Tariffs won’t stop China’s electric vehicle dominance

One of the most useful distinctions in economic policy is between purpose-driven and profit-driven motives. While it is hard to deny that, under the right conditions, the profit motive can lead to preferred outcomes for consumers, it is equally hard to deny that consumer satisfaction is not the only goal of economic policy. No one knows this better than the Chinese, who have been pursuing a purpose-driven economic strategy for decades. Only now, though, is the West waking up to it.

On Tuesday, Joe Biden’s administration is expected to announce quadrupled tariffs on Chinese electric vehicle (EV) imports. Xi Jinping has for some years been throwing the full weight of Beijing’s political and economic apparatus behind the quest to dominate global EV production. From the rare earth metals needed for battery production to the cars’ design, China is on course to have a chokehold on all the crucial parts of supply chains, which will provide geopolitical leverage for potential conflicts in the future.

Thanks to Beijing’s dominance in rare minerals crucial to the energy transition, over 90% of solar panels in Europe are now imported from China. This was not the consequence of free-market forces but, rather, deliberate policies aimed at establishing China as the main supplier of “clean” energy technology, using “dirty” coal, government subsidies and — more likely than not —forced labour.