Under the guise “Buy America”, Biden U.S. has built a fortress to keep out Chinese EVs as millions sell around the world. Let’s discuss in detail what that really means.
Why Americans Can’t Buy Cheap Chinese Electric Vehicles
The Wall Street Journal has an interesting article on China’s EV dominance. Unfortunately, the WSJ never gets to the heart of the matter.
Please consider Why Americans Can’t Buy Cheap Chinese Electric Vehicles
Chinese automakers are winning over millions of consumers around the world with affordable electric vehicles. They are conspicuously absent from one big market: the U.S.
Washington has effectively built a fortress to keep out Chinese EVs. Former President Donald Trump imposed a 25% tax on Chinese auto imports. President Biden backed that policy and went further, denying them “Buy America” credits that can reduce consumers’ price tag by thousands of dollars.
These steps have made it virtually impossible for Chinese automakers to compete with vehicles built in the U.S. or imported from friendly nations, even as they rapidly penetrate other markets.
“China is determined to dominate the electric-vehicle market by using unfair trade practices, but I will not let them,” Biden told auto-union workers in Illinois earlier this month. “I promise you.”
China is on its way to becoming the world’s largest auto exporter this year, replacing Japan. It builds roughly two-thirds of all electric vehicles globally and the biggest Chinese EV maker, BYD, made 1.9 million vehicles last year, more than Tesla’s 1.4 million, according to the companies.
Complicating matters is the fact that China has built dominant supply chains for EV batteries and the minerals used to make them. U.S. automakers will inevitably rely on these supplies as they increase their own EV manufacturing to meet the Biden administration’s goal of reducing carbon emissions, said John Bozzella, who heads Alliance for Automotive Innovation, an industry group whose members include Ford Motor and General Motors.
BYD’s popular Atto 3 SUV, a global bestseller that comes with an advanced driving-assistant system and heated seats, is offered at €39,500, or about $43,000. Also popular is the MG5 EV, a larger “estate car” built by a former British brand now owned by Chinese state-owned SAIC Motor. Its price starts from €35,395, or $38,500.
In the U.S., the average EV sale price was $53,469 in July, according to Cox Automotive.
Biden Wants You To Pay the Maximum for an EV
The combination of UAW support and tariffs ensures you will pay a steep price for an EV. It’s the same for solar panels and even European-made trucks.
The US accuses China of “dumping”. Assume that is true.
It is axiomatic that if someone is giving away something for “free” or “too cheap” that someone else is paying. So, if China is indeed subsidizing exports, who is the winner and who is the loser?
The answer should be obvious. China is subsidizing US consumers at the expense of China’s consumers and Chinese taxpayers.
Meanwhile, in the US, Biden appears on the UAW picket line endorsing massive pay raises that further make the US automotive industry uncompetitive.
The Buy America Battle Cry
The “Buy America” battle cry is the same as the “Buy France” battle cry or the “Buy Wherever” battle cry.
It’s a battle cry to pay more and get less.
Fair Trade or Free Trade
The only fair trade is free trade.
But if China wants to subsidize the world (I really doubt it’s happening to the extent proclaimed) Chinese taxpayers are the loser and US consumers are the winners.
Yet, we complain!
US Subsidies
Recall the decades-long tussle between Boeing and European manufacturer Airbus. Trump threated Airbus with huge tariffs. The WTO ruled both were equally guilty.
US military contracts are nothing more than subsidies to the US weapons industry.
Biden’s Inflation Reduction Act is certainly against WTO rules.
Ironically, yet as predicted in this corner, Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Despite hundreds of billions of dollars the US is throwing at clean energy, wind and solar power projects are still losing money.
EV Bottom Line
When you stand with the UAW, you are begging for higher prices.
Not only does Biden want to force everyone into an EV. He wants everyone to pay $20,000 more for them than they can get elsewhere.
Why Are Americans in Such a Rotten Mood?
People are struggling with rent and putting food on the table. Biden wants to send hundreds of billions of dollars to Israel and Ukraine. And he wants everyone to pay more for cars.
And Biden wonders why people are in such a bad mood. For discussion, please see Why Are Americans in Such a Rotten Mood? Biden Blames the Media
As an aside, Trump’s trade policies were terrible. Biden took those policies and made them even worse.
The Devil We Had Is Better Than the Devil We Got
Trade policies are a classic example of my post yesterday, The Devil We Had Is Better Than the Devil We Got
Voters have a choice between the devil they know and the devil they know. Polls show voters don’t like the choice, but if forced to make a choice between the two, Trump would win.
