Five days after seemingly cordial US-China climate talks, US President Joe Biden has announced he will increase US tariffs on Chinese solar panels, electric vehicles (EVs) and batteries to run them.
Last Wednesday and Thursday, China’s new top climate diplomat Liu Zhenmin travelled to Washington DC for two days of talks with his US counterpart John Podesta, also fresh in the job.
They discussed co-operation on climate issues, including plans for both sides to ramp up renewables, and vowed to “intensify technical and policy exchanges”.
But the day after, with Liu still in the country, the US State Department briefed journalists that Podesta had told Liu that China was producing too many solar panels and lithium-ion EV batteries.
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Then on Tuesday, the White House increased tariffs on Chinese EVs, lithium-ion batteries and solar panels, accusing the Chinese government of “unfair, non-market practices” and “flooding global markets with artificially low-priced exports”.
“Clear protectionism”
In response, the state-owned China Daily newspaper in an editorial described the tariffs as “a clear act of protectionism”.
The head of the China Automobile Association Fu Bingfeng agreed, adding that “the new energy industry is jointly created by mankind and can bring common benefits to mankind”, saying the tariffs were “very unreasonable”.
Asia Society analyst Li Shuo told Climate Home that, rather than thinking of over-supply of solar panels as a problem, “it is the world’s inability to deploy these products that is the problem”.
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The tariffs reflect “the new reality global climate politics needs to deal with” – that low-carbon products will not be made in the most cost-efficient way and distributed around the world, he explained. India also has trade barriers against Chinese solar panels, designed to boost its domestic solar manufacturing.
Research from the Center for Strategic and International Studies has found that such trade barriers can, in general, delay the competitiveness of low-carbon technologies against their market rivals – like solar against gas, or EVs against internal combustion engines.
Limited effect on solar, batteries bigger
The US-imposed measures are designed to increase the cost of Chinese goods needed for the energy transition – and could therefore slow down America’s shift away from fossil fuels.
But BloombergNEF solar analyst Jenny Chase told Climate Home that the increase in the tariff on solar cells and modules from 25% to 50% would “have little effect”.
She noted that tariffs of 25% have been in place “for ages – and as a result the US imports almost no cells or modules directly from China, instead importing from Southeast Asia”.
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The Biden administration is currently weighing whether to impose tariffs on solar imports from four Southeast Asian countries over concerns that China is routing its panels through these nations.
US solar panel manufacturers are lobbying the government in favour of those tariffs, while US solar panel installers are lobbying against them. A decision is needed by June 6, two years on from a pause on tariffs affecting the Southeast Asian nations.
Similarly, the US already imports relatively few electric vehicles from China, as it already has Trump-era tariffs on them. The US’s adoption of electric vehicles is far slower than in Europe or China.
But US car-makers do import lots of lithium-ion EV batteries for their vehicles despite existing 7.5% tariffs. China produces about three-quarters of all the world’s EV batteries, with the US producing less than a tenth.
(Reporting by Joe Lo; editing by Megan Rowling)
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