GLASS-HALF-FULL ANGLES
There is, in other words, plenty to worry about. Yet, there are also a few important glass-half-full angles that risk being overlooked.
For one, as proponents of the Biden administration tariffs would argue, the bipartisan consensus on competition with China means there is currently no politically feasible American clean energy transition that involves relying on Chinese imports. For the climate then, the argument is it is either this, or nothing.
That also, for now at least, means that US protectionism is being directed mostly at China specifically. That creates opportunities for others. Pre-existing US tariffs on China mean clean energy supply chains have already been shifting to other developing country locations such as Vietnam, Cambodia, and Mexico. The latest tariff hikes will reinforce this trend.
It has not escaped notice though that much of the shift in trade flows is being driven by Chinese investment, along with a hefty dose of imported Chinese parts and components in the supply chain.
From a development standpoint that’s okay, as over time this will help countries to build their own domestic capabilities. But a lot will depend on whether the US eventually extends its targeting beyond China geographically to its firms operating in third countries also.
Some US politicians are pushing to do so. Perhaps, though, the costs involved will help keep this in check. As the International Monetary Fund has pointed out, it has been the shift to “connector” third countries that has contained the economic fallout from previous rounds of US tariffs.
Biden’s tariffs of course also reflect the strong protectionist currents coursing through American politics. It is a small consolation though that even as Donald Trump talks about a “ring” of tariffs around the country, he still envisages hitting China far harder with 60 per cent tariffs or higher, compared to 10 per cent for everyone else.
