Opinion | In a world of tariff threats, China opts to share green tech dividends

With Donald Trump elected again as US president, China is concerned about the self-professed “Tariff Man” and his threats to kill off Chinese imports with big increases in tariffs, which are to be imposed on his first day back in the Oval Office next January.

Over the past five years, China’s trade landscape has been marked by the burgeoning of its electric vehicles, lithium-ion batteries and photovoltaic products – dubbed the “new trio” – all technology-intensive exports leading the global energy transition.

In response, the Biden administration and its Western allies complain about China’s “industrial overcapacity” and attribute the competitiveness of the “new trio” to government subsidies. The United States and Canada are working to close their doors to Chinese EVs and the European Union recently levied additional tariffs of up to 35 per cent.

Amid continuing negotiations, the EU has proposed that Chinese EV makers commit to a minimum export price, or price undertaking, in exchange for the EU dropping the countervailing duties. This is reminiscent of the 1980s US-Japan trade war, when the US demanded that the Japanese car industry commit to voluntary export restraints – which the World Trade Organization prohibits.

Rather than a subsidy-induced overcapacity, the success of Chinese EVs is, at its core, due to science and technological advancements. Having learned lessons from the US, China has chosen the challenging path of independent innovation over convenient short cuts such as tech imports and forced technology transfers. For companies like Huawei Technologies that bore the brunt of the US tech war, that determination has hardened.

China’s success is also thanks to its entrepreneurship. Over a decade ago, the West initiated a ruthless battle against Chinese solar panel imports, levying anti-dumping and anti-subsidy duties. It turned out to be counterproductive, forcing Chinese enterprises to intensify innovation and rise from the ashes, while killing the West’s ailing solar panel industry.