We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
British Chancellor of the Exchequer Rishi Sunak leaves Millbank Studios after a media interview in London, Britain, May 27, 2022.
Hard Numbers: Sinking Sunak, Mellon's millions for Trump, Israelis bearish on two-state solution, Thousands displaced in Haiti, Chinese carmakers take aim at EU
516: British Prime Minister Rishi Sunak might be on the verge of making history … and not in a good way. He could be the first sitting prime minister to lose their seat in a general election, according to a new poll, which predicts Labour could win a whopping 516 seats in Parliament. Meanwhile, the poll suggests that Sunak’s Conservative Party will win just 53 seats.
50 million: Conservative billionaire Timothy Mellon reportedly sent $50 million to Donald Trump's presidential campaign the day after the former president was convicted on 34 felony counts in his hush-money trial last month. Donations disclosed to the Federal Election Commission show that the Trump campaign raked in $68 million from donors in May. Oddly, Mellon has also been the biggest donor to independent candidate Robert Kennedy Jr.’s campaign, having donated at least $20 million to his super pac in the past.
26: Amid the ongoing Israel-Hamas war in Gaza, just 26% of Israelis think a way can be found for Israel and an independent Palestinian state to coexist peacefully, according to new polling. This is a drop from 35% who said the same last year.
580,000: Nearly 580,000 people have been displaced by gang violence in Haiti, according to the UN, which amounts to roughly 5% of the country’s population. It’s estimated that gangs control more than 80% of Port-au-Prince, the Haitian capital. The country is now awaiting the arrival of a Kenya-led international police force to battle the gangs and lend support to a governing council overseen by a prime minister who was appointed in April.
25: It’s a trade war summer!Chinese carmakers are calling for a 25% tax on large European cars over the EU’s plans to impose tariffs of up to 38% on electric vehicles made in China beginning on July 4. The US also recently moved to hit Chinese electric vehicles with higher tariffs — all the way up to a staggering 100%.
People walk in front of BYD Auto company and Autotorino store in Milan, Italy, March 20, 2024.
It’s about to be “Trade War Summer” in Europe!
The EU is expected to slap tariffs on Chinese-made electric vehicles this week, citing a months-long investigation into Beijing’s subsidies for EV manufacturers.
The move comes amid wider EU-China trade tensions over green technologies like EVs, solar panels, and batteries, where China has become a major low-cost producer whose exports often undercut those of Western competitors.
The EU says China is unfairly subsidizing producers and “dumping” goods in Europe that it can’t sell at home because of weak consumer demand.
China says it’s being unfairly punished for being too good at producing precisely the products the West claims it wants to meet its climate goals.
Experts doubt the tariffs will be big enough to dent sales. Chinese EVs are relatively cheap in the EU, starting at around $32,000.
But China could retaliate against EU industries. Chinese media say local firms want Beijing to consider EU subsidies for European brandy, dairy products, and pork.
If the Europeans try to unplug Chinese EVs, expect Beijing to clap back fast with tariffs of its own on those industries, upping the ante in a trade dispute between the world’s largest exporter (China) and the world’s largest advanced consumer market (the EU).
Caught between giants: Canada’s role in US-China EV dispute
Canada must be tired of getting stuck between major world powers. Yet, as the Biden administration moves to nearly quadruple tariffs – to a whopping 102.5% – on imported Chinese electric vehicles, the Trudeau government may have to choose between provoking a trade war with China or alienating its top ally.
The increased US tariffs on Chinese EVs are part of a package of trade measures the Biden administration is imposing on its rival. They will also hit steel, aluminum, solar cells, semiconductors, batteries, and more as the administration seeks to shield domestic workers from “China’s unfair trade practices concerning technology transfer, intellectual property, and innovation.”
Subsidy Wars
President Joe Biden argues that China has flooded the market with “artificially low-priced exports” subsidized by the state. That’s true. But the US and Canada are playing the subsidy game, too.
