Well this is rich!
President Biden recently warned us that one of the reasons we should not allow Chinese EV imports is because they pose a national security risk.
Really, a national security risk?
He claims that the Chinese could use these vehicles to collect huge amounts of data that could be sent back to China.
As if the U.S. government doesn’t already collect mountains of data on you and me every single day. But I guess the Feds don’t want any competition.
Is it just me or does it seem like every time the U.S. government sees potential competition from China, its immediate response is to shut it down in the name of “national security.”
It’s all bullshit. And the only reason the Biden administration is pushing this narrative is because they know that once cheap Chinese EVs arrive on domestic soil, the American auto industry is toast.
We simply can’t compete with Chinese car companies because those companies don’t actually have to be profitable. The Chinese government ensures their existence.
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If the Chinese can’t sell all those cars in new markets, its auto industry will ultimately implode. Especially as China’s economy slows. Which is why China has been working diligently to boost exports and facilitate EV production facilities outside of China.
In fact, China’s most successful EV company, BYD (OTCBB: BYDDY), recently announced plans for a new production facility in Europe.
It’s likely that China will have little trouble exporting its new line of EVs across the globe — but with the U.S. being the outlier.
There’s NOTHING Patriotic about Killing American Jobs
While Trump was president, he put a 25% tariff on all auto exports from China, and now Biden is considering raising that even further.
But here’s the thing …
While most Americans say they want to “buy American,” the truth is, few people can afford to. Sure, the rhetoric sounds good on the campaign trail. This idea that we must protect American jobs by slapping tariffs on cheap Chinese goods. You know, stand strong against China. But the reality is that tariffs never work out as promised, and oftentimes result in unintended consequences.
Wall Street Journal reporter Andy Kessler brilliantly opined on this, writing …
“With tariffs, you get false price signals and less innovation. They misallocate capital and human resources by having entrepreneurs chase fake opportunities. Domestic manufacturers love tariffs, which allow them to raise prices, but the rest of us have to overpay for goods while manufacturers become lazy. The largest and lowest-cost electric-vehicle manufacturer in the world, China’s BYD, is effectively kept out of the U.S. by Trump and Biden tariffs, and we now have a glut of unprofitable and expensive domestic EVs.
If all the chips in an iPhone were made in the U.S., I calculate we would be paying close to $2,000 for one and unit sales would decline 50%. Would you upgrade at that price?”
Keeping Chinese EVs off American roads has not magically allowed Ford (NYSE: F) and GM (NYSE: GM) to sell millions of EVs. And raising those tariffs won’t change that.
This isn’t to say GM and Ford won’t eventually be able to get more EVs on the roads. They will. But between lack of domestically-sourced materials, union influence, lack of innovation, and really just ignoring the EV market while China was getting a first-mover advantage, the legacy auto industry in the U.S. left the door wide open for both foreign and domestic competition. The latter, of course, being Tesla (NASDAQ: TSLA).
Interestingly, the only EV maker that’s been able to actually make money is Tesla, and prior to last year, those cars were quite pricey. Yet, Tesla has not only sold more than 2 million of its electric offerings in the U.S. (and about 5 million worldwide), its Model Y was the number one selling vehicle in the world last year.
I can’t say for certain that tariffs helped Tesla accomplish this goal, but I’d find it highly unlikely.
Of course, the only way to tell would be to open up the market and let the chips fall where they may.
Yes, politicians want you to believe that it’s patriotic to buy American. But can it be argued that it’s far more patriotic to defend the very basic fundamentals of free market capitalism?
Or consider this …
All tariffs are removed from EV imports from China.
If this results in more EVs on the roads, then we’ll see a higher demand for all the things EVs need to operate: charging stations, electricity, repair shops, retail and ecommerce, and shipping. This means providing American jobs and strengthening local economies. Indeed, tariffs don’t create jobs, they’re job killers.
Personally, I find a strong job market far more conducive to national security than the fear of China collecting data on you via its electric cars.
Make no mistake: your data is collected and analyzed every second of every day by the Chinese, the Russians, and of course, your very own government.
Placing high tariffs on Chinese cars is not being done to protect you. It’s being done to protect those industries that pay large amounts of cash for steady access to our elected officials.
And let’s face it: shouldn’t you really be able to buy whatever you want without it being artificially priced out of the market, anyway?
I think you should. But most of our politicians disagree.
And it doesn’t matter which side of the aisle you call home.
Hell, this is one of the things that both Biden and Trump seem to agree on.
In fact, Trump just recently said that he’s considering a plan to impose tariffs of 60% or higher on Chinese goods.
This is absurd.
Matt Welch from Reason magazine put it best when he said, “I’m not a mathematician, but I think what that means is that if you buy the $500 China thing, it’s now going to cost $800.”
Whether it’s cars, furniture, toys or lamps, tariffs are only successful at one thing: making everything you buy more expensive. And given the inflationary pressures we’re all feeling right now, I’m pretty sure that this is the last thing we need.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
