If you need to own a car, an EV is a solid win for the climate, regardless of the electricity source to charge it. But nearly two thirds of Americans who are interested in upgrading to an EV are deterred by high purchase prices, according to a survey by the non-profit Smart Energy Consumer Collaborative earlier this year.

So why on earth did Joe Biden slap a 100% tariff on Chinese EVs in May—a move that effectively doubles their price on the showroom floor? The EU looks set to follow suit, imposing tariffs of up to 38% on Chinese EVs at the start of next year. A US tariff on solar cells also doubled to 50% in 2024. For Joe, it was all about jobs.

But these trade barriers intended to protect local workers and industries are pushing up prices of some of the most effective low-carbon technologies. Tariffs are certainly making EVs more expensive. Here we ask: is the carbon for jobs trade-off worth it? 

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Tariffs Are Bad News For The Climate

1. Low-carbon tech needs to be ubiquitous and cheap. Biden set a goal of 50% of car sales being electric by 2030. Reaching it will mean increasing the number of EVs on US roads by a factor of 20 in just six years. But the US is only responsible for about seven percent of the world’s battery production today, according to the Rocky Mountain Institute. Even with generous incentives from the Inflation Reduction Act, it will take years to scale up domestic production and reduce prices.

2. Tariffs actually cut domestic jobs. The non-partisan Tax Foundation takes a weary tone when pointing out that while tariffs can save existing jobs, they lead to wider domestic job losses throughout the country. Making imported goods more expensive is effectively a tax of up to $300 per year on each US household currently. That depresses the overall economy, reducing employment by around 142,000 jobs nationally. If Trump wins the election, his planned tariffs would cost another 684,000 jobs across America. Germany, the biggest auto-producing country in Europe, voted against higher tariffs, fearing that its carmakers would ultimately lose jobs from tit-for-tat Chinese tariffs against European vehicles.

3. Why not let China pay? The argument for tariffs on Chinese EVs and solar panels is that the Chinese government uses subsidies to flood markets with cheap goods. We should let them go right ahead, says Jeffrey Frankel, an economic professor at Harvard. “Do American and European policymakers prefer that their own taxpayers, instead of Chinese citizens, bear the costs of clean-energy subsidies?” he writes in The Guardian. “With US unemployment at 4%, policymakers and voters are now more concerned about inflation than jobs. Removing tariffs is the surest way for western governments to lower energy and transportation prices, thereby reducing inflation.”

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Tariffs Can Build A Durable Low Carbon Economy

1. Low prices are only half the carbon battle. The NRDC has crunched the numbers and concluded that after considering sticker prices, incentives, running costs and maintenance, owning an EV is already always cheaper than a gas car, by as much as $11,000. This suggests the actual barriers to EV purchasing are complex, including range anxiety, charging, and especially political resistance. Building more EVs in the US with US workers could slowly build cultural and economic buy-in for low-carbon technologies, and help build a bipartisan market for them.

2. Some tariffs are smarter than others. Where the US simply slapped a flat 100% tariff on Chinese EVs, the EU is taking a more nuanced approach. Its tariffs are calculated based on how much state assistance each Chinese company receives. So while SAIC will suffer a 38.1% tariff, Geely (maker of Polestar EVs) gets 20%, and Tesla faces a tariff of just 7.8% for its China-made vehicles. The EU’s motivation is “not geopolitical competition, not protectionism, but the issue of the lack of a level playing field,” according to this deeply wonky take by Francesca Ghiretti at the Center for Strategic and International Studies. That leaves the door open to negotiating a settlement, she thinks, rather than risking tariffs blooming into an old-fashioned trade war.

3. Goldilocks tariffs. Talking of wonky, an in-depth analysis of the EU tariffs by the Rhodium Group consultancy is long on detail but also on insight. It calculates that with EU tariffs of up to 40%, some China-based producers will still be able to generate comfortable profit margins on cars exported to Europe, and even offer discounts. This could be the sweet spot for trade barriers—high enough to generate revenue for domestic job and climate incentives, yet low enough to encourage more purchases.

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What To Keep An Eye On

1. CBAM, thank you ma’am. You’ll hear a lot more about the CBAM—the Carbon Border Adjustment Mechanism—when the EU fully implements it in 2026. This will charge foreign exporters for the emissions they generate at home, and will effectively enroll any country that exports to Europe in its carbon pricing mechanism. However, CBAM will give exporters a break if they can prove they’ve already paid a carbon fee domestically, pushing countries like the US to set their own carbon price or get left behind, according to MIT economist Catherine Wolfram, quoted recently in Bloomberg.

2. A border backdoor. One way China might be able to skirt the 100% EV tariff is by building cars in Mexico then importing them virtually duty-free into the US under a Trump-era trade agreement. One of China’s leading EV makers, BYD, has been reportedly looking into setting up a factory in Mexico, although the US could stymie such efforts by declaring Chinese EVs a national security threat.

3. From cars to crops. The same free trade vs protectionism arguments are playing out in the world of food production. The Trump-era trade war with China reduced US agricultural exports by $27 billion from mid-2018 to the end of 2019, according to the US Department of Agriculture. In 2020, researchers at the University of Leuven calculated that extreme temperatures caused by climate change could mean 55 million more people being undernourished. That number would increase to 73 million if countries chose to tighten trade barriers, or drop to 20 million if they eliminated tariffs on food products.

Top image ©Anthropocene Magazine