Campbell Clarke
For those concerned about climate change and its increasingly calamitous consequences, the policies enacted by the Biden Administration to combat the climate crisis constitute a favourable shift from the anti-environmental policies adopted by Donald Trump during his first term in power. While the Trump Administration withdrew from the Paris Agreement, rolled back over one hundred regulations governing water, wildlife, clean air, and toxic chemicals to facilitate the expansion of the fossil fuel sector, and suppressed climate science, the Biden Administration sought to catalyse global climate action and frame the climate crisis as one of its primary priorities. But the Biden Administration also adopted a variety of protectionist policies in response to growing competition from China that could complicate the energy transition in the US and compromise the competitiveness of its clean technology sector.
The importance that the current administration ascribes to climate change is especially evident in the clean energy sector. President Biden immediately adopted ambitious electric vehicle (EV) sales targets after assuming office, and subsequently authorised strict pollution standards for passenger cars, light-duty trucks, and medium-duty vehicles. These measures were intended to compel automakers to cut carbon emissions from petroleum-powered models and stimulate a sweeping shift to EVs. Such actions are significant for combating climate change because the transportation sector represents the largest direct—and second largest indirect—source of greenhouse gas emissions in the US, and EVs create fewer carbon emissions than their gasoline-powered counterparts over the course of their product life cycles.
Nevertheless, the protectionist policies that the Biden Administration implemented could undermine such efforts by delaying the adoption of technologies—like EVs—needed to transition to a carbon-neutral economy. Crucially, these policies could also adversely affect the productivity and competitiveness of the clean technology sector in the US by raising production costs for companies and inordinately isolating firms from foreign competition.
The broad tariffs that the Biden Administration imposed on Chinese EVs and clean technology components are particularly problematic. Due to the extraordinary scale of its renewable energy and clean technology industries, China produces approximately 60% of EVs, 70% of wind turbine nacelles, 80% of solar modules and battery cells, and controls between 40% and 90% of global processing capacity for many critical minerals. Chinese firms are thus able to sell such technologies at significantly lower prices compared to corresponding products produced in the US. In fact, low-cost EVs manufactured in China—like BYD’s Seagull—can be bought for less than $10,000, whereas the most affordable model made in the US—the Nissan Leaf—retails for approximately $29,000.
Importing these inexpensive automobiles would likely increase EV use—and thereby expedite the clean energy transition—because lower prices would appeal to less-well-off buyers and a broader category of customers. At the same time, however, the Biden Administration’s decision to impose a one-hundred per cent tariff on Chinese EVs in order to protect domestic automobile producers from external competition effectively undermines its efforts to reduce greenhouse gas emissions by increasing the cost of adopting clean energy technologies for consumers.
Similarly, the overly-stringent upward revisions to tariffs on steel, aluminium, solar cells, semiconductors, batteries and critical minerals produced in China will inevitably raise production costs for manufacturers. While it is reasonable for the US to impose tariffs on particular high-value-added input products—like semiconductors or certain critical minerals, for instance, which exert an outsized influence on international trade—to diminish its dependence on China for these components and buy time for domestic companies to cultivate their capabilities across clean technology value chains, these measures are too blunt in their current form. Since the US lacks a vertically-integrated national supply system and cannot feasibly create one, domestic firms would be better off sourcing low-value-added intermediate products —such as steel or aluminium—that do not pose such significant national security risks from China so that they can obtain the inputs they need in the cheapest way possible.
In their current configuration, the industrial policies that the Biden Administration implemented might also pose problems. After it proved to be politically impractical to adopt measures that address climate change directly—like a national carbon tax, for example, or a cap-and-trade scheme for carbon dioxide emissions—legislators turned to industrial policies to achieve multiple political objectives. Major measures like the Inflation Reduction Act (IRA) were designed to use standard tools such as subsidies, tax breaks and loan guarantees to help firms secure key positions in the supply chains needed to produce products essential to economic prosperity and national security. The IRA also constitutes the most significant step the federal government has ever taken to address climate change, and is intended to facilitate the development and deployment of strategically significant technologies needed to transition to a carbon-neutral economy.
But an obscure rule in this legislation known as the Foreign Entities of Concern prohibits many enterprises owned or controlled by Chinese entities from investing in the US or receiving the subsidies that these measures offer. Relatedly, the Biden Administration recently proposed a rule that would prohibit the sale or import of connected vehicle components developed, manufactured, or supplied by entities “with a sufficient nexus” to China, and subsequently finalised a regime to restrict investments by US businesses into the Chinese semiconductor, microelectronics, and artificial intelligence sectors. When combined with the existing tariffs that the Biden Administration has imposed, such measures might excessively insulate domestic companies from competition levied by their Chinese counterparts, which could stifle innovation and foster technological complacency within the automobile and clean technology industries.
