Tariffs on Chinese EVs? Yes, or no?

This article is indirectly about the human-to-animal relationship which is the raison d’être of this website because ultimately, it’s about global warming and how humankind can tackle it successfully. One of those ways is to arguably create more EVs but there are some big question marks on this topic.

Firstly, there are many people who don’t even believe in climate change and the numbers are substantial which puts the brakes on any advancements in curbing it. Secondly, there are many people who have doubts about whether electric vehicles are any better at curbing climate change then for example petrol-driven vehicles. It’s a very complicated formula. You have to factor in the manufacture of the vehicles and the sourcing of the precious metals to make the batteries for example before you then assess the emissions and the pollution.

There is a third problem area which is that the technology employed in making electric vehicles is advancing so rapidly that existing models will become redundant quite quickly. Therefore, they are devaluing quite quickly. The second-hand market for these cars will be shrinking and therefore their second-hand value will be much reduced. This makes their purchase as a second-hand car almost unviable at a certain time in the history of that car as also electric vehicle batteries have a lifespan (10 years or 100k miles usually) and they are very expensive to change (up to £12k). This also devalues a second-hand electric vehicle. The whole EV market is quite fraught with difficulty and complex. And we now have an added dimension which I discuss below.

You might know that China is turning out millions of EVs to flood the European and American market. In one way this is a good thing because it means they will be cheap which tackles an enormous problem with EVs namely that they are too expensive which means more people will be purchasing electric vehicles which means there will be a greater contribution to curbing climate change. All well and good.

But in terms of the economics of a country, it cannot accept subsidised electric vehicles from China which would damage their car manufacturing base. And therefore president Biden in America has placed 100% tariffs on Chinese electric vehicles and Europe has placed 50% tariffs on some electric vehicles on a sliding scale based upon the amount of Chinese government subsidies which had been provided to these manufacturers.

The subsidies come in the form of cheaper energy, cheap land and easy to access loans from provincial state-run banks. These are hidden subsidies but subsidies nonetheless and European governments and the American government realise it and they need to protect their car manufacturing base as mentioned.

However, the German car manufacturers are upset because, for example, Volkswagen stated that “The negative effects of this decision outweigh any potential benefits.”

And the chief executive of Mercedes-Benz stated that, “As an exporting nation, what we do not need are increasing barriers to trade.”

Mercedes-Benz has a linkup with Chinese manufacturers and therefore if the tariffs hurt the Chinese manufacturing base it may have a backlash on that relationship. In other words, they have established highly productive joint ventures with Chinese partners and they fear retaliation.

The tariffs are a necessary economic evil to protect jobs in America and Europe but they also damage the advancement of tackling climate change. This is a balancing act and for some the tariffs are too high and too damaging. Although they are set at a point in Europe where they won’t fatally damage Chinese imports. In America the hundred percent tariffs probably will fatally damage Chinese imports of EVs but we will wait and see.

The last point to make is this: the UK has yet to decide to impose tariffs on Chinese electric vehicles. There is a glut of them parked at ports waiting to be exported to Europe and America. It seems conceivable that a lot of these cheap electric vehicles will come into the UK because there are no tariffs which will flood the UK car market and which will severely depress the prices of existing EVs.

Perhaps the failure of this government to impose tariffs on Chinese imports comes about because the Conservative government is in disarray, in any case, and also of course the country is going through a general election.

But the nub of this article is about the economics versus the environment and which takes precedent and it seems that economics, as usual, is more important than saving the planet from climate change.

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