Biden's industrial policy made America’s EV tariffs necessary

livemint.com:

In one sense, US President Joe Biden’s punitive new tariffs on Chinese electric vehicles (EVs) are indeed necessary, just as he argues. What makes them so are the enormous sums that the administration is devoting to expanding US capacity to produce its own EVs. An almost-invariable characteristic of industrial policy is to start with one dumb idea, after which many more then follow—by necessity.

America’s local EV makers are struggling despite generous subsidies. Output and sales are growing, but not as quickly as hoped. Early adopters have adopted and the rest are less enthusiastic.

That could change, but the charging infrastructure has been slow to roll out and converting American drivers to EVs isn’t easy. Even after the subsidies, EVs made in the US aren’t cheap. Hence the need for tariffs to make the competition more expensive.

The high cost of producing EVs in the US is partly by design. Bidenomics aims to do two things that are in tension: Suppress carbon emissions by speeding adoption of EVs and create high-wage manufacturing jobs. Well-paid workers making cheap EVs is a tricky combination.

“Good-paying union jobs" of the kind Biden advocates are difficult for a high-wage economy like the US to sustain because the resulting production is likely to be globally uncompetitive. A low-wage country can use subsidies to incubate a new industry that might in due course thrive abroad, letting governments withdraw support. In pricey-labour economies, this formula is less successful.