Why both Trump and Harris embrace clean energy tariffs

By Brian Dabbs | 10/29/2024 06:48 AM EDT

Some economists have softened their stance on tariffs as China floods the globe with cheap renewable components.

Viewers cheer as they watch the September debate between Vice President Kamala Harris and former President Donald Trump at the Angry Elephant Bar and Grill in San Antonio.

Viewers cheer as they watch the September debate between Vice President Kamala Harris and former President Donald Trump at the Angry Elephant Bar and Grill in San Antonio. Eric Gay/AP

U.S. trade strategy will likely continue to lean heavily on tariffs in the energy sector no matter who wins the November election.

Both former President Donald Trump and Vice President Kamala Harris have pledged to slap penalties on clean energy goods and other imports to boost U.S. manufacturing. Their platforms signal a dramatic transformation for a country that led efforts to liberalize global trade for more than half a century.

Free trade is losing political ground in the U.S. as China floods the globe with cheap clean-energy goods. Even some economists are embracing tariffs they long advocated against — at least when it comes to clean energy components.

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“We do not want to be dependent on China for those products,” said Sanjay Patnaik, director of the Brookings Institution’s Center on Regulations and Markets. “We need to build a lot of those things either at home or, if it’s too expensive, then at least in countries that are friendly to us.”

Tariffs are among the rare policies that presidents can unilaterally implement, with major impacts on the U.S. and global economy. Trump did so in 2017, sparking a yearslong tit-for-tat trade war with China, which lessened the U.S. trade deficit with Beijing but increased the U.S. deficit globally.

The move continues to influence U.S. trade policy. The Biden-Harris administration extended and increased many of the Trump-era tariffs, and last month, Biden ratcheted up tariffs on Chinese electric vehicles, solar panels and other goods.

“Both parties seem to be allergic to the types of trade negotiations we’ve had in the past,” said Jeffrey Schott, a senior fellow at the free-trade advocate Peterson Institute for International Economics.

Economists across the political spectrum continue to broadly oppose tariffs, which they say drive up prices for consumers. They say that trade agreements, which typically reduce tariffs between countries, increase competition and gross domestic product. The U.S. currently has formal free trade agreements with 20 countries, after first inking a deal with Israel nearly 40 years ago.

Because of those trade deals, most products imported into the U.S. do not come from China.

Still, the Obama administration tried to strike a broad, multilateral trade deal called the Trans-Pacific Partnership, which it argued would counteract Chinese growth. Unions and Democrats blocked it, ushering in a new era of pro-tariff politics in the U.S.

Since then, some economists have softened their stance on clean energy tariffs.

“The last couple of years have seen a shift, kind of a realization among some economists, that you need to look other aspects [of trade] as well and not only the economics,” Patnaik said. “You have to look at the political economy and you have to look at national security.”

While both Trump and Harris plan to use tariffs, their approaches are far apart. Trump has called for a 60 percent tariff on all Chinese goods and 20 percent tariffs on all other imports, while Harris has indicated she would use targeted tariffs to protect U.S. businesses in specific industries.

Most economists vigorously oppose the unprecedented tariff proposals laid out by Trump. Such steps would slash U.S. gross domestic product and spike prices, which will hurt poorer Americans hardest, they say.

“Irresponsible is the most polite term I could use,” Schott said.

Anna Kelly, a spokesperson for the Republican National Committee, emphasized Trump’s willingness to enact tariffs in his first term.

“President Trump will re-shore American jobs, keep inflation low, and raise real wages by lowering taxes, cutting regulations, and unshackling American energy,” she said.

Harris has called tariffs essentially a “sales tax,” but her campaign website says “Vice President Harris will not tolerate unfair trade practices from China or any competitor that undermines American workers.”

“She will not hesitate to take action when our workers and businesses are threatened, whether it is in shipbuilding, electric vehicles, or intellectual property,” the website says.

A campaign spokesperson did not respond to a request for comment on which specific tariffs she may raise or reduce.

Tariffs vs. tax cuts

The warming up to tariffs among some economists is a major shift for a group of policy wonks that have historically coveted free trade and loathed penalties on imports.