In 2022, the White House introduced a $7,500 consumer tax credit for eligible, made-in-America EVs. The Inflation Reduction Act also committed money for EV charging infrastructure and EV battery manufacturing. In March, China opened a World Trade Organization case against the US, the Inflation Reduction Act, and its “discriminatory subsidies.”
For its part, Canada has a 6% tariff on Chinese EVs and offers a $5,000 rebate for zero-emissions vehicles. Along with provincial assistance from Ontario, the federal government has recently spent just under CA$30 billion on deals for battery plants with Stellantis and Volkswagen and another CA$5 billion for four Honda EV plants in Ontario as it looks to build a domestic industry and supply chain.
The battle with China over EVs is layered, with Biden and Justin Trudeau expressing concerns over jobs, economic growth, supply-chain integrity, and national security, while surely thinking about their political futures ahead of upcoming elections.
Currently, Chinese EVs comprise 60% of global sales, but a fraction of zero-emission vehicle sales in the US and Canada, and none of those are made by Chinese manufacturers. But other manufacturers are building their EVs in China and selling them in the US, including Volvo’s EX30.
In 2023, Tesla – which sells roughly a third of all EVs in Canada – began manufacturing its Canadian EVs in China, raising the value of the Chinese import market from CA$84 million to CA$2.2 billion. Now China is looking to expand its EV presence in both countries, including for its own vehicle brands.
The EV Transition Is Coming – and it’s Political
EV sales have recently dipped in the US and Canada, but the Biden administration is still aiming for half of all new vehicles sold to be electric by 2030, while Canada is mandating that all new passenger vehicle sales must be electric by 2035. The market for these cars and trucks will surely keep growing as prices come down, manufacturers open shops, and charging infrastructure expands.
Both leaders are worried that China will be the principal beneficiary of the EV transition at the expense of domestic industries and workers. EV politics may thus be unavoidable for good reason. In Canada, the auto manufacturing industry employs 135,000 workers directly and another 500,000 indirectly – most of whom are employed in Ontario, the country’s most populous, and electorally stacked, province. It also accounts for CA$16 billion in GDP.
In the US, the numbers, and stakes, are even higher. Over 4.4 million Americans work in auto manufacturing or retail, with nearly another 6 million indirectly employed by the industry while accounting for about 3% of GDP.
Graeme Thompson, a senior analyst with Eurasia Group's global macro-geopolitics practice, says the political calculus for the Biden administration is clear on this matter and points out that the tariffs – not just on EVs, but on steel, aluminum, and more – are at least in part about domestic political concerns.
“It’s classic US protectionism vis-a-vis domestic manufacturing,” he says, adding that it is no coincidence we’re seeing this in an election year.
“It looks increasingly like Joe Biden's path to the presidency runs through Wisconsin, Michigan, and Pennsylvania,” he says, where manufacturing is king. And Biden might not be alone in thinking through the politics of this conundrum.
Speaking to reporters after a visit to the Service Employees International Union International Convention in Philadelphia, Trudeau said he was “watching very closely what the Americans are doing” with tariffs on China.
Canada is now “considering all measures,” including a tariff bump of its own as it seeks to further harmonize its trade policy and EV industry with the US while protecting its domestic auto industry and workers. The government isn’t committing to anything, but the pressure to act is building.
Not Necessarily Tariffs, but Tariffs if Necessary
The Canadian automotive industry is calling for the federal government to be prepared to match Biden’s tariffs.
Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, says Canada should be ready in case subsidized Chinese EVs hit the market en masse.
“We don't have to immediately respond and increase tariffs today, but we know what can happen. So let's make sure that our defenses are adequately prepared in the event that this occurs,” he says.
Taking this posture would protect the Canadian industry from the consequences of falling out of step with the US, he argues.
“The Canadian automotive industry is and always has been completely integrated with the United States,” he notes. “The reason companies invest and build in Canada is because we align our regulations … with the Americans … But that success depends on maintaining our alignment and maintaining our preferential access to the US market through the USMCA.”
He also argues Canada should scrap its EV 2035 mandate.
