Can the West afford to abandon cheap, imported, Chinese green technologies?

The United States and the European Union are investing heavily in developing green energy and clean technology sectors to support the green transition and ensure they can meet growing energy demands. However, both regions are all too aware of their heavy reliance on China for energy and clean technology, as the Asian giant continues to dominate many sectors, from key minerals to microchip production. This has led several Western powers to consider tariffs and restrictions on Chinese imports. However, many energy experts are now questioning whether such an approach could limit the ability of the US and EU to transition to green energy as quickly as they had hoped, as they need to rapidly expand their green energy and manufacturing capacity to shift away from China.

In May, President Biden introduced new, sweeping tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum and medical equipment to protect U.S. jobs and manufacturers. Biden said Chinese companies don’t have to make a profit because of subsidies from the Chinese government, which give them an unfair advantage in the international marketplace. Biden said, “American workers can outwork and outperform anyone as long as the competition is fair. But for too long, it hasn’t been fair. For years, the Chinese government has poured state money into Chinese companies… that’s not competition, that’s fraud.”

Many of the tariffs won’t go into effect until 2026, giving the United States time to ramp up production and increase clean energy capacity. But the tariffs could mean higher prices as companies struggle to deliver enough clean energy products without the same low-cost manufacturing capabilities and heavy government subsidies as in China. The tariffs will be phased in over the next three years. They are expected to help prevent a new wave of cheap Chinese electric vehicles from entering the U.S. market, keeping U.S. automakers competitive as they introduce their electric vehicle models. The tariff rate on solar cell imports will double this year to 50 percent, while tariffs on Chinese steel and aluminum products will increase by 25 percent and tariffs on lithium-ion electric vehicle batteries will increase from 7.5 percent to 25 percent.

The United States has made huge strides in green energy since the Inflation Reduction Act (IRA) was introduced in 2022. The IRA has poured billions into expanding renewable energy and cleantech sectors and has attracted even higher levels of private investment into the industry. Now, energy experts fear that imposing such far-reaching tariffs on Chinese products could undermine the IRA’s goals and undo the significant progress made over the past two years. Related: Steel industry reacts cautiously to import limits, tariffs

Similar problems are evident in the EU, after the European Commission imposed temporary tariffs on Chinese electric vehicles on grounds of “unfair subsidization” by China. The new tariffs on Chinese electric vehicles average around 31 percent, significantly higher than tariffs on imports of conventional cars. The tariffs are expected to spur accelerated growth in green energy production in the U.S. and EU and support job creation, but they could also hamper the pace of deployment of electric vehicle and renewable energy projects and raise consumer prices.

The introduction of tariffs will undoubtedly make the green transition more expensive and difficult, even if it has the side effect of increasing U.S. energy and manufacturing jobs and reducing dependence on China. Governments around the world need to consider their priorities when it comes to green energy. While the Chinese government has done little to hide its predatory trade tactics, China Is supplying components and technologies needed to accelerate the global green transformation. This has indeed made many countries around the world highly dependent on China for energy, transportation, and electronic devices. About 80 percent of the world’s solar cells and 60 percent of wind turbines, electric vehicles, and batteries are manufactured in China, showing how important this country is to the global green transformation.

Still, Biden’s tariffs on China were a powerful political move in the run-up to the presidential election, and they’ve won supporters over. The promise of job growth in America will always be a winning one, and it’s a move many saw as necessary to compete with Trump. But the long-term impact of the move, which voters may not immediately see, will be higher costs for consumers who are forced to subsidize domestic clean energy companies to make the components they need for the green transition. It remains to be seen whether the tariffs will lead to a major manufacturing renaissance in the U.S. and Europe, but they’re likely to limit the acceleration of the green transition in the short to medium term.

By Felicity Bradstock for Oilprice.com

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