Why China’s Green Energy Push Worried the Western World

When former US President Donald Trump ascended to the Oval Office in 2017, he began his presidency by investigating China’s unfair trade practices as part of his “America First” policy. A year later, he imposed high tariffs on a wide range of goods from the Asian nation, sparking outrage and retaliatory tariffs from his trading partners. But people who predicted that the Biden administration would mark a return to normalcy on trade matters after the drama of tariff battles and Trump-era Twitter diplomacy were dead wrong. The current administration has been almost as tough on China as the previous one, albeit with much less fanfare. Office of the US Trade Representative (USTR) only has has finalized its rate hike plan on a host of Chinese goods, largely adopting the hikes it first proposed in May.

The tariffs spent mainly target strategic product categories, including electric vehicles, batteries, solar cells, semiconductors and critical minerals. The final tariff structure covers thousands of items across 14 product categories, with the first tariff increases set to take effect on September 27 and the remainder over the next two years. And, they’re just as punitive as the Trump-era ones: Chinese electric vehicles slapped with a whopping 100% tariff; a 25% tariff on lithium-ion EV batteries and a 50% tariff on solar PV cells. Meanwhile, a 50 percent tariff on semiconductors made in China will take effect in 2025.

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But the US is no exception here. The 27-member European Union is currently in the process of deciding whether or not to impose tariffs on electric vehicle imports from China. A year ago, EU President Ursula von der Leyen launched anti-subsidy probeand ended by task recommendation ranging from 8% to 35% in Chinese EVs. A informal vote on July 15 a group of countries representing 62.5 percent of the bloc’s population were in favor of the tariffs, meaning that the tariffs are likely to be approved in the final vote. While these duties might buy time for people like Volkswagen (OTCPK:VWAGY) or Stellar (NYSE:STLA) to adapt could trigger another huge trade war, with Beijing already threatening to impose tariffs on a range of European goods, including high-end cars, brandy, pork and dairy products .

China dominates renewable energy

The outcry against China’s renewable energy sector comes at a time when Chinese green energy companies have been market share theft from their western rivals. According to an analysis by the “Nikkei” newspaper, the top five Chinese suppliers in 71 categories of products and services in the renewable energy sector increased their market shares in 21 different categories from 2022, mainly at the expense of American and European companies. In 2023, all Chinese companies were the world’s top five solar panel suppliers, with their combined market share increasing by 7.5 percentage points to 59.3%.

In the wind energy sector, Chinese companies occupied four of the top five positions, double from 2022, while their combined market share almost doubled in one year to 44.2%. In particular, Goldwind Science and Technologywhich ranked second in 2022, took first place last year from European industry leader Vestas Wind Systems (OTCPK:VWDRY). Last year, Goldwind’s global market share rose to 13.9 percent, while Vestas’s fell from 14 to 10.5 percent. In electric cars, the Chinese company BYDthe world’s second largest producer, has increased its global market share to 14.7%, now approaching adze(NASDAQ:TSLA) 18.3 percent.

Western nations are desperate to counter the huge competitive advantage China’s green energy products enjoy thanks to generous government subsidies.

Earlier in the year, US Treasury Secretary Janet Yellen Beijing warned that his domestic underwriting of energy and other companies creates oversupply and distorts global markets when he makes an official visit to the country.

“I plan to talk to the Chinese when I visit about overcapacity in some of these industries and make sure they understand the unintended impact this is having — flooding the market with cheap goods — on the United States, but also on many of our closest our alliesYellen said in a speech in Norcross, Georgia.

“I will convey my belief that overcapacity poses risks not only to American workers and firms and the global economy, but also to the productivity and growth of the Chinese economy, as China itself acknowledged at the National People’s Congress this month,” he added it.

Yellen made the comments after visiting Georgia to see a recently reopened solar cell factory that closed up shop in 2017 due to stiff competition from factories in China. However, the plant reopened thanks to generous solar and clean energy tax credits in the 2022 Inflation Relief Act.

By Alex Kimani for Oilprice.com

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