Why the United States Must Rethink its Strategy to Compete With China in the EV Market
The following is an excerpt from Lizzi C. Lee's op-ed in The Diplomat. Lizzi is a Fellow on Chinese Economy at the Asia Society Policy Institute's (ASPI) Center for China Analysis (CCA).
The Biden administration’s decision to impose up to 100% tariffs on Chinese electric vehicles (EVs) signals a pivotal moment in China-U.S. trade relations. This maneuver aims to protect the United States’ fledgling EV industry from the influx of cheaper Chinese imports, a stance that resonates strongly with the electorate in an election year. Nevertheless, the immediate economic impact of these tariffs may be limited.
Chinese EVs currently account for less than 2% of the U.S. market, a figure suppressed by existing tariffs and stringent regulatory barriers. Moreover, many Chinese firms have circumvented these obstacles by shifting production to Southeast Asia, thereby diluting the effectiveness of the new tariffs. This underscores the largely symbolic direct effect of these measures.
Although tariffs can offer temporary respite by shielding domestic industries from foreign competition, they fail to address the deeper structural issues that undermine long-term competitiveness. The Biden administration’s objective is clear: to grant the U.S. EV industry a reprieve from lower-priced imports, affording American manufacturers the opportunity to scale up, innovate, and reduce costs. However, a strategy reliant solely on tariffs is fundamentally insufficient.
To genuinely compete with China, the United States must stop hiding behind the flimsy excuse of China violating trade rules by dumping cheap products or exporting overcapacity. Instead, Washington should acknowledge that Beijing’s long-term industrial policies aimed at nurturing nascent, strategically important technology offer valuable lessons. By scrutinizing China’s approach, the United States can emulate its triumphs while avoiding its missteps. Leveraging its own technological and financial strengths, the United States can not only match but surpass China’s success.