Kingston says that plan “has no regard for where those EVs are manufactured and whether or not the supply chain in North America is developed fully enough to meet the targets that have been established,” adding that the US isn’t mandating hard targets, having instead “connected their environmental policy with their industrial policy.”
Caught in the Middle
China is Canada’s second-largest trade partner after the US, but that fact is misleading. In 2023, 78% of Canadian exports went stateside while about half of its imports came from the US, with total goods worth over $770 billion compared to about $64 billion with China. While a trade war with China could be costly for Canada and its exports, it would pale in comparison to whatever the US might do if its ally stepped too far out of line – especially if Donald Trump wins in November.
Thompson says Canada might expect to see consequences if Chinese EVs flood the market.
“There would be some pressure from the US if Chinese EVs start washing up on Canadian shores,” he says. That might invite US retaliation.
“You could imagine that might come up in the context of a USMCA review or renegotiation,” he adds.
Despite Canada’s dilemma, it may have few options but to follow the US lead.
“Canada is kind of in between these two giants,” Thompson says, “but at the end of the day, it has so many more interests on the US side, whether economic and trade or defense and national security, that there's not really much of a choice to make.”
US-China relationship at its most stable in years as Yellen visits
Ian Bremmer's Quick Take: A Quick Take to kick off your week. Want to talk about the most important geopolitical relationship in the world, the US and China. Janet Yellen, the secretary of treasury, back over to China yet again, both to help ensure that the relationship is reasonably stable, also to deliver tough messages in places where she feels like that is required, the Biden administration feels it's required. And it's been a useful trip.
On the one hand, the United States, like the Europeans, delivering tough messages on Chinese dumping, on overproduction and low-cost goods going into the American and European markets, because of massive state subsidy, into key sectors. Particular concern on transition energy. On the one hand, great to see more effort to reduce carbon emissions, both in China and globally, and as the prices come down, that's a good thing. On the other hand, really hurting less competitive corporates that don't have that level of state subsidy in the United States and Europe. Tesla was really fast out of the box, hasn't got much support from the White House, but that's been the American champion to the extent that there is one. On the other hand, when you talk about other corporations, American and European, nowhere close to the Chinese. The hundreds of Chinese EV companies that are less expensive, they are higher quality, they are manufacturing at scale, and people can buy them all over the world. So, that is creating a lot of friction.
On the one hand, Americans and Europeans that are saying, “We want to move towards net-zero faster.” On the other hand, if the Chinese government is leaning into that and US and European jobs are at stake, and production is at stake, then they don't feel so comfortable with it. So, that's the primary area of tension between Yellen and her counterparts in China. Having said all of that, the meetings have been open, they've been pretty frank, they've been reasonably friendly, certainly not hostile, and Chinese state media and state influence media has been both very detailed and very fair in their coverage of Yellen, as they have been every high level meeting the Americans have had with the Chinese for months now. And that clearly has been a shift from the top in China, saying, “We don't want you to be picking on the Americans. We want you to show that this is a relationship that is treated with respect, and we want you to cover it reasonably accurately.” That's a big plus.
You know, you go to Russia, you go to Iran, you read their media and I try to follow their media pretty closely, it is overwhelmingly anti-US, anti-Western, strongly propaganda in orientation. That used to be more the case in China. It is not today. In fact, in many ways, I would argue, presently, US media covering US officials, certainly much more hostile, towards China, than the Chinese are towards the United States right now. That's very unusual in this relationship. And in large part it's because the Chinese economy continues to underperform and they're trying to get more American, more Western investment in, they're trying to have less pressure for capital flight out.
There are plenty of other areas where there are big tensions. In particular, we see that with semiconductors, with TSMC now getting, speaking of industrial policy, billions and billions in American government loans, as well as direct grants, subsidies, to expand production in the United States, which TSMC is now planning on doing. The Americans want 20% of semiconductor production globally in the United States by 2030. It is plausible that they get there. A big fact is at TSMC, the world's leading producer of semiconductors, now saying they are going to put their highest end production in part in the United States. That's a big win for the Americans.