I guess its fortunate for me that I am unlikely to ever buy an EV
price EV at $1million – don’t care
every penny of new debt should have to have biden regime/CONgress/spotus/MIC liable along with heirs for entire amount
and if fiat $dollar devalues by more than 30% then it ought to trigger automatice siezure of their assets
I like and understand your position on free trade mish, but the less chinese products in the world the better.
From the brain melting psyop that is tiktok, to backdoor chips in our electronics, to ccp control of EVs. This country is a very bad actor on the world stage and must not be trusted.
link to express.co.uk
Mish,
I have been reading your posts since about 2006-07 or so and value your fantastic insights. Thank you.
Economic protectionism is a difficult topic for everyone. More and more often and in this case in particular, I am favoring protectionism for 3 main reasons:
1) Imbalance in international environmental regulations make it much harder for US Corporations to comply with regulations and have significantly higher production costs. While thankful that the environment has improved it has been difficult watching US jobs get offshored to less expensive markets. I applaud every effort to Re-Shore any and all US jobs by whichever party makes the initiative. So part of this protectionism could be relabeled as an environmental offset or balancing tax to level the playing field in the US market to subsidize the additional expense imposed on US producers.
2) Note also the additional legal expense of operating in this country as similar to above.
3) So much manufacturing ability and efficiency has been lost to Offshoring it will take time, effort and expense to bring that back. I applaud the last administration for getting the ball rolling on that and the progress that was made in what was really only 3 years.
So if the above and many other issues are covered I support protectionism as we have a lot of catching up to do. Let’s get the jobs back.
=It is axiomatic that if someone is giving away something for “free” or “too cheap
it is not that easy MIsh!
what if after dumping and killing competition chinese-korean-whatever WOULD HiKE PRICES?? esp for critical stuff.
Agreed.
I’m on board with 85% of Mish’s views…but here he seems to be ignoring/discounting the impact of 20 *years* of US de-industrialization and the horrible DC “solutions” in response (ZIRP, read as ultimate inflation).
Aren’t EVs not as cost effective for many other reasons as well? Fuck EVs, China can have the whole goddamn market.
they are a short-term unemployment risk (but that’s coming anyway with the rise of the robots), but also a national security risk.
I like the idea fairly (lower priced) priced internal combustion engine cars. The US can’t even pull that off.
=internal combustion engine cars
terrorist and probably white supremasist! i am calling FBI !
/SARC
It will be interesting to see how many praised Trump for tariffs and will call this horrible … and how many trashed Trump for his tariffs and will call this great. Thus far, most people are consistent (praising or trashing tariffs) … but I’m getting some po corn just in case
90% of people are mor$ons!
🤔
All the current ruling vested interests utterly require endless inflation to keep their unearned ascendance. Seeing as inflation causes depression, they must inflate ever faster to outrun it. Those who fall under it don’t matter to them anyway.
sounds like a recipe for hyperinflation to make all that debt (and cash) go away…
I want cheap Chinese car. Can I go to Mexico or Canada, buy and drive one home? Can I register it when I get home? Can I sell it? So many questions….
Nonstop deflation. Mish clusters : 3m, 1Y, 2Y, 5Y, 10Y, 20Y and 30 years.
Cluster #1 : 1989 to 1995. Cluster #2 : 2000 to 2006. Cluster #3 : 2007
to 2019. Flatbed #1 : between 2008 and 2015. Flatbed #2 : between 2020 and 2021.
Since 2021 all rates are rising together, tangled with each other, but lately the spread
between the 3M and the middle and the long duration is rising. Cluster #4 might be
born. For the first time the 3M is above the long duration. When the long duration rises, even in recession, to find buyers, it will form the boundaries of Cluster #4.
Lately I delete Mish Talks after my comments in order to avoid aggravations…
I won’t be buying any EV’s, Chinese or not. Who can afford to pay so much for a car that is only good for commuting and takes an hour+ to charge? Plus, even though we all know the horror stories of how much it cost to rebuilt an ICE engine these days, new EV batteries are at least twice as much.
I would consider getting an EV when I have enough solar and wind power on my roof to charge the car and run my appliances and HVAC systems in New York.
When will that happen? Probably never!
Biden believes in Big Unions which can focus political contributions like a magnifying glass.
If China is subsidizing export who are the winners and the losers. The winners are
US consumers. The losers are US mfg and millions of people in the flyover country
who lost their mfg jobs since president Carter transferred jobs to China to fight
inflation. The globalists who put down walls and built a bridge to the world are the winners. The loser is the US.
