Excuses For Tariffs Abound But Tariffs Are Never A Good Idea
I saw my first Rivian yesterday, a spiffy R-1-T pickup truck. I haven’t been walking in the hills above my house for a long time but yesterday I did. It’s a neighborhood where just about everyone has a Tesla. There are just about 100,000 Rivians so far, but it’s made in America and it fits Biden’s strategy for electric car production. El Presidente, reported Jim Tankersley on Monday, “wants more of America’s cars and trucks to run on electricity, not gas. His administration has pushed that goal on multiple fronts, including strict new regulations of auto emissions and lavish new subsidies to help American consumers take as much as $7,500 off the cost of a new electric vehicle. Biden’s aides agree that electric vehicles— which retail for more than $53,000 on average in the United States— would sell even faster here if they were less expensive. As it happens, there is a wave of new electric vehicles that are significantly cheaper than the ones customers can currently buy in the United States. They are proving extremely popular in Europe. But the president and his team do not want Americans to buy these cheap cars, which retail elsewhere for as little as $10,000, because they are made in China. That’s true even though a surge of low-cost imported electric vehicles might help drive down car prices overall, potentially helping Biden in his re-election campaign at a time when inflation remains voters’ top economic concern.”
Instead, the president is taking steps to make Chinese electric vehicles prohibitively expensive, in large part to protect American automakers. Biden signed an executive action earlier this month that quadruples tariffs on those cars to 100 percent.
Those tariffs will put many potential Chinese imports at a significant cost disadvantage to electric vehicles made in America. But some models, like the discount BYD Seagull, could still cost less than some American rivals even after tariffs, which is one reason Senator Sherrod Brown of Ohio and some other Democrats have called on Biden to ban Chinese E.V. imports entirely.
The apparent clash between climate concerns and American manufacturing has upset some environmentalists and liberal economists, who say the country and the world would be better off if Biden welcomed the importation of low-cost, low-emission technologies to fight climate change.
Biden and his aides reject that critique. They say the president’s efforts to restrict Chinese electric cars and other clean-technology imports are an important counter to illegal and harmful trade practices being carried out by Beijing.
And they insist that Biden’s trade approach will ultimately benefit American jobs and national security— along with the planet.
Here are the policy and political considerations driving Biden’s attempt to shield American producers from Chinese competition.
Denying Beijing a new monopoly
China already dominates key clean-energy manufacturing in areas like solar cells and batteries. Biden’s aides want to prevent it from gaining monopolies in similar industries, like electric vehicles, for several reasons.
They include climate concerns. Administration officials say Chinese factories, which tend to be powered by fossil fuels like coal, produce more greenhouse gas emissions than American plants.
There is also a central economic reason to deny China a monopoly: ensuring that electric cars and trucks will always be available, at competitive prices. The Covid-19 pandemic drove home the fragility of global supply chains, as critical products like semiconductors became hard to get from China and other Asian nations that the United States relied upon. Prices for consumer electronics and other products that relied on imported materials soared, fueling inflation.
Biden officials want to avoid a similar scenario for electric vehicles. Concentrating the supply of E.V.s and other advanced green tech in China would risk “the world’s collective ability to have access to the technologies we need to be successful in a clean energy economy,” said Ali Zaidi, Biden’s national climate adviser.
Shoring up national security
Biden officials say they are not trying to bring the world’s entire electric vehicle supply chain to the United States. They are cutting deals with allies to supply minerals for advanced batteries, for example, and encouraging countries in Europe and elsewhere to subsidize their own domestic clean-tech production. But they are particularly worried about the security implications of a major rival like China dominating the space.
The administration has initiated investigations into the risks of software and hardware of future imported smart cars— electric or otherwise— from China that could track Americans’ locations and report back to Beijing. Liberal economists also worry about the prospect of China cutting off access to new cars or key components of them, for strategic purposes.
Allowing China to dominate E.V. production risks repeating the longstanding economic and security challenges of gasoline-powered cars, said Elizabeth Pancotti, the director of special initiatives at the liberal Roosevelt Institute in Washington, which has cheered Biden’s industrial policy efforts.
Americans have struggled for decades to cope with decisions by often hostile oil-producing nations, which act as part of the OPEC cartel, to curtail production and raise gasoline prices. China could wreak similar havoc on the electric-car market if it drives other nations out of the business, she said.
If that happens, she said, “reversing that is going to be really difficult.”
Biden needs the energy transition to create jobs
There is no denying that politics also play a huge factor in Biden’s decisions. Simply put: He is promising that his climate program will create jobs— good-paying, blue-collar manufacturing jobs, including in crucial swing states like Pennsylvania and Michigan.
Biden is a staunch supporter of organized labor, and is counting on union votes to help win those states. He has pledged that the energy transition will boost union workers. He is betting their support for tariffs meant to protect American manufacturing jobs will dwarf any complaints from environmentalists who want faster progress on reducing emissions.
“One of the constituent groups in the Democratic Party that’s really highly organized, that gets people out to knock on doors, is the labor movement, more so than the environmental movement,” said Todd Vachon, a professor of labor studies at Rutgers University and the author of “Clean Air and Good Jobs: U.S. Labor and the Struggle for Climate Justice.”
Those concerns have come into especially high relief given that many clean energy jobs are with young companies where workers aren’t unionized, he added.
Biden put those concerns front and center when announcing his tariff decision last week.
