- President Biden is set to increase tariffs on electric vehicles and other clean-energy goods from China, aiming to protect the U.S. economy from low-priced competition.
- The new trade policy includes a hike in tariffs on Chinese EVs to 100%, up from the current 25%, which has already kept these vehicles out of the U.S. market.
- Despite U.S. tariffs, China’s exports have surged, with critics attributing low prices to government backing and deflation.
President Biden is set to hike tariffs on Chinese electric vehicles and clean-energy goods, aiming to protect the U.S. economy from low-priced competition. This move could have significant implications for the global clean-energy sector.
Biden’s New Trade Policy
According to the Wall Street Journal, President Biden’s administration will announce the new tariffs on Tuesday. This comes after a review of China tariffs imposed by former President Donald Trump. The new trade policy is expected to include tariffs on Chinese EVs hiked to 100%, up from 25%. The current 25% tariff on China-made EVs has helped keep the vehicles from the U.S. market. Under these protections, Tesla dominates EV market share, even as EV programs from General Motors and Ford have struggled to gain traction.
Impact on China’s Economy and Exports
Despite tariffs in the U.S., China’s exports have surged recently. Critics in the U.S. and Europe blame government backing and swelling capacity for the low prices of goods. But deflation has also played a key role, unwinding the value of the yuan vs. the dollar. As of early May, China’s real effective exchange rate had erased a decade of progress, according to the Wall Street Journal, rewinding to 2014 levels. This weakness in the yuan gives China-made goods a competitive edge over inflation-plagued regions, led by the U.S. It also makes goods imported into China comparatively expensive, driving down China’s demand for imports. The combination has ramped the U.S./China trade imbalance higher.
Implications for Jobs and Clean-Energy Stocks
In 2019, the Solar Energy Industries Association claimed more than 62,000 jobs and around $19 billion in new private sector investment had been lost due to tariffs imposed in 2018 by the Trump administration against solar imports — primarily from China. Meanwhile, the Tax Foundation estimates that the Biden-Trump tariffs currently in place will reduce long-run gross domestic product by 0.21%, wages by 0.14% and employment by 166,000 full-time equivalent jobs. However, the Energy-Solar industry group has climbed more than 150% since tariffs were imposed in 2018.
Conclusion
The new tariffs set to be imposed by President Biden could have significant implications for the global clean-energy sector. While they aim to protect the U.S. economy from low-priced competition, they could also impact jobs and investments in the sector. As the situation unfolds, it will be crucial to monitor the effects on both the U.S. and Chinese economies.