It also, over time, makes Taiwan less critically important. That's also true for mainland China, as the Chinese will have to build their own. Finally, when you talk about Taiwan, you talk about the upcoming, in a month, inauguration and an incoming Chinese, Taiwanese president, who is has no engagement with mainland China as former President Ma is meeting with XI Jinping this week. Those things are not connected. They are very far apart. So former president of Taiwan, that China says, “We can work with that guy, we can't work with the incoming guy,” potential for greater tensions going up.
Also, especially around the South China Sea, in the Philippines, their president coming to the United States this week, He’s going to meet with Biden in addition to Japanese PM Kishida and it's going to be more coordinated and deepening defense relations as the Chinese are pushing the Philippines pretty hard in contested waters that the international legal community has ruled on in favor of the Philippines and the Western position. The Chinese say, “Sorry, we don't accept that outcome.”
So, plenty of areas where there is fighting, plenty of areas with this tension, but lots of communication at the high level and generally speaking, and Yellen said this, but I completely agree, the relationship is more stable than we've seen it, certainly in the first three years of the Biden administration and the four proceeding of Donald Trump.
That's it for me. And I'll talk to you all r- Can Biden-Xi meeting ease tensions? ›
- China hawks’ Beijing trip makes a Biden-Xi summit more likely ›
- Beijing sees “rainbows” after Yellen visit ›
- Janet Yellen is (probably) tripping ›
- EVs, economics, and a warning from Yellen in China ›
- Ian Explains: Xi Jinping's nationalist agenda is rebuilding walls around China - GZERO Media ›
- Where the US & China agree - and where they don't - GZERO Media ›
President Joe Biden riding around in a Hummer EV during a tour of the General Motors 'Factory ZERO' electric vehicle assembly plant, in Detroit, Michigan, back in 2021.
Biden boosts EVs with new tailpipe emissions rules
As goes the American car market, so goes the world. Or at least large swathes of North America. With the Biden administration’s latest auto regulations, that may mean electric vehicles pull ahead as those with internal combustion engines.
On Wednesday, President Joe Biden introduced tailpipe pollution limits that require automakers to reduce carbon emissions from their vehicles by 56% by 2032 based on 2026 levels.
The new rules also require automakers to ramp up EV production. The administration is aiming for full EVs to account for roughly 35 to 56% of all vehicle sales and for plug-in hybrids to make up 13 to 36% within the next eight years. Full EVs currently account for 7.6% of sales.
Conscious of growing American protectionist impulses – and the coming presidential election – Biden hammed hard on protecting American auto jobs, promising the EVs would be made in the US-of-A. Democrats were concerned about alienating unions or automakers and their workers ahead of November.
In Canada, Prime Minister Justin Trudeau's government is planning for 20% of new light-duty vehicles sold to be zero-emissions by 2026, gradually rising to 100% by 2035. Biden’s move may help his cause as it pushes automakers to speed up production on more environmentally friendly vehicles.Employees work on an assembly line at startup Rivian Automotive's electric vehicle factory in Normal, Illinois, U.S. April 11, 2022.
North American EV makers face headwinds
Asian electric vehicles surged at the end of 2023 in both the United States and around the world, raising questions about the feasibility of North American plans to profit from the conversion to electric transport.
In the US, Hyundai and Kia came second to Tesla in sales, but ahead of Chevrolet and Ford. Hyundai and Kia, which are both manufactured by Hyundai Motor Group, have profited by focusing efforts on low-cost sedans, unlike American manufacturers, who have emphasized SUVs and pick-ups.
Globally, Chinese automaker BYD outsold Tesla in the final quarter of 2023 by cutting prices. BYD, which makes its own batteries, is seen as a growing force in the international market, second only to Tesla.