Noah Kaufman, a senior research scholar at the Columbia University Center on Global Energy Policy, has experienced the tariff transformation at the highest levels of government.

He worked for an Obama administration that pushed hard — and unsuccessfully — for U.S. participation in the Trans-Pacific Partnership, a free trade agreement with Pacific nations that would open market access to signatories. He’s also a former top economist for Biden.

Kaufman said Chinese EV production changes the calculus for U.S. tariffs.

“When you lay out this specific situation our automobile industry is in and, you know, the millions of Americans whose jobs depend on the automobile industry, and, you know, the rapid shift towards electric vehicles and the fact that Chinese EVs are just much more cost-effective, … there’s just a really compelling case that, if it’s possible to build a competitive domestic industry, we want to do that,” Kaufman said in defense of tariffs.

Still, Kaufman said tariffs are essentially new taxes on Americans. He also said it’s “really hard to separate the tariffs from the overall [Biden administration] strategy,” which is boosting U.S. clean energy manufacturing with billions of dollars of grants and tax breaks in the 2022 Inflation Reduction Act and 2021 bipartisan infrastructure law.

Kaufman recently argued in a column for the relief of some — not all — of the Biden tariffs.

A range of domestic industry groups, like the Solar Energy Manufacturers for America Coalition and steel associations, staunchly back tariffs. But not everyone in the clean energy industry is on board.

Some clean energy advocates, like Ray Long, president of the American Council on Renewable Energy, say tariffs fail to adequately boost domestic industry and ultimately make clean energy projects more challenging and expensive to build.

“Tariffs are not durable and long-term, and because of that, they don’t provide the right signals that would free up companies to make the massive amounts of investments that are needed,” said Long. “Tariffs haven’t worked.”

Instead, Long said the Inflation Reduction Act’s advanced manufacturing tax credit is driving new U.S. projects, which he called “durable and reliable.”

But Patnaik and others say the threat from China is too large to put the tariffs back in the toolbox.

“We don’t want to switch our dependence on fossil fuels from countries like Saudi Arabia to dependence on electric vehicles from another autocratic regime, which is China,” he said.

‘A very powerful tool’

In the final days before the election, Trump has promised to aggressively use tariffs.

“I am a believer in tariffs,” Trump said this month at the Economic Club of Chicago. “To me, the most beautiful word in the dictionary is tariff, and it’s my favorite word. It needs a public relations firm.”

The Biden-Harris trade agenda, meanwhile, was put on display earlier this month at a Cleveland-Cliffs steel plant in Pennsylvania, a major battleground state in the neck-and-neck fight for the White House.

“We think about tariffs every single day,” U.S. Trade Representative Katherine Tai said at the event.

“You understand better than anybody how tariffs can be used constructively to level the playing field to give all of us a fighting chance,” she told the crowd of plant workers. “A tariff is like a slab of steel. You can either put it into a design and architecture to make something powerful and strong that stands tall, or you can use it to create chaos.”

Cleveland-Cliffs CEO Lourenco Goncalves said tariffs are “a very powerful tool in the toolbox to be used in a way that can bring back sanity to capitalism.” Tai agreed.

That approach to tariffs is gaining steam in Washington advocacy circles.

Tariff supporters, like Nick Iacovella, senior vice president for public affairs and communications for the lobbying group Coalition for a Prosperous America, say importers, not consumers, typically shoulder the costs of tariffs — an argument often dismissed by economists. The Trump campaign promotes analysis and commentary from CPA.

In an interview, Iacovella referenced a U.S. International Trade Commission report from 2023 that shows U.S. production of steel and aluminum increased amid recent tariffs.

“If you don’t have an industrial capacity, you can’t be a strong nation,” he said.

Iacovella said the group will be an ally for either administration, so long as they’re boosting U.S. manufacturing and protecting U.S. companies from cheap imports. He called for new policies to prevent Chinese projects from taking advantage of U.S. clean energy incentives. Republicans have challenged many China-linked projects in recent years, including the Gotion battery plant in Michigan.

“If Trump wins, we’re going to see broad-based tariffs,” he said. “If Harris wins, I think it’ll be a system of tariffs that’s much more targeted and still in line with what she and Biden did.”