Proponents of these policies argue that the state support the Chinese government provided domestic firms to develop its clean energy and technology sectors resulted in unfair competition, and that industrial policies and trade restrictions are therefore necessary for the US to secure critical supply chains, reduce national security risks, and compete with its foremost geopolitical and economic adversary.
There is undoubtedly some truth to such statements. Between 2009 and 2022, China’s central government played a critical role in the development of its clean energy and technology sectors by directing significant subsidies—equivalent to approximately RMB 200 billion or USD $29 billion—to entities that manufacture EVs and batteries within the state. Although both state-owned enterprises and private firms benefited from specific structural advantages—such as lower labour costs, reduced real estate prices, and lax environmental standards—government-directed policies like local content requirements, forced technology transfers, state-sanctioned intellectual property theft, and incentives intended to encourage individuals to purchase EVs played a crucial part.
The Chinese government also enhanced the economy’s enabling environment, invested across adjacent industries, and worked with Chinese banks to enable upstream suppliers to acquire ownership interests in mines and processing facilities, both in China and abroad. These practices enabled domestic firms to dominate key input markets—like those for critical minerals or battery components—and thereby develop a distinctive advantage relative to their rivals in Europe and North America, which do not possess thoroughly integrated supply chains.
The industrial policies implemented by the Biden Administration targeting climate-related technologies serve as a response to such state-supported efforts, and they are indeed necessary. Industrial policies like the IRA are increasingly required to incorporate national security and climate change externalities into market decisions and to offset efforts by China to achieve commanding positions in critical sectors around the world. There is also a strong case for using subsidies and tariffs to buy time for domestic industry to develop while low-emission technologies are still in their infancy. One might also argue that the aforementioned import and investment restrictions reflect legitimate national security concerns; after all, clean energy systems are crucial for countering climate change, but they are also geostrategic products that will define the future of industrial and technological competition.
Regardless, prohibiting Chinese companies from competing in the clean energy sector in the US reflects an “all or nothing” approach that precludes the possibility of balancing environmental, economic, and national security interests through the adoption of middle-ground measures. Allowing for more foreign competition from China would help domestic automakers learn, innovate, and concentrate on accelerating cutting-edge technologies that might unlock new sources of competitive advantage. In the EU, for example, policymakers are simultaneously protecting EV producers from certain Chinese imports and inviting Chinese investments so domestic firms can compete with—and learn from—their Chinese counterparts. Legislators in the US would be wise to learn from this approach and avoid classifying any Chinese involvement in the domestic clean technology sector as inherently incompatible with US interests.
A strategy that benefits from trade with China also does not necessarily entail eliminating every existing tariff to allow for crushing competition. A targeted approach to tariffs and countervailing duties that abides by the rules of the World Trade Organization—which has been subjected to a series of steady impediments imposed by both the Biden and Trump Administrations—would be more productive, both for addressing climate change and catalysing domestic competitiveness. As Dr. Robert Lawrence from Harvard University suggests, policymakers might retain some steel tariffs but exempt the type of steel used to build windmills in order to lower the cost of wind power, and eliminate trade barriers pertaining to inexpensive solar panels produced in China—which are approximately 44% cheaper than comparable products manufactured in the US—to stimulate solar energy growth across the country. Doing so would pose a minimal risk to the US economy because the domestic solar industry is small and alternative fuels for electricity generation are available if China suddenly decides to stop selling.
After a hotly contested and highly controversial election campaign, Donald Trump decisively defeated Kamala Harris on 5 November 2024 to secure his seat in the White House for the next four years. This surely represents a significant setback for climate action in the US, especially considering the Republican Party secured a majority in the Senate and maintained marginal control over Congress, which could provide the president-elect with the political means needed to execute his proposed agenda.
Despite this setback, it is still possible to learn from Donald Trump’s first term and find novel ways to make more environmental progress. While the president-elect has pledged to repeal crucial elements of the IRA, increase fossil fuel production, and raise tariffs on Chinese goods and imported automobiles, it will be difficult to quash climate legislation like the IRA because it has stimulated such significant investment in congressional districts ruled by Republicans. Crucially, there are also a series of potential steps that the Biden Administration can take while it remains in power to protect the environment and foil efforts to push Donald Trump’s proposed policies through Congress.
It ultimately remains to be seen how the impending administration will alter the industrial and climate policies imposed by its predecessor, so those engaged in efforts to address the climate crisis will have to wait to see how the president-elect’s plans unfold. Amid such uncertainty, however, one thing is clear: excessive protectionism is bound to pose problems for the energy transition in the US and compromise the competitiveness of its clean technology sector—regardless of which political party or president holds power in the years to come.
Campbell Clarke is currently pursuing a dual MA/MSc in International and World History at Columbia University and the London School of Economics and Political Science. He also holds a BCom in Strategic Management and History from McGill University. His interests lie at the intersection of climate change, international law, and geopolitics, and his current research explores the manifold ways in which climate change affects the efficacy of international treaties that are intended to regulate resources that transcend national boundaries.
