U.S.-China trade spat over EVs, green tech
by Christopher Rugaber
China has sharply ramped up its production of cheap electric vehicles, solar panels, and batteries just as the Biden administration has pushed through legislation supporting many of those same industries in the United States.
China’s burgeoning production of electric cars and other green technologies has become a flashpoint in a new U.S.-China trade fight, highlighted by Treasury Secretary Janet Yellen during her five-day visit to China and seized on by former President Donald Trump in incendiary remarks on the campaign trail.
China has sharply ramped up its production of cheap electric vehicles, solar panels, and batteries just as the Biden administration has pushed through legislation supporting many of those same industries in the United States. Concerns are growing not just in the U.S. but also in Europe and Mexico that China will seek to bolster its own struggling economy with a wave of exports that could undercut factories overseas.
A U.S. trade group, the Alliance for American Manufacturing, noted in a February report that leading Chinese automaker BYD had recently introduced an electric SUV at the “astonishingly low” price of $14,000. China’s auto industry poses an “existential threat” to U.S. carmakers, the report argued.
Trump, at a rally late last month in Ohio, charged that China would seek to export cars into the United States through Mexico. The U.S. currently has a 25% tariffs on cars from China that has largely blocked vehicles from that country, but Mexico has a free trade agreement with the U.S.
Trump promised to block such imports with new tariffs, but suggested if Biden were reelected it would be a “bloodbath” for the auto industry.
So what’s behind this new trade fight between the U.S. and China? Here are some questions and answers on the issue:
WHAT IS THE THREAT FROM CHINA?
After more than a decade of subsidizing its automakers, China has built a substantial car industry that accounts for 60% of global electric vehicle sales, according to the Paris-based International Energy Agency.
Yet by some estimates, Chinese companies are producing as many as 10 million more electric vehicles annually than they can sell domestically, according to the AAM. That is driving them to sell more cars overseas. Similar dynamics exist in other industries, such as solar panels, batteries, and more traditional areas such as steel.
WHAT’S NEXT?
For now, the two sides have mainly agreed to hold talks on the issue. China hasn’t committed to any steps to address American concerns, arguing that its cheap solar panels and other green products are helping the world wage the costly battle against climate change.
But the government in Beijing has also acknowledged that manufacturing overcapacity and weak consumer spending are challenges it needs to confront to achieve sustainable growth for its own economy.
The rapid expansion of EV production has sparked fierce price wars that are expected to drive some makers out of business. Huang Hanquan, an expert on industrial policy, said that China needs better policy coordination so that it can encourage the development of new technologies without prompting every province to promote the same industry, and companies to overinvest.
“I think the Chinese realize how concerned we are about the implications of their industrial strategy for the United States, for the potential to flood our markets with exports that make it difficult for American firms to compete,” Yellen told reporters on Saturday.
“It’s not going to be solved in an afternoon or a month, but I think they have heard that this is an important issue to us,” she said.
