President Biden is expected to quadruple tariffs on electric vehicles from China in an announcement Tuesday, according to a source familiar with the decision.
This is very much a mixed bag of news - while it sucks to force ridiculously high tariffs on EV imports the Chinese EV market is currently unsustainably subsidized by the government and domestic companies wouldn’t be able to compete. If we want to grow our domestic EV automakers we can’t let them be forced to sell vehicle at a perpetual loss.
This is made even more complicated by the fact that EV manufacturing is already being heavily domestically subsidized by PE money - I believe one of the manufacturing startups is currently losing 350k on every car they sell.
I suppose that there are also some externality reasons to favor EVs over ICE vehicles, though because carbon dioxide emissions are a negative externality, for it to produce an economically-efficient outcome, you’d want to internalize that with something like a carbon tax on ICE vehicles rather than a subsidy on EVs.
I think that a subsidy probably only makes much sense from a national security standpoint, if one is worried about China controlling vehicle production.
In World War II, the US was able to leverage vehicle production capacity, and it was a significant factor affecting the war, though I don’t know how likely it is that that would be an issue today.
Like, if we get into a WW2-style long slugging match where what matters is how many people you can put on assembly lines, I suspect that China is going to have a significant advantage anyway, due to population. Like, we don’t want to get into that kind of situation in the first place.
This is very much a mixed bag of news - while it sucks to force ridiculously high tariffs on EV imports the Chinese EV market is currently unsustainably subsidized by the government and domestic companies wouldn’t be able to compete. If we want to grow our domestic EV automakers we can’t let them be forced to sell vehicle at a perpetual loss.
This is made even more complicated by the fact that EV manufacturing is already being heavily domestically subsidized by PE money - I believe one of the manufacturing startups is currently losing 350k on every car they sell.
I suppose that there are also some externality reasons to favor EVs over ICE vehicles, though because carbon dioxide emissions are a negative externality, for it to produce an economically-efficient outcome, you’d want to internalize that with something like a carbon tax on ICE vehicles rather than a subsidy on EVs.
I think that a subsidy probably only makes much sense from a national security standpoint, if one is worried about China controlling vehicle production.
In World War II, the US was able to leverage vehicle production capacity, and it was a significant factor affecting the war, though I don’t know how likely it is that that would be an issue today.
Like, if we get into a WW2-style long slugging match where what matters is how many people you can put on assembly lines, I suspect that China is going to have a significant advantage anyway, due to population. Like, we don’t want to get into that kind of situation in the first place.