EV sales are up in the crucial US market, although the transition is slowing. The softening market and growing strength of Asian competitors are raising questions among auto executives about the shift to EVs. Both Joe Biden and Justin Trudeau’s governments are spending huge amounts on tax incentives and manufacturing credits to create jobs at home while pushing to cut emissions through EV sales.
In Canada, the auto parts industry is expressing skepticism about the feasibility of the Trudeau government’s target of 60% of sales by 2030, which is more aggressive than Biden’s 50% target. Analysts say the only way the targets can be met is if a large number of Chinese vehicles are imported.
Speed bumps on the road to EV dominance
On Thursday, Ford withdrew its full-year results forecast because of uncertainty over cost structures stemming from its tentative deal with the United Auto Workers, which could tack on an additional $900 in labor costs per vehicle. The company is scaling back its investment in EV technology after disappointing earnings — it is losing $36,000 on every EV sold. “The narrative has taken over that EVs aren’t growing. They're growing. It’s just growing at a slower pace than the industry and, quite frankly, we expected,” Ford Chief Financial Officer John Lawler said.
Meanwhile, General Motors recently postponed the construction of a major new EV plant in Michigan in the face of softening demand. Now, the Detroit-based auto giant doesn’t plan to start building until late 2025.
Both developments raise questions about the big bets both Biden and Trudeau have placed on the EV industry, with massive industrial subsidies for battery plants and tax credits for EV purchases. Even with large incentives, consumer adoption is slower than the car companies anticipated. The business challenge may make it harder to argue that the transition to a greener economy offers as much opportunity as hardship, an important argument for progressives in their debate with conservatives over the shape of the economy of the future.
U.S. President Joe Biden steps out of an electric Chevrolet Silverado EV pickup truck being shown to him by General Motors Chief Executive Mary Barra during a visit to the Detroit Auto Show.
Biden’s EV agenda runs up against his China agenda too
Joe Biden has big plans to supercharge the US electric vehicle industry. He wants half of all new cars sold in the US to be electric by 2030 as part of his bigger goal of putting the country on track to be carbon neutral by 2050.
But as admirable as it may be from a climate policy perspective, Biden’s EV agenda is also getting him in trouble with other policy priorities.
First, the unions. As we previously wrote, Biden this week joined the picket line with the United Auto Workers union, which is striking for the first time against all three major American automakers.
It was an unprecedented move for a sitting president, meant to reinforce his image as “Union Joe” ahead of the 2024 elections. As he knows, winning the industrial Midwest will be important if he wants to win the White House again.
But part of the reason the UAW is on strike in the first place is because of the rapid rise of the EV industry, which generally requires less human labor and is so far led by non-unionized companies like Tesla, where UAW leaders say the labor standards are lower. To UAW workers, a bigger EV industry looks like a threat to their job security.
Second, China policy. One obstacle to greater uptake of EVs in the US is that they’re still more expensive to buy than comparable gas-powered cars. To solve that problem, the Biden administration has provided $7,500 subsidies to consumers who purchase EVs from specific automakers.
But there’s a catch — starting next year, that subsidy won’t apply to any EVs made with components supplied by US rivals. And the country that happens to produce EV batteries most cheaply is (you guessed it) also Washington’s number one rival: China!
Ford, for example, has staked its EV future on a new $2 billion plant that will make batteries with technology licensed from China. The factory is a crucial part of the company’s strategy to compete in the EV market, and it would also help the Biden administration meet those ambitious EV targets.
But China hawks in Washington say using Chinese technology in an American EV factory is a self-own. After all, what good is it to meet the Biden administration's stated objective of “bringing supply chains home” if that means bringing China into the house?
Ford’s crosstown rival GM, wary of losing ground to Ford in the EV race, has picked up this argument, lobbying the administration to adopt the strictest possible interpretation of the subsidy restrictions, according to the Wall Street Journal.
All of this puts Union Joe, Green Joe, and China Hawk Joe in a three-way squabble: People can’t buy EVs unless they are cheaper, but they can’t get cheaper (for now) without Chinese technology, but they can’t get Chinese technology without tripping up the policy of NOT using Chinese technology.