The Cost of Competing with China

The Cost of Competing with China

By Oghale May16,2024

President Biden announced this week that he planned to sharply increase the taxes America imposes on electric vehicles, solar cells, advanced batteries and other climate technologies imported from China. Labor groups cheered him on, unsurprisingly: Those tariffs would make Chinese green technology more expensive for Americans, which could protect American jobs in the clean energy sector.

Politically speaking, support from labor groups like the United Auto Workers is a win for the president, who needs strong union backing in his rematch election this fall against Donald Trump.

But some climate activists and economists say the tariffs could slow the fight against global warming at a time when global temperatures continue to smash records. They want Americans to buy E.V.s and solar panels and anything else that will speed the transition away from fossil fuels, with less regard to where those products come from. Biden’s tariffs, including a 100 percent rate on E.V.s, would make it nearly impossible for some Chinese products to compete in the United States on price.

“Tens of millions of low-cost E.V.s being sold around the world in the next few years would hugely help advance the effort to slow emissions,” Dean Baker, an economist at the liberal-leaning Center for Economic and Policy Research, wrote in a blog post this week. “If China wants to subsidize this process, we should be thanking them.”

The simple read of the situation is that Biden’s re-election efforts are taking priority over his climate efforts. He needs union voters to win Michigan and Pennsylvania and Wisconsin, all swing states, and if the price of those votes is more expensive electric trucks and a slower path of emissions reduction, so be it. Right?

Well, that’s not the way Biden and his team see it.

The administration’s view of climate, China and tariffs, centers on this question: Would you rather have a fast but fragile energy transition? Or a slower one that’s more likely to stick?

In a series of conversations with current and former administration officials in recent weeks, a picture emerged of why they are so worried about a new tide of low-cost Chinese imports crashing into the American clean energy marketplace. Some of those worries are environmental: Because Chinese factories emit more greenhouse gases than America’s do, the officials see Chinese goods as less “green” than products made in America.

Some of the concerns are about national security. The administration is investigating the threats from the software and hardware in Chinese cars, for example. Biden aides don’t like the idea of an electric Chinese-made SUV sending data back to Beijing on where American drivers are on the road.

They also worry about economic risks, particularly from allowing China to dominate critical supply chains in clean energy. They warn against Chinese officials effectively gaining a monopoly on critical products around the world, and, with it, the power to sharply raise prices in the future or cut off the flow of imports on a whim.

“Supply chain risk is climate risk,” Ali Zaidi, Biden’s national climate adviser, said in an interview. If one country gains enormous market power in clean energy, he said, “you dictate the terms. You are able to play hold-up at critical moments and really leverage your market position to exact unfair economic outcomes with your competitors.”

But, of course, politics are a crucial factor here. Biden is fighting against Republicans who are essentially arguing that any subsidies for Americans to buy electric vehicles or other green technology are a handout to China because it dominates those industries. It has become the Republican Party’s go-to critique of the climate-related subsidies in the Inflation Reduction Act, which Biden signed in 2022, and of Biden’s efforts to tighten auto emissions regulations. Republicans have now extended that complaint to Biden’s tariffs, even though they would make it harder for Americans to buy Chinese imports.

“The entire Green New Scam is a Biden giveaway to Crooked Joe’s Chinese masters,” Trump said this week, in response to Biden’s tariffs. The former president has called for even harsher new tariffs on China, though not targeted to green technology as Biden’s new tariffs largely are.

Biden is partially borrowing Trump’s hard line on China, including by maintaining tariffs that Trump imposed starting in 2018. But he’s also trying to convince voters that Trump and his party are wrong about climate policy helping China, by leaning into its potential to create jobs in the United States.

His hope is that the jobs-emissions link will protect his climate policies from attack and prevent voter backlash, ensuring a more durable transition.

Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, said that the administration appeared to be searching for a strategy that would create domestic support for its overall climate goals.

“There’s one way of looking at this week’s announcements that highlights the trade-offs between accelerating the clean energy transition as quickly as possible and protecting union jobs,” he said. “Another way to think about it is to say the best climate strategy is one that can maintain domestic political support.”

Complicating this task is that fact that many blue-collar workers in regions like Appalachia have lost jobs, including to China, in recent decades, and remain skeptical about clean energy.

Industrial workers in Appalachia have experienced boom and bust cycles, and are now seeing an influx of solar and wind projects. But as new jobs come in, work force advocates are eager to ensure that those new positions come with good pay and benefits.

“There’s a push and pull when it comes to these dynamics,” said Dana Kuhnline, program director for Reimagine Appalachia, a nonprofit group that promotes work force development and sustainability. “I’m excited to see the progress and the build-out, but I don’t want to see these communities get hurt.”

Several big environmental groups are well aware of those dynamics, and they’ve shifted strategy accordingly. Instead of butting heads with labor, they have joined forces with unions to push clean energy industrial policy, including subsidies and corresponding tariffs.

That may be the most politically important part of Biden’s new taxes on Chinese products: It’s policy that many of the big players in his electoral coalition agree on.

Consider this news release, which also arrived this week, celebrating the Biden tariffs. “We cannot trade a dependency on foreign oil for a clean energy future reliant upon China,” it said. “We must continue to invest and build our clean energy future in America.”

That sounds a lot like a labor leader talking, but it wasn’t. It was Ben Jealous, the executive director of the Sierra Club.

1. Canada’s wildfire season has started and large blazes in British Columbia have already released a record amount of wildfire carbon emissions for that province for the month of May, according to Europe’s Copernicus Atmosphere Monitoring Service. Experts are concerned that this year’s fires will be even more catastrophic than last year’s record season, when about 45 million acres of forest burned, almost eight times the annual average. Ian Austen reported that a wildfire in Alberta, near the country’s largest oil producing region, has prompted the evacuation of 6,600 people.

2. Florida’s state government will no longer be required to consider climate change when setting energy policy under legislation signed yesterday by Gov. Ron DeSantis, a Republican, Coral Davenport reported. The new law will also prohibit the construction of offshore wind turbines in state waters. Multiple scientific studies have shown that an increase of heat-trapping greenhouse gases in the atmosphere has contributed to sea level rise and more flooding in the state’s coastal cities.

3. The White House may relax sanctions on a mining billionaire for corrupt business practices in order to gain access to metals in the Democratic Republic of Congo. The Biden administration is offering the executive a deal that officials hope will bolster the supply of cobalt, which is seen as vital to electric vehicles, Eric Lipton reported. Human rights activists and some government officials are enraged.

4. Microsoft’s carbon emissions are up 30 percent since 2020. The push to be the global leader in artificial intelligence is threatening the company’s ambitious climate goals, Bloomberg reported. Data centers in the U.S. may have used as much energy as the country’s utility-scale solar farms produced last year, according to an analysis by the Financial Times.

5. More than half of Zimbabwe’s population will need food aid this year, after a drought led to widespread crop failures, Reuters reported. A recent study found no evidence that climate change had helped to cause the drought. It showed instead that the El Niño weather pattern was its main driver.

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By Oghale

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