Citing the need to protect U.S. jobs from what otherwise would be Chinese domination of clean energy manufacturing, President Biden has announced steep new tariffs on Chinese-made steel and aluminum (25 percent), semiconductors (50 percent), solar cells (50 percent), and electric vehicles (100 percent). Though the immediate, tangible impact of his decision might be modest — it affects just $18 billion of imports, in part because there are very few electric vehicles from China sold in the United States — Mr. Biden intended to send a message. He did; too bad it’s a mixed one.
By the Editorial Board
The inescapable fact is that — to the extent it has a material effect — Mr. Biden’s tariff wall makes the transition to a carbon-free future more costly and difficult. The tariffs pad the bottom lines of incumbent manufacturers such as Tesla but provide no guarantee the profits will be used for investments in cutting-edge green technology.
The White House is right about Beijing’s predatory trade tactics, to be sure. These practices have helped it build commanding leads in the markets for critical green technologies. Some 80 percent of the world’s solar cells and 60 percent of its wind turbines, EVs and batteries are made in China. China’s broader macroeconomic policies tend to suppress domestic demand, leaving exports as the only outlet for excess production. This is why Europe, too, is considering protectionist measures.
Nevertheless, for the climate, Chinese industrial policy has done undeniable good. Beijing’s subsidized production helped slash the cost of solar power by nearly 90 percent, drop the price of offshore wind power by 73 percent and reduce the price of batteries by 80 percent over the past decade. “What shouldn’t be missed is how the reduction in solar power costs reshaped the electricity supply in the U.S. and all over the world,” noted Michael Greenstone, who served as economist on President Barack Obama’s Council of Economic Advisers and is now at the University of Chicago.
Passenger cars and light-duty trucks account for about 16 percent of U.S. carbon emissions. Reducing automotive pollution is crucial to getting total emissions down to half of 2005 levels by 2030, Mr. Biden’s goal. It will be harder to achieve that objective if American drivers cannot get their hands on the ultracheap EVs made by China’s BYD. BYD’s entry-level hatchback retails in China for about a third of what the cheapest EV available in the United States — the Nissan Leaf — costs.
Meanwhile, Mr. Biden’s tariffs could pit clean-energy sectors against each other. The 50 percent levy on solar cells, for example, aids U.S. companies that make those items but raises costs for those that install them. Solar panel installation is a robust part of Colorado’s economy. Unsurprisingly, that state’s Democratic governor, Jared Polis, blasted the tariffs as a “regressive tax” and “horrible news for American consumers and a major setback for clean energy.”
Cheap Chinese imports in the first decade of the 21st century greatly harmed some communities that depended for employment on a certain set of industries exposed to import competition. Still, the main factor driving the long decline in manufacturing’s share of employment has been not trade but automation. There is little government can do about that, which is partly why — despite all the federal dollars the Biden administration has spent on industrial policy so far — manufacturing has added only 139,000 jobs over the past five years.
No doubt, Mr. Biden’s tariffs are good politics. They amount to his imitation of the China-focused protectionism that his predecessor and 2024 opponent, former president Donald Trump, has mainstreamed. The best solution to the problem of stimulating carbon-free energy development, however, would be a tax on carbon — ideally a global one.
The second-best solution is one the Biden administration hit upon in the Inflation Reduction Act: subsidies. There will undoubtedly be mistakes and waste in programs related to the law. Still, it’s hard to imagine the misallocation of resources could be greater than protecting Tesla from Chinese competition. And such programs should also produce positive spillover effects — accelerating investments in technologies like solar and wind power, energy storage and carbon capture.
Politically, Mr. Biden’s new tariff war with China might be a winner. But forcing consumers, via tariffs, to subsidize domestic clean energy companies that are far from the cutting edge of technology is an economic and environmental loser.
