Saturday, July 13, 2024

Biden is slapping tariffs on China. Will the climate suffer?

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Are tariffs good for fighting climate change?

It’s a question at the center of President Joe Biden’s move to hike duties on a host of Chinese-made green goods.

Biden will announce Tuesday that he’s imposing a 100 percent tariff on electric vehicles from China, quadrupling the current rate, administration officials told reporters Monday evening. The White House will also double tariffs on Chinese solar cell imports to 50 percent, triple tariffs on Chinese steel and aluminum to 25 percent and more than triple lithium-ion EV battery tariffs from 7.5 percent to 25 percent.

The moves are necessary because China is subsidizing its industries and flooding global markets, said Lael Brainard, director of the National Economic Council. That glut is weakening companies that cannot compete with severely diminished prices, she said.

“The president’s actions ensure that American businesses and workers have the opportunity to compete on a level playing field in industries that are vital to our future, such as clean energy and semiconductors,” Brainard said. “The president is taking a tough strategic approach, combining investment at home with enforcement against China in key sectors.”

The tariffs come as the Biden administration injects billions of dollars into clean energy manufacturing, unleashing a wave of new jobs as the president races toward the November election. The tariffs are meant to safeguard emerging U.S. industries from dominant competitors in China.

Yet the approach highlights a deep tension between two of Biden’s biggest policy objectives: delivering well-paying union jobs to Americans and speeding efforts to slash the pollution driving up global temperatures.

“Ultimately, this is about making sure that there is a domestic industry and that you have economic returns to the investments that have been made for the energy transition,” said Ilaria Mazzocco, a senior fellow focused on Chinese business and economics at the Center for Strategic and International Studies. “But if you don’t get that balance right, you’re ultimately just making sure American consumers can’t get low-cost, high-quality products.”

China has spent years investing in the latest clean energy technologies and has heavily subsidized the growth of its industries, helping drive down global prices. Increasing tariffs on imports from China could raise costs in the short term and slow down the deployment of EVs, solar and wind technologies, and other renewable energy systems, said economists.

“If you’re thinking about the global transition to net zero, or just reducing carbon as fast as possible, then if some country is willing to subsidize production of green goods — solar power, EVs — then the rest of the world should say thank you very much,” Albert Park, chief economist at the Asian Development Bank, told E&E News in a recent interview.

Park argued in an opinion piece last year that to make green goods widely available globally, governments should work to lower trade barriers rather than engage in protectionism.

That’s harder at present, he said. “The real rub is that this is also now a huge growth market.”

The Biden administration knows it needs a domestic constituency that will benefit from the transition and support longer-term climate action, said Mazzocco.

And although access to cheap, clean energy could ignite the shift to renewables, it could also have the opposite effect if it creates downsides in states that could help reelect Donald Trump, the presumptive Republican nominee for president.

Trump has railed against what he dubs Biden’s EV “mandate” and has promised to hike tariffs on Chinese imports and drill for more oil and gas, all measures that observers say could have negative consequences for global climate efforts.

Brainard, the White House economist, said Biden was taking a “tough strategic approach” to China that was not designed to ramp up tensions but to manage competition.

The previous Trump administration, she said, “did not deliver on its promises to increase exports to China from the U.S., to create manufacturing jobs here in America or to end China’s unfair practices,” Brainard said.

But Biden’s tough approach toward China hasn’t gone unnoticed.

A spokesperson for China’s foreign ministry told reporters during a press conference in Beijing on Monday that the U.S. tariffs were “self-defeating” and ran counter to efforts to jointly address climate change.

“More importantly, it will harm the world’s green economic transition and climate action,” said Wang Wenbin, the spokesperson, according to a readout of the briefing provided by China. “We urge the US to stop repairing and digging up the road at the same time, so to speak, and create enabling conditions for China-US climate cooperation and global green transition.”

‘Theory of change’

The president’s focus on tariffs is part of a wider shift in U.S. climate policy that puts a premium on jobs, said Noah Kaufman, a climate economist who served as a senior adviser on Biden’s Council of Economic Advisers.

The Inflation Reduction Act — Biden’s signature climate law — sought to stimulate a wave of technological innovation and job creation by offering subsidies for clean energy technologies and domestic manufacturing. But it also relies on tariffs, said Kaufman, who’s now a senior research scholar at Columbia University’s Center on Global Energy Policy.

The U.S. automotive industry, for example, is a major employer in swing states such as Michigan, and in pursuing EV tariffs, Biden is seeking to avoid the type of industrial outsourcing that hollowed out many manufacturing communities.

“There is a theory of change that climate progress will stall if the domestic auto industry starts crumbling,” Kaufman noted.

The approach could have benefits in electorally important states in the Midwest, but it also has broader implications that go beyond election-year campaigning.

“Communities matter, and if you want an equitable transition, you want strong local economies throughout the country,” said Kaufman. “We’ve seen it before in this country where powerful companies decline and communities are left in the lurch.”

The threat that Chinese EVs pose to U.S. manufacturers hasn’t really been tested since the Trump administration slapped a 27.5 percent tariff on electric cars from China. That has kept those vehicles from entering the U.S. market, leading Mazzocco of CSIS to call Biden’s newest duties largely performative.

The situation is different for solar.

The IRA offers subsidies to companies that manufacture solar components in the U.S., leading to a boom in announced solar factories across the country. Yet industry analysts expect that many of the announced facilities won’t be built amid a flood of cheap imports made by companies based in China.

That has led to calls from the U.S. industry to impose additional tariffs.

Biden could simply propose additional subsidies for U.S. solar manufacturers, simultaneously helping American solar manufacturers and domestic solar installers, said Gernot Wagner, a climate economist at the Columbia Business School. But Biden is unlikely to win congressional support for additional subsidies — leading him to propose the tariffs.

There is not a lot of evidence to date to suggest that tariffs lead to higher or lower emissions, said Catherine Wolfram, an economist at the Massachusetts Institute of Technology. The presidential election this fall will provide a bigger test of whether climate policies linked to job creation can create long-term political support for cutting emissions.

“In the short run, we want as much clean energy as possible,” she said. “In the long run, we want to build a base of support for the U.S. transition to clean energy and want to do that in a way that supports jobs.”

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