions. Wind and solar are not now so potent that they could liberate armies from these serpentine supply chains, but energy technologies can drive surprising military innovations anyway: In Ukraine and Nagorno-Karabakh, we have already seen how e-bikes and drones powered by small, lightweight batteries have transformed modern warfare.

    11.

    Perhaps this kind of thinking is premature, or too dire. Nonetheless, this is what makes this moment so different from the 1970s, when Japanese-made cars changed the American car market, or the 1980s and ‘90s, when the Korean brands arrived. For the first time, a country outside the American security umbrella — a country that, in fact, aims to compete as a geopolitical hegemon with the U.S. — has attained the cutting edge of motor vehicle production. Even if Michigan and Wisconsin were not so important in the Electoral College, even if climate change did not require the rapid decarbonization of the global car fleet, that fact alone would distinguish this moment from what has come before. This is why the Chinese EV industry poses such a profound challenge to American policy.

    12.

    This challenge for the U.S. also requires conjuring an entire value chain from nothing. A thoroughly classic Hamiltonian industrial policy would involve reducing tariffs on commodity and low-value inputs, such as the minerals that make up batteries, while increasing them on high-value imports, such as completed batteries and cars. But China controls so much of the critical mineral supply chain — it is “the dominant player” in global minerals refining — that American officials feel like they must diversify; they must try to spin up low value supply chains for graphite, lithium, and rare earths at the same time that they encourage the construction of EV factories.

    13.

    One of the most important aspects of the Inflation Reduction Act is that it pursues two simultaneous industrial policies: In some sectors (EVs, solar, batteries), it aims for America to catch up to its technological rivals; in others (carbon capture, hydrogen), it aims to preserve America’s pre-existing position at the technological frontier. Notice what industries aren’t affected by today’s tariffs — not carbon capture, not anything to do with fossil fuels, not even anything hydrogen-related, even though China makes 61% of the world’s electrolyzers . (That is because the Biden administration has shaped its hydrogen policy so it does not automatically favor the type of electrolyzer that Chinese firms make.)

    It’s easy to get ahead of oneself here. Just because China has created a superior EV industry, that doesn’t mean it will have one forever; just because China makes better EVs, that doesn’t mean that America lags on all climate technologies. But make no mistake: America is trying to do something very difficult, and it has no guarantee of success.

    Read more: This Is How You Die of Extreme Heat

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