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Econometer: Is raising the tariff on Chinese EVs a good move?

Phillip Molnar, The San Diego Union-Tribune on

Published in Business News

The Biden administration quadrupled tariffs on Chinese electric vehicles this week in order to protect American automakers.

The tariffs are expected to rise to 100 percent from 25 percent for EVs. There are additional tariffs for critical minerals, solar goods and batteries.

Critics of the EV tariffs say they go against national efforts to reduce carbon emissions, and they prevent a low-cost option for consumers looking to avoid gasoline prices.

On the flip side, the American auto industry supports many high-paying union jobs and flooding an industry with cheap goods from Asia hasn't historically been good for many cities and towns across the U.S. Also, there are national security concerns: The U.S. Commerce Department has launched an investigation into whether Chinese vehicles' navigation and communication features could spy on Americans.

Q: Is raising the tariff on Chinese EVs a good move?

Economists

Caroline Freund, UC San Diego School of Global Policy and Strategy

NO: Eliminating import competition from China will slow the urgent transition to clean energy. If U.S. auto producers need a 100 percent tariff to compete with China, then we should not be producing EVs. The gaping tariff margin will drive up EV prices and put the brakes on efficiency-enhancing effects of global competition. Finally, China will retaliate, as they did to the Trump tariffs, hurting the most competitive U.S. exporters.

Kelly Cunningham, San Diego Institute for Economic Research

NO: Chinese producers do not pay the tariff, American consumers do. Instead of favoring only some domestic producers, the free flow of ideas, finances and trade benefits American consumers. Quality is an aspect to consider in every trade negotiation, imposing barriers limits choices and freedoms. If China produces low-cost, quality EVs that American consumers want, even if they are subsidized below their cost, why should the U.S. not take the gift as reverse foreign aid?

Lynn Reaser, economist

YES: There are three issues: national security, clean energy and jobs. The Chinese would probably not use the navigation and communications systems of vehicles for espionage purposes. However, the average cost of an EV in the U.S. is $54,000, which is beyond the reach of most low-income individuals. A flood of subsidized Chinese EVs would thwart the development of a low-cost U.S. segment of the market and hurt jobs.

James Hamilton, UC San Diego

NO: A tariff will discourage sales of electric cars. It would come at a time when many consumers are growing skeptical of going electric and will set us back in our efforts to reduce carbon emissions. A tariff will raise the price of cars, which will undermine the Fed's efforts to bring inflation down without causing a recession. And a trade war will inflame geopolitical tensions. This is the last thing we need right now.

Norm Miller, University of San Diego

NO: The current tariff of 27.5 percent should be enough to offset Chinese EV-industry subsidies. A 100 percent tariff is effectively a ban and will ignite a trade war hurting U.S. farmers, lumber producers and other export industries. We can continue to provide buyer tax credits for U.S.-made products and consider subsidies to accelerate efficient battery technology, but we also need to allow maximum market pressure on GM, Ford and Chrysler to join Tesla in competing globally.

David Ely, San Diego State University

YES: The administration can argue that this action is needed to offset the advantages that Chinese government subsidies provide to their own EV manufacturers. U.S.-imposed tariffs will help protect domestic auto manufacturers from being harmed by artificially cheap imports. Hopefully, these benefits will outweigh the costs associated with tariffs, including the likely retaliation by China, a slower conversion to EVs in the U.S., and higher EV prices in the near term.

 

Ray Major, SANDAG

NO: Tariffs are an extremely complicated taxing mechanism that often end up with unintended consequences. Most economists agree that the bulk of tariffs costs are passed on to the consumer, increasing the price of the imported good. In the case of EVs, consumers have many choices — many of them in the $100,000+ range. If the government's goal is to replace gas engines with EVs, allow low-priced EVs without a tariff into the country so that the average person can afford them.

Executives

Gary London, London Moeder Advisors

NO: And for a host of reasons, including: 1) Competition usually leads to higher quality, less costly domestically produced product. 2) international competition is even better, particularly with a geopolitically antagonistic nation like China. If we trade with them maybe we don't fight with them. 3) This nation needs to continue to press for EV transition for climate change reasons. And 4) tariffs by us lead to tariffs on us. None of this ends well.

Bob Rauch, R.A. Rauch & Associates

YES: Tariffs can help protect domestic EV manufacturers from competition from lower-priced Chinese imports. This safeguards American jobs and the domestic automotive industry. Reliance on foreign-made EVs could threaten national security — think TikTok. The tariffs are a response to China's lack of fair trade practices, and politically, imposing tariffs can be a way for the current administration to demonstrate a tough stance on China.

Austin Neudecker, Weave Growth

NO: The climate is changing with devastating global effects and we need adoption of EV vehicles. Legacy automakers have focused on high-priced models and consumers would benefit from competition. Quality and security are legitimate concerns, so we should raise the standards on all vehicles. China does not play fair with government subsidies, IP, labor or tariffs. Regulate on identified abuses rather than origin. Increases will spur retaliation in the short term and relocation (e.g. Mexico) in the long term.

Chris Van Gorder, Scripps Health

YES: I might answer "no" if China were an ally working with us to mutually support our economies, but that is not the case. We must let American manufacturers and ally countries have time to convert to EVs and support our own economy with jobs and growth. The current 25 percent tariff has kept Chinese EV imports down but may not be enough to do so in the future given the scale of Chinese manufacturing.

Jamie Moraga, Franklin Revere

YES: It's essential the U.S. protects strategic competition in the EV industry. Chinese EVs not only threaten domestic automakers and U.S. manufacturing jobs, but also pose risks to U.S. cybersecurity, national security and Americans' personal privacy. Similar to concerns with TikTok, the U.S. must prevent a foreign country's ability to nefariously utilize technology to obtain sensitive personal information, track drivers and remotely manipulate vehicles. Raising the tariff is a good move.

Haney Hong, San Diego County Taxpayers Association

YES: But not because we need to protect American automakers. We should use the tariffs to pay for the people who can do the national security checks on the cars that are imported. Until the American public can be assured Chinese technologies aren't spying on us and they aren't pre-positioning hacks into our lives should we go to war, we're going to need an army of people. Trust should be earned, not given here.

Phil Blair, Manpower

YES: But the U.S. needs to very publicly prove that the Chinese government is unfairly subsidizing the EV industry. Tariffs should predominantly be used to balance any unfair competitive markets. This is our economy they are playing with.


©2024 The San Diego Union-Tribune. Visit sandiegouniontribune.com. Distributed by Tribune Content Agency, LLC.

 

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