A case of failed politics

Last week, the Biden administration announced a wave of trade barriers aimed at Chinese manufacturers. The real casualty will be the climate.

The United States has just set a 100% tariff on electric vehicles imported from China, quadrupling previous figures. Solar cells (panels) and batteries suffered a similar fate, receiving a 50% and 25% tariff respectively.

The impetus for the unprecedented trade barriers on EVs are fears of anti-competitive practices by Chinese firms and the government. The latter is being accused of injecting its industry with waves of subsidies to eke out as much market share from the growingly lucrative green technology business. Moreover, the “artificially” low average unit costs firms achieve thanks to lax industry and labour regulations, a vertically integrated supply chain in the country and other alleged unethical business practices (e.g. intellectual property theft) give Chinese producers an enormous competitive advantage in the global market.

These cost advantages filter through to the final price tag. Whilst a new (American-made) Tesla or Ford EV will set the average consumer back between $40’000-100’000, a consumer can get their hands on the newest (Chinese) BYD electric vehicle for as low as 10’000$. And these prices are only going down. In the future, mass-produced standard-issue Chinese EVs could retail for well under their current price, exacerbating fears of dumping.

The price war created by the new arrivals has thrown incumbent car brands into a tailspin, and the over three million US workers in the motor vehicle manufacturing and retail industry are certain to feel the pinch. Trade protectionism aims to protect this domestic industry and jobs, hence boosting the party’s popularity – a rather convenient policy move in view of the upcoming elections.

However, trade protectionism brings about many issues. Where free trade encourages competition, lower prices, greater availability of goods, services and capital and international cohesion, protectionism is a product of political divergence; trade barriers prompt retaliation, shield sunset industries through supporting inefficient business practices and lead to net lower welfare as they typically result in a negative ripple effect felt across the economy.

In the advent of geopolitical schism, the world is increasingly switching to a more isolationist stance. The modern global economy is a far cry from the admirable economic and political progress made during the heyday of globalisation and free trade movements; the rise of the right, global shocks such as the global pandemic, financial crises, trade illiberalism, withdrawal from international unions such as Brexit and many more factors pose an existential threat to globalisation. The United States is not alone in waging war against Chinese EVs: the EU is carrying out an investigation on setting similar antidumping duties.

Although Mr. Biden presents his trade levies as a much more sophisticated version of the crude and chauvinistic anti-China rhetoric supported by his predecessor, never before has trade illiberalism so blatantly targeted the green transition. Restrictions on green technology sacrifice decarbonisation and green sources of energy in favour of an elusive notion of protecting national industry; blocking Western access to Chinese battery and solar technology will set the green transition back – time we do not have the luxury of losing.

The case for protectionism is a messy case for prioritising the goals of very few as opposed to those of the majority. Meddling politics into climate change dismisses it as a merely political issue, failing to recognise it as the global emergency it truly is. The case for protectionism is, in this case, a case of failed politics.