It’s Bidenomics that has made America’s EV tariffs necessary
One bad idea after another: EV subsidies have spelt trade barriers
is a Bloomberg Opinion columnist and member of the editorial board covering economics. the market uptake of a much-needed technology. If the administration is to keep its promises on climate change, it will need other ways of inducing Americans to use EVS. One such policy is in the works: New EPA rules to control the proportion of EVS and gas-powered vehicles sold in the US. Unless demand patterns shift, producers will be induced to lose money on EVS and recover the losses by selling their reduced output of fossil-fuel vehicles at far higher prices. If this arithmetic doesn’t work out, demands for more subsidy may arise.
Support for persistently uncompetitive industries sometimes makes sense. Access to some kinds of goods really is a nationalsecurity imperative. Some of the products covered in America’s new bundle of tariffs, such as high-end semiconductors, might qualify. EVS plainly don’t.
Right now, Biden’s officials aren’t really pressing the national-security argument. The China threat lurks in the background, of course, but the main case for high tariffs on EVS and other Chinese exports rests on Beijing’s market-distorting policies. In this view, US producers can’t match their Chinese rivals not because US costs are too high but because China’s exports are artificially cheap, driven down by Beijing’s pursuit of industrial excess capacity.
A stickler for consistency might pause at this logic. When the US adopts trade-distorting policies, it’s presented as an overdue recognition of market failures. When China does it, it’s decried as artificial and a threat to global economic stability.
Be that as it may, trade-distorting policies do distort trade. America’s industrial polices can make its trading partners worse off. The same goes for China. The question is whether disputes and imbalances can be resolved cooperatively. Pro-trade, positive-sum outcomes are at least imaginable. But governments, led by the US, have chosen to go the other way. Some argue it was a mistake even to hope for cooperation. China, it’s argued, is a cheat and should never have been allowed into the World Trade Organization, a defunct institution. I disagree, but let’s see how the negativesum alternative of protection, retaliation and counter-retaliation works out.
It’s early days for such policies, and the cycle of error piled upon error has plenty of room to run.