When it comes to green industries China is way ahead
US and EU tariffs on Chinese EVs are too little too late
Last week, the EU notified Beijing that it would slap 38% tariffs on Chinese-made electric vehicles (EVs). This mirrors a US decision in May to sharply increase tariffs on Chinese EVs, solar panels, and computer chips. This has been criticised by China’s commerce ministry which said the new moves would “severely affect the atmosphere for bilateral cooperation”.
The Ministry of Commerce has also announced that it will investigate imports of polyoxymethylene copolymer, a US and EU-made plastic used in electronics and cars. This has widely been viewed as a retaliation.
Furthermore, on Monday Chinese officials announced an anti-dumping probe on European pork imports. This could result in a massive blow to economies like the Netherlands, Spain, and Denmark, which are major exporters of pork to China.
China imported $6 billion worth of pork products last year according to Chinese customs data to give a sense of scale. Most of this came from EU countries. This pales in comparison to the value of European EV imports, which was $11.5 billion last year. Most of the imports are from Western automakers with factories in China, including Tesla and BMW.
The US under President Biden has raised tariffs on Chinese EVs to 100%, virtually blocking all EVs from China. The EU, in contrast, has imposed less stringent tariffs because of its ambition to achieve its goal of cutting greenhouse gas emissions by 55% by 2030. While the US is more overtly protectionist, the EU’s tariffs are more of a half measure that balances protecting European industries with environmental commitments.
Yet, for both the EU and the US, trade protection is too little too late considering how far China is ahead in developing its green industries. As Joe Biden has said: “The Chinese are spending multiple billions of dollars trying to own the technology of the future while we sit with our thumb in our ear.”
Imposing tariffs on Chinese green industries is a classic example of closing the stable door after the horse has bolted. While the US and EU scramble to protect their struggling industries, China, through aggressive industrial policy, has already raced ahead in cornering the green market. China’s global market share is over 50% for solar panels, wind turbines, and EVs. This is a disaster for Western countries, which have all committed to pursuing Net Zero, and will thus be heavily reliant on importing Chinese-made products at the expense of domestic industries.
The overreliance on Chinese imports exacerbates the economic stagnation in Western regions once buoyed by manufacturing. Former steel and manufacturing workers now often find themselves in low-paid retail and security jobs or unemployed. While China’s economic rise contributes to this shift, it is also the result of political choices by Western leaders who allowed traditional industries to decline without investing in future industries. This lack of strategic foresight has allowed China to become a global leader in sectors like EVs, an industry valued at a staggering $319 billion.
China's strategic focus on the electric vehicle industry is driven by multiple goals: reducing air pollution, decreasing reliance on imported oil, and positioning China as a global leader in clean energy and automotive technology. Policies supporting Chinese-made EVs include generous subsidies, regulatory support, charging infrastructure development, state-owned enterprises, and significant research and development funding. Visiting Shanghai last year, I observed that the vast majority of vehicles were electric, each with distinctive green license plates. In Shanghai, while the cost of a regular license plate can reach up to $15,000, it is free for EVs.
This rapid advancement in China's EV industry also poses significant security risks. As Cindy Yu writes in the Spectator, “Modern EVs have the potential to collect huge amounts of information, such as location data and even conversations between passengers. Given that China’s major companies ultimately answer to the government in Beijing, how safe will people’s data be if they buy such products?” Moreover, there is the concern that “these cars could be switched off remotely,” presenting a serious security threat.
China has taken an aggressive approach to cornering the green market. The People’s Bank of China and other Chinese banks have lent some $44 billion to the green economy. Meanwhile, The US and EU have refused to invest strategically in new industries, and have allowed traditional industries like steel, shipbuilding, and automotive to either offshore or collapse.
Imposing tariffs, however, is a regressive policy that does not address the root cause of China’s green industry dominance, which is the West’s pursuit of Net Zero. Without the surge in demand for green products, there wouldn’t be such a huge gap in the market for China to exploit. China is not forcing the EU and US to buy Chinese-made EVs. The West has chosen this path by allowing China to race ahead with developing its green industries. Much of the green subsidies, paid for by green taxes on energy bills, go towards paying companies and individuals to import Chinese-made solar panels, wind turbines, and EVs. This means that Europeans have been paying higher taxes to enrich Chinese industries.
With Chinese green industries benefiting from both European and Chinese subsidies, it is unsurprising that it has become a world leader so fast. Yet, while many people will argue that this is good for the environment, the environmental benefits of the green transition are undermined if the production of green technologies themselves is not sustainable. China's rapid industrialization has often come at the expense of environmental protection, with significant pollution and resource depletion. Many wind turbine blades and solar panels, for example, are manufactured using Chinese coal-fired power stations. This raises questions about the true environmental impact of relying on Chinese-made green technologies.
To counter this, Western countries need a comprehensive industrial strategy that goes beyond tariffs and protectionism. This strategy should include significant investment in domestic green technologies, support for innovation and research, and the creation of a favourable regulatory environment for green industries. By fostering an innovative and competitive green economy, the West can reduce its dependence on Chinese imports and create a more resilient economic model.
Like it. Exposes the folley of not having well thought out industrial policy