What about those American workers in industries targeted by China? Do they win too in your scenario?
Those who work in pig’s slaughter houses are winners.
Those who work in high tech are making good money, transferring knowledge to China
Could you be a bit more concise?
I think he said Silicon Valley isn’t slaughtering pigs.
just metaphorically, then?
Yeah,man! The loser is the one whois being gifted free cars. While the guy who just gave you a free car, is somehow “evil.” Yeah!
Just imagine how horrible it would be for “America” if the Saudis started paying Americans’ gas bills!
Carter transferred jobs to China? I don’t think so in any significant numbers. Chinese manufacturing didn’t take off until the early 1990s when Clinton was in office.
Free trade even if its subsidized by China allows the US to undergo creative destruction in economic terms. Those low skilled low end jobs that can’t be filled anyway nowadays will be replaced by higher complexity and skilled manufacturing jobs with higher pay. Otherwise there will be no economic evolution just stagnation if you protect your industries.
That’s the theory and it depends on a frictionless peaceful world where all the players recognize the same rules. It’s different in practice however. The perfectly spherical cow does not exist.
In theory, there is no difference between theory and practice. But in practice, there is.
Yup. Americans simply have to evolve those southern immigrants into high complexity skilled manufacturing jobs with higher pay.
like baristas manufacturing complex drinks?
or build robot police, AI judges, to suppress them.
Those low-skill, low-pay factory jobs will be replaced by automation… particularly in the developed world. So for the Developed world, it means layoffs now; in the developing world, it means layoffs later.
Politically, it means a rise in protectionism and nationalist politics across the developed world, “race riots” and serious push-back against immigration now and in the near-term; later it means food riots and coups in some parts of the developing world, with some exceptions… most notably places like India and Vietnam, which look likely to displace China economically to some extent, as they grow demographically and in development, and as China declines demographically and its overproduction leads to a soft implosion.
Where are the big electrical transformers made? What does the supply chain look like for planned – and unplanned- replacement?
The transformers are made in friendly offshore places. Be glad so you don’t have to spend gazillion in taxpayer money to re-shore them, too.
Alas, there are nowhere near enough to meet the needs of mass EV adoption. Hybrids and fuel cells are less supply-chain dependent.
Slightly off-topic, but If your income is keeping up with inflation, then inflation doesn’t matter.
“Official” inflation since 2019 was 20%. UAW workers today are making 6% more than they did in 2019. That’s 14% less in real terms.
A 10-11% raise with their new contract means they are making 3-4% less in real terms than they did in 2019.
UPS drivers are making less than they did in 2018 in real terms despite the “huge” pay raise they just got.
“..but If your income is keeping up with inflation, then inflation doesn’t matter.”
If, AND ONLY If, you are talking about actual inflation; as in money supply; then yes: As long as your income keeps up with money supply expansion; you’d be doing just fine. At least income wise. To be truly unaffected, your savings has to grow in lockstep with money supply as well. And then there’s the growth required on top of that, to account for time preference.
But not, not in any way whatsoever, is “keeping up with inflation” enough in a financialized retardtopia where what is labelled “inflation” is nothing more than the price of some arbitrary “basket” consisting of two cellphones and a computer. In such retardtopias, you can “keep up” with what the gullible and illiterate indoctrinati is told is “inflation” all you want; and you will still be further and further away from buying something as basic as a house in a decent neighborhood, as well as a decent retirement. Both courtesy of The Fed transferring money you worked for, deadweight leeches who can then use their newfound loot to outbid you. For decent-neighbourhood housing; for a sufficient share of productive resources to retire comfortably on; and for protection from Mickey Mouse “laws” which are invariably for sale to to those who are handed a share of the inflation loot.
If you’re not “beating inflation”, then “inflation” is “beating” you etc..
If you use, for example, Truflation dot com as a less badder alternative to Corruption Price Index or Retard Price Index you will get a better sense of how much you’ve lost since 2020, which is about a third.
…but then of course it depends on where you were relative to previous years before 2020, what is your own personal income 200 day moving average (rhetorical)?
That probably is distorted a lot by housing, because the sheer scalar increase of the cost of that thing, never mind the percentage, can literally decimate your income relative to it in some especially bubbly regions of some jurisdictions.
I don’t know how you really value a house, 100oz of gold? Or is it full of many intangible variables? Either way if it’s going to cost more wealth than a typical human lifespan can generate, then the “sh!tstem” seems a little bit broken or unsustainable.
