The US government is desperately looking for ways to level the clean energy playing field across the US and China. The federal government is currently pumping trillions of dollars into U.S. factories and infrastructure, with a particular focus on clean energy manufacturing capacity, but that investment could be significantly undermined by the dominance of cheap Chinese products in global markets. There is sex. In response, the US has imposed increasingly protectionist trade policies, which threaten to escalate tensions in the trade war between the US and China without actually having a significant impact on the issue. .
The United States is currently lagging behind in increasing spending on domestic clean energy industries. And even the $2 trillion dedicated to building back better pales in comparison to the kinds of investments China has made over the past decade. China has outperformed the competition in recent years, quadrupling US clean energy spending levels last year and strengthening an already established clean energy supply chain that spans the globe.
The Chinese government has a de facto monopoly on a worrying number of key supply chain nodes. According to a recent report in the New York Times, “China produces about 80 percent of the world’s solar panels, nearly 60 percent of its electric vehicles, and more than 80 percent of its electric vehicle batteries.” Additionally, China produces 60 percent of the world’s rare earth minerals and processes nearly 90 percent. Rare earth minerals are key raw materials essential for manufacturing clean energy infrastructure such as electric vehicle batteries and solar panels.
The barriers to entry are huge for any competitor, but the United States is trying to find a way to overcome the challenges. The government’s main strategy over the past five years has been to impose tariffs on a variety of Chinese products to protect U.S. manufacturers who cannot sell their products cheaply enough to compete. Some executives and officials say China’s actions violate trade rules by using predatory pricing to flood the market and stifle competition.
And the problem will only escalate. China’s economy is slowing and the Chinese government is doubling down on supporting manufacturing and export potential. Indeed, there are growing legitimate concerns that China is headed toward overproduction and overproduction of numerous products as its own demand shrinks. A recent Wall Street Journal headline said, “China is making too much and other countries are worried.” Drowning in its surplus, China is likely to push unnecessary solar panels, electric vehicles and other products onto global markets at deep discounts, threatening in no small part to many economic sectors and the global economy. There is.
The New York Times reports that Biden administration officials “appear likely to raise tariffs on electric vehicles and other strategic goods from China” as part of a continuing review of the tariffs that the Trump administration began four years ago. ” reported. This comes against the backdrop of the “coming wave” of Chinese electric vehicles hitting the international market as the cost of EVs falls in China. Currently, the average price of an EV in China is about $28,000, compared to $47,500 in the US.
Congress is also lobbying for further increases in tariffs on imports from China. A bipartisan House committee sent letters to the Biden administration in November and on January 5 of this year asking the administration to impose tariffs on Chinese electric vehicles and semiconductors, respectively.
However, the imposition of tariffs also comes with its own drawbacks. First, this move could intensify existing trade tensions with China, at a time when the growth of our country’s green economy remains heavily dependent on imports from China. This could hurt U.S. producers as much as it helps them, if not more, if the prices of the raw materials they rely on soar and their operations become unprofitable. Second, it may be meaningless. U.S. protectionist policies cannot stop other countries from stealing China’s cheap exports. This means that China could still be a global price setter with or without US government involvement, ultimately leaving the US with a global market in which it cannot compete at all.
Written by Hayley Zaremba, Oilprice.com
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