“Back in 2000, when cheap steel from China began to flood the market, U.S. steel towns across Pennsylvania and Ohio were hit hard,” he said at the White House. “Ironworkers and steelworkers in Pennsylvania and Ohio lost their jobs. I’m not going to let that happen again.”
Many American reactionaries hate the whole idea of EVs Reporting, appropriately enough, for the Wall Street Journal yesterday, Mike Colias spoke with Republicans who feel resentful and put upon to buy electric vehicles. “Automakers,” he wrote, “are fixated on easing the practical concerns around electric-vehicle ownership, primarily high prices and charging hassles. But in the industry’s quest to persuade more Americans to consider EVs, a swath of the buying public could prove tough to convince: those opposed to EVs for political or ideological reasons. In a recent Morning Consult poll… about four in 10 said they had an unfavorable view of EVs. Of those who are opposed to them, 38% said their political views were a factor. Even more of those with unfavorable views— 63%— cited China’s dominance of the EV supply chain as a reason. As for party affiliation, 31% of people who identified themselves as conservative said they had a favorable view of EVs, compared with 66% of liberals.”
The fact that millions of Americans are ideologically dug in against electric cars will make it harder for automakers to comply with those rules, said Mike Murphy, a Republican strategist who has been frustrated by his own party’s bashing of EVs. The Detroit native formed a nonprofit to ease the political divide on EVs and consult with carmakers on ways to tamp down the negativity.
“There is a hearts-and-minds resistance to EVs, mostly on the Republican side,” Murphy said. “If you can’t break down that tribalism, the industry isn’t going to sell enough EVs” to meet the rules.
…In the run-up to the November election, some Republican candidates have criticized Biden for trying to force EV sales. Democrats, meanwhile, have touted the tens of billions of dollars in federal funding for battery factories and other EV projects.
But there’s another perspective besides the reactionary MAGA way of looking at Biden’s industrial policy, especially these tariffs against Chinese EVs. Let’s face it, the most pressing issue facing humanity today is the climate crisis, necessitating immediate and decisive action to reduce greenhouse gas emissions. By blocking the import of cheaper EVs from China, the Biden administration is slowing down the transition to cleaner transportation. Cheaper EVs can significantly accelerate the shift from fossil-fuel-powered vehicles, directly reducing emissions and combating climate change more effectively. Sane people— not MAGAts— agree that climate considerations should take precedence over protectionist policies, especially when time is of the essence in reducing global carbon emissions. On top of that, the high cost of American-made EVs places them out of reach for most working-class Americans, stokting economic inequality. Those low-cost $10,000 Chinese EVs would help democratize access to clean transportation, making it affordable for a broader segment of the population benefitting not just the environment but also the goal of economic equity.
No doubt, the imposition of high tariffs or even bans on Chinese EVs will provoke retaliatory measures, leading to a trade war that could have broader economic repercussions, increase costs for consumers and hurting American businesses that rely on international trade. And let’s face it, the Biden administration's protectionist stance is a form of corporate welfare, where American automakers receive government protection from competition rather than being incentivized to innovate and reduce costs, which will inevitably lead to inefficiencies and a lack of competitiveness in the industry. Instead, policies should focus on supporting innovation and improving productivity to ensure American EVs can compete globally on quality and price. The challenges faced by American manufacturing are rooted in decades of neoliberal policies that prioritized corporate profits over workers' rights and community well-being. Simply blocking Chinese imports does not address these systemic issues. I’d like to see comprehensive industrial policy reforms, including significant investments in infrastructure, education, and worker training, as well as stronger labor laws to protect workers’ rights and ensure fair wages.
Instead of tariffs and trade wars, Biden should be talking about mitigating potential job losses in traditional manufacturing sectors by implementing a Green Jobs Guarantee to ensure that any worker displaced by the transition to a green economy, including those affected by the influx of cheaper imported EVs, would have access to new employment opportunities in the renewable energy sector. Jobs could be created in various areas, such as solar and wind energy, public transportation, and sustainable infrastructure projects, aligning with the Green New Deal framework, which emphasizes both climate action and economic security.
The federal government should invest heavily in retraining and education programs to equip workers with the skills needed for jobs in the green economy making sure that workers have the opportunity to transition into new, well-paying green jobs.
And instead of relying on dangerous Trump-like protectionist measures, the government should provide substantial incentives for domestic production of green technologies, including EVs. Grants, tax credits, and low-interest loans can help American companies innovate and reduce production costs, making their products more competitive globally, supporting the growth of the domestic green tech industry while ensuring good jobs are created at home. Massive public investment in green infrastructure projects, such as expanding electric vehicle charging networks, modernizing the electrical grid, and building high-speed rail, can create millions of jobs. These projects would not only support the green economy but also provide employment for workers across various sectors, including construction, manufacturing, and engineering.
Every successful industrializer has relied on protectionist trade policy.
That is all the Asian Tigers, and particularly the U.S. in the 19th century.
Thank god for the death of "free trade". The only people that worked for were the people who owned factories.
On the on the other hand, the last time U.S. automakers made cheap reliable transportation was probably the Model-T. They will never ever make a $10k car.
Instead of tariffs, why not subsidies? Because that would mean helping the non-rich?
a note about that $7500 tax rebate. there are many conditions. so many that the PiHy car I bought in 2015 on which I saved the full $7500 no longer qualifies. Before you shop, look at their list of qualified cars for all or part of that rebate. No chinese made car would.