EV trade fight tests climate priorities in Europe, U.S.
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New trade restrictions on China are a test of whether the U.S. and Europe can pursue strong industrial policy and fight climate change simultaneously.
Why it matters: These huge carbon emitters are looking to speed deployment of renewables and electric vehicles, and China is a huge producer of low-cost equipment.
- But officials on both sides of the Atlantic are also keen to boost domestic climate tech industries.
Catch up quick: European Union officials on Wednesday announced higher tariffs, up to 38%, on Chinese-made EVs.
- It comes just weeks after the White House announced 100% tariffs on China's battery-powered models.
- Chinese EVs have yet to gain a real beachhead in the U.S., while in contrast China's exports to Europe have surged in recent years.
- They reached one-fifth of European EV sales last year, by one estimate.
The big picture: The new penalties are part of wider efforts to diversify EV supply chains away from China, including critical minerals and batteries.
What we're watching: Analysts are tracking whether trade friction affects EV sales growth, which has recently slowed in key markets.
- "Tariffs and further protectionist measures could slow down global EV adoption in the near term," research firm BloombergNEF said in a new report.
The intrigue: The European Commission said China's major EV subsidies "unduly hurt the EU industry and ultimately undermine" the energy transition.
- U.S. officials have similarly argued that diversified supply chains ultimately make it easier to meet climate goals.
What they're saying: The Atlantic Council's Joseph Webster said the EU's tariffs "appear aimed at incentivizing Chinese inward investment within the EU, not cutting out China from supply chains."
- "[I]f Chinese automakers site production facilities within the EU, the disruption to emission targets could be minimal," he said via email.
