New Tariffs on Chinese Goods
The ongoing trade dispute between the US and China, ignited during the Trump administration and continued by Biden, underscores the escalating tensions surrounding the energy transition. Recently announced tariffs on $18 billion worth of Chinese imports target crucial energy transition goods like solar cells, electric vehicles (EVs), batteries and aluminum.1 This trade friction, often overshadowed by other global crises, indicates a deepening struggle for dominance in the evolving landscape of renewable energy.
The energy transition has become a battleground for economic and geopolitical supremacy. Both the US and China are vying for leadership positions in this transformative era, leveraging their economic might and access to critical resources. China's substantial investments in renewable energy infrastructure position it as a formidable competitor, capable of offering low prices for key energy transition components, from EVs to solar cells.2,3
China Exerts Significant Influence over Critical Materials
This trade skirmish is not merely about economic interests; it embodies a broader struggle for geopolitical power, one that will likely expand as countries with transition-critical industries test the extent of their newfound influence. China's strategic control over the production and export of essential transition materials highlights the potential for leveraging such resources for political gain. In October (prior to the recent tariffs), China imposed export restrictions on graphite, a key component of virtually every EV battery. As the refiner of 90% of the EV-quality graphite, China has an uncomfortable degree of influence over EV production around the world.4 By manipulating access to critical components, nations can exert influence over the pace and direction of the energy transition, shaping the future of global energy markets.
Other Countries May Begin to Push the Boundaries as the Transition Progresses
We have previously noted that copper is a potential choke point, with only a handful of primary global suppliers, notably Chile and Peru.5 Recent challenges facing First Quantum, a major Canadian copper miner, have drawn attention to the US's efforts to organize funding to prevent it from falling under Chinese control. First Quantum’s financial woes are largely due to a copper mine in Panama, capable of producing 350,000 tons annually, lying idle due to a less business-friendly government assuming control.6 Nationalization of natural resources is nothing new in Latin America, but this situation is a reminder that every country has its own version of success in the energy transition, and these versions will not always align.
Certain Sectors Stand to Benefit
The US-China trade dispute underscores the high stakes in the energy transition, with tariffs targeting crucial transition goods. This struggle for dominance extends beyond economics, shaping geopolitical power dynamics. Challenges facing key metals such as copper highlight the complexities of navigating local opposition and geopolitical pressures and add further inflationary pressure to transition-related technologies and commodities. While consumers are unlikely to benefit in the short-term, firms in the affected sectors could benefit from the increased prices.7 These bumps in the road also reinforce our expectation that traditional energy will likely be around longer than expected.
Important Disclosures & Definitions
1 Tankersley, Jim, and Alan Rappeport. “Biden Hits Chinese Electric Vehicles, Chips and Other Goods with Higher Tariffs.” The New York Times, May 14, 2024.
2 Li, Qiaoyi, Zhang Yan , and Brenda Goh. “China’s BYD Prices New Version of Best-Selling EV Lower than Predecessor | Reuters.” Reuters, March 4, 2024.
3 Maguire, Gavin. “China Steers Solar Module Export Stream towards Asia | Reuters.” Reuters, February 28, 2024.
4 Liu, Siyi, and Dominique Patton. “China, World’s Top Graphite Producer, Tightens Exports of Key Battery Material | Reuters.” Reuters, October 20, 2023.
5 Source: Observatory of Economic Complexity (OEC) copper export data, May 16, 2024.
6 Lorinc, Jacob. “A $10 Billion Copper Mine Is Now Sitting Idle in the Jungle.” Bloomberg, April 16, 2024.
7 To be fair, it is impossible to know what the cost to consumers would be if these sorts of policies were never implemented, and policies based around national security concerns have lopsided payoff distributions (a small price is paid now to prevent some catastrophic eventuality).
AAI000695 05/21/2025