Commentary: US green trade war with China is just getting started

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Biden will nonetheless take the risk. US trade policy is inherently strategic. Remember that the Inflation Reduction Act effectively seeks to replicate China’s industrial policy, complete with protectionism, that fostered Beijing’s lead in clean tech in the first place.

The free-trade paradigm that is now crumbling was set up in the ruins of World War II; not out of altruism but in order to rebuild allies to make common cause in containing the USSR. Even at the height of paranoia about the Japanese competitive threat to Detroit, among other sectors, in the 1980s, Japan remained a critical Cold War ally – unlike China, now the Pentagon’s designated pacing threat.

Only a month ago, White House climate envoy John Podesta essentially called for the creation of a new trading system targeting China on another front; namely, “carbon dumping” via the emissions embedded in exports. It remains to be seen whether the administration can persuade like-minded, generally lower carbon-intensity nations to join such an effort. The EU, with its attachment to the World Trade Organization and more ambitious green targets, is the key region in this regard.

In any case, the direction of travel in Washington is unmistakable.

While the tariffs grab headlines, possibly more consequential measures are taking shape in the background, not least the Commerce Department’s inquiry into “connected vehicles”, launched in February. Given the growing overlap between data-rich driver-assistance systems and all vehicles, including EVs, this could provide a far-reaching, national security justification for targeting models merely connected with Chinese companies, regardless of where the factory is sited.

The tension between cutting emissions and cutting supply chains, always there, is now reaching the point where trade-offs are inevitable. The coming election plays a big part in where the emphasis falls in 2024, but this presents a chronic headwind to the US energy transition for years to come. This is a case where, even if you don’t take Biden literally, you should take him seriously.