The Biden administration announced sweeping new tariffs on China clean technology including:
- EVs: go from 25% to 100% in 2024
- EV batteries: go from 7.5% to 25% in 2024
- Solar cells: go from 25% to 50% in 2024
- Natural graphite and permanent magnets: go from 0% to 25% in 2026
- Other critical minerals: subject to a 25% tariff in 2024
Notes:
- Tariffs were also imposed on steel and aluminum products, but these are window dressing. The U.S. only imports about 1% of its steel and 3% of its aluminum from China.
- Imports of Chinese EVs spiked 70% last year but from a small base. China EVs can sell for as little as $12,000 – a price that would open the market to all income levels.
- The initial tariffs only apply to about $18 billion of goods and will have little impact on inflation. Total U.S. imports in 2023 were about $3.8 trillion - $18 billion represents less than 0.5% of total imports.
Here are some administration quotes along with my comments:
- Effectively fighting climate change requires "diversified, not concentrated production" of key goods.
True enough, but it also requires the ability to produce goods at a competitive global price.
- “Resilient supply chains" offer the best chance of meeting climate goals.
So would a $12,000 EV.
- Lael Brainard, the director of the National Economic Council noted that the objective was to ensure our own supply chain is "not undercut by a flood of unfairly underpriced exports from China in areas like EVs batteries…and solar."
Just to clarify: we place tariffs on China because of their unfair subsidies in order to aid a U.S. sector that does not exist today, but we hope to create by offering heavy subsidies?
- “Hopefully, we will not see a significant Chinese response — but that's always a possibility," said Treasury Secretary Janet Yellen.
Ya think!
- “American workers can outwork and outcompete anyone as long as the competition is fair,” said Biden.
Perhaps, but the more pertinent question is: can America – with its higher cost of labor – produce globally competitive goods without government subsidies?
- A Chinese foreign ministry spokesperson said the U.S. is trampling on the principles of a market economy and international economic and trade rules.
Haaa! - don’t care for the taste of your own medicine? Here’s an idea – start playing by the rules.
Bottom line: we need to lessen the dependence on China for the essential elements to achieve net-zero. However, it’s questionable that without continued subsidies, the U.S. can be globally competitive. A better strategy would be to form partnerships with friendly and reliable international partners that are better positioned to be price competitive. Of course, no political points would be scored from such an approach. Its only advantage is that it might actually accomplish the stated goals.
#tariffs #cleantech #chinatrade #netzero