Key Takeaways
The Biden Administration is starting to awaken to the reality that its “climate agenda” is pushing U.S. manufacturing into the arms of China, which benefits from cheap coal-fueled electricity to power its dominance.
President Biden is expected to slap heavy tariffs on China-made electric vehicles, which are cheaper and more advanced than the ones manufactured in the United States.
China has long prepared to dominate the “green industries” they saw as inevitable because of the Paris Accords on climate, which Biden re-entered upon assuming office.
China’s dominance extends throughout the supply chains including the mining and processing of essential minerals.
Biden is soon expected to target some of China’s key strategic sectors including electric vehicles, batteries, and solar cell manufacturing with higher tariffs. Biden has called Chinese electric vehicles a national security threat and has accused China of using unfair industrial policies to distort markets. The Biden administration is preparing to raise tariffs on “clean-energy” goods from China, with the levy on Chinese electric vehicles set to roughly quadruple. The higher tariffs will also include critical minerals. The decision comes at the end of a yearslong review of tariffs imposed by former President Donald Trump on roughly $300 billion in goods from China.
Whether to adjust the Trump-era levies divided Biden economic advisers for years, with trade officials pushing for higher duties and others, such as Treasury Secretary Janet Yellen, calling for lowering tariffs on consumer goods while focusing duties on strategic sectors. But signs and media reports that China was ramping up exports of “clean-energy” goods prompted concern in Washington, where officials are trying to protect the American “clean-energy” industry from China’s exports.
Officials are particularly focused on electric vehicles, and they are expected to raise the tariff rate to roughly 100 percent from 25 percent. An additional 2.5 percent duty applies to all automobiles imported into the United States. The existing 25 percent tariff on Chinese electric vehicles has so far barred them from the U.S. market, despite having cheaper models than Western-made cars. But as China is finding an excess of electric vehicles on its lots, Chinese automakers are looking to foreign markets. China’s BYD, for example, is looking to build a factory in Mexico to use the U.S. Mexico and Canada trade agreement to sell cars in the United States while avoiding tariffs.
On the campaign trail, President Trump announced that he is considering imposing tariffs of 60 percent or more on all Chinese imports—a move likely to escalate the trade war with Beijing that he started in his first term. Trump has warned that the U.S. auto industry would face a “bloodbath” at the hands of China if he loses in November, and he has pledged to impose stiff tariffs on Chinese-made vehicles that are imported into the United States. Volvo, which is China-owned, will start importing vehicles this summer using a loophole available to them.
Also on the campaign trail, Biden has promised to protect American industry and workers from foreign competition. In Pennsylvania last month, Biden said he would significantly raise tariffs on steel from China.
The trade moves are weighing on U.S.-China relations as the two countries have spent months trying to stabilize diplomatic relations after disagreements over Taiwan, Russia’s invasion of Ukraine and access to advanced technology. China has become the world’s leader in “clean energy” manufacturing in its bid to stimulate overall growth of its economy. In a trip to China last month, Treasury Secretary Yellen warned Chinese officials that the rest of the world will take steps to counteract a wave of inexpensive Chinese exports that undercuts their own industries. The European Union is also weighing raising tariffs on Chinese electric vehicles that have already infiltrated its markets.
Chinese officials have publicly dismissed Western criticisms about their export practices, and last month Beijing placed a levy on imports from the United States of a widely used chemical. A spokesman for the Chinese foreign ministry denounced the Biden administration’s plans to increase tariffs, saying that they have disrupted trade between the two countries. “China will take all necessary measures to defend its rights and interests,” the spokesman said.
Trying to bar the most affordable electric vehicles from the U.S. market will put pressure on Biden’s goal of reducing carbon dioxide emissions. The United States is spending a trillion dollars in subsidizing “clean-energy” industries here at home in an attempt to catch up to China, who has spent decades preparing to be the dominant “clean-energy” producer in the world.
Biden Administration in Contradiction
The Biden administration will allow consumers to get up to $7,500 on tax credits for electric vehicles containing Chinese graphite through 2026–a two-year extension. The Treasury Department published final rules governing the tax credits, which are supposed to be designed to encourage EV production in the United States and also push supply chains for minerals and batteries into the United States. Democrats in Congress expanded EV tax credits in the 2022 Inflation Reduction Act (IRA) to spur rapid electrification of the passenger-automobile fleet, but included a series of escalating requirements that the vehicles exclude critical minerals and other materials from some foreign countries, especially China. But in 2023 China produced about 77 percent of the world’s graphite compared to none for the United States, providing the reason for the exclusion. The graphite in battery anodes has been defined by Treasury as “impracticable-to-trace” meaning it is exempted from the due diligence and “foreign entity of concern” requirements until 2027. The issue is how much more of this type of situation will make Biden’s latest move mute.
Conclusion
China dominates the production of solar panels, wind turbines, batteries and electric cars and buses, and also processes most of the minerals that go into “clean-energy” technologies. Further, Chinese companies have found workarounds to trade barriers in the West, including by sending products through indirect routes that avoid tariffs on goods that come directly from China. The situation presents a dilemma for the Biden administration, who wants to limit carbon emissions while developing a domestic renewable energy and EV industry. Competing with China on low-carbon manufacturing at this point is a losing battle as China is decades ahead, and uses nine times as much coal as the United States to provide cheap energy to make the goods Biden is demanding the United States buy. Relying too much on a rival country also raises national security concerns and can jeopardize American industries and jobs.
Biden is faced with running for the U.S. Presidency against President Trump, who has already announced the likelihood of raising tariffs on China should he win the election. Trump wants to save American industry and does not want to be bogged down with Biden’s “no win” climate agenda as it would cost $9 trillion a year worldwide by 2030 to keep the goals of the Paris Agreement alive—7 times what is currently being spent. Biden needs to ask himself where he intends to get his share of that kind of money.