Systems tend to self-correct (think Easter Island), and disintegrate into chaos or conflict, and that creates the destruction to begin again.
The solution to inflation:
Saturday Morning Breakfast Cereal – Gold (smbc-comics.com)
Yea, verily.
Lithium collapsed. It’s down 77% from the peak a year ago. China sent Lithium prices down to prevent Lithium batteries production and extraction in the US.
China dominates Lithium processing and ev production. They are lowering Lithium
prices and ev car prices to destroy US competition.
No. It’s just over supply of a commodity found in many countries on many continents.
…not to mention the giant 20MT-120MT Lithium discovery in the USA (Thacker Pass, Nevada/Oregon). No conspiracy theory imagining CCP mystical powers of competence required.
The Chinese are weaponizing everything they can to achieve global control. It is short-sighted to celebrate lower costs from a country determined to destroy your country. It is better to pay US factory workers more than to pay for freedom with factory workers’ lives.
“a country determined to destroy your country”
Oh please! Where is your evidence that China is “determined to destroy your country”? You should really get someone to check out your paranoid delusions.
China is determined to make itself great. Nothing more, nothing less.
That’s true. But the big irony is China depended on housing bubbles and subsidized exports to do so. It failed on both accounts.
China, or more accurately, the CCP, is desperate to survive and avoid counter-revolution inside. However, it’s collapsing demographics, and wilting exports expose it’s lack of domestic consumption. Domestic consumption requires the CCP loosen it’s grip on the population, which isn’t likely to happen; so CCP’s mafia extortion politics seems likely to generate long-term Japanification there. Hence the risk of rising “revitalisation of Communism” and implicit nationalism, because all forms of statism need an external enemy to focus public anger upon, but even an indulgence in nationalism is risky for the CCP. Invasion of Taiwan will open up a real threat of foreign support for a domestic resistance movement to topple the CCP.
US and Europe print fiat money and enrich themselves. How can they compete with low paying skilled workers in China or India or Vietnam or Mexico or somewhere else. Putting blames on China is the easiest way instead of themselves.
The world is more competitive than before. If you can’t you’ll be left behind.
Look at Europe which is least competitive.
No they don’t. If you don’t believe me, go and look at some charts at how the amount of money in circulation has declined – this is the opposite of “moneyprinting”, its deflation. “Bank Reserves” are not money in any real sense.
Biden forcing everyone into an over priced EV will eventually obliterate legacy automakers in the US. Ironically, then and only then will we be allowed to buy Chinese EVs.
US Automakers no longer being even remotely competitive, is why we had the BEV frenzy in the first place.
As long as BEVs were not even remotely viable, anywhere; the racket “worked”: Since noone could make money from selling the nonsense; all money so-called “made” by “investors” would have to come by way of the only thing the US is anymore competitive at: Printing money, handing it to the rankest of idiots, who can then waste the loot by “inveeeesting” in whatever trivially obvious nonsense is currently hyped. In the process driving up the “asset vaijues” of the connected dilettantes “founding” and “owning” the childish, capital destroying outfits. No different from any other so-called “business” in the US post 1971.
Once someone is actually able to, at least sorta-kinda, profitably produce the occasional BEV (still at 2-3x the price of equivalent utility real cars made by competent organisations), the clueless dilettante hype pitchers, get stuck, though. Hence protectionism is now the new fad, here in protect-incompetent-dilettantes-and-leeches-, at the expense of potentially productive people-, -land.
As always: Those who can, do; Build competitive products at competitive prices. While those who can’t; cheer for totalitarian government to instead transfer wealth to idiots who “own” instead. Since any idiot can sit on his illiterate rear and “own” something a central bank stole for him. Much easier that way, for those who can’t; than having to sit there and watch wealth instead go to people who can, and do.
Japan in the 80s showed how uncompetitive American cars were.
Korea followed that model; China has attempted it, but it has the disadvantage of not being an ally of America with American bases in it.
Why has the price of lithium dropped 78% in the last year? And how much has the price of Tesla’s dropped this year, 20%?
Funfunfun : Wolfstreet deleted my explanation.
Thacker Pass… <120 Million Tons of Lithium discovered in the USA… imports not required.
Chinese cars often lack the “safety” equipment required for sale in the US. Another barrier, and a choice denied to Americans
I kind of like not being pancaked in an accident so if Chinese cars don’t want to follow our safely standards then they can keep their cars.
Chinese EVs are also filled with spyware… think about that for a moment…