US Tariffs on Electric Cars from China: Isolationism Is Not the Right Approach

With the increase in tariffs to 100%, President Joe Biden completes the triumph of Trumpism in the U.S.; Europe would be ill-advised to follow the same path.

U.S. President Joe Biden and his Republican challenger, Donald Trump, couldn’t be any further apart. Both differ in their approach to economic issues, both have a different understanding of economic issues and different priorities in global politics. But there is one exception to this: China.

In 2018, Trump began a trade war against China. He imposed tariffs on a large amount of imports from the People’s Republic, on washing machines, as well as on steel or aluminum. Biden has maintained this policy, and is now intensifying it in precisely the sectors from which Beijing expects a good deal. For example, the U.S. will increase its tariffs on electric cars to 100%, while tariffs on solar panels will be doubled to 50%.

The message is clear, regardless of whether it’s Democrats or Republicans: China will be seen as a systemic rival needing to be contained or harmed, or at least to be separated from. This is bad news for the world, since it threatens to complete Trumpism’s triumph in trade policy. Trump’s understanding of economic relations between countries is simple. His mindset in trade relations is that there can only be winners or losers; one always takes advantage of the other. But the reality is much more complex.

Winners on Both Sides

The reality is that there are winners on both sides in trade between developed countries. The export boom in China has helped lift hundreds of millions of Chinese people out of abject poverty. China is currently climbing the next rung on the development ladder: Instead of textiles and toys, more and more electric cars and solar panels are coming from the People’s Republic. This also benefits people in the U.S. and Europe by providing them with decent products that can contribute to climate protection for less money.

Interdependencies also help maintain peaceful relations because both sides have something to lose. In this respect, emerging China is not comparable to Russia, which has little to offer apart from raw materials. Beijing has a much more vested interest in geopolitical stability than Moscow ever had.

The EU Has A Lot To Lose

Naturally, trade also creates losers, such as workers who lose their jobs in uncompetitive industries. But compensating laid-off workers is the job of the state. Many of the arguments against imports from China appear to be pretexts. The main problem is American car manufacturers being asleep during the shift to electric cars, rather than unfair Chinese trade practices. What’s more, the U.S. would have easier means than tariffs since it is already promoting the purchase of American electric cars to the tune of billions.

While Trumpism has already won in the U.S., it remains to be seen which path Europe takes. The EU is already examining the introduction of anti-dumping tariffs on electric cars and solar panels from China. The EU would be well advised not to follow the same aggressive path as Washington, not just because manufacturing solar panels and electric cars is more expensive and detrimental to climate protection. The EU has more to lose economically speaking: VW and BMW sell a third of their cars in China. If the EU introduces tariffs, Beijing will react. Instead of relying on isolationism, politicians should do everything possible to open up access to the Chinese market for European companies, because there are also great opportunities to be had.