Who Wins with Electric Vehicles?

If personal vehicles are here to stay (they are), we need to think about how workers fit into the EV transition. And how to protect them. That may mean tariffs on foreign cars.

I’m not going to lie, I’m going to miss the smell of gas stations. Source: Andrew Roberts on Unsplash.

Let me start by getting ahead of the breathless complaints. Electric passenger vehicles are here and more are coming. The long-term market for EVs will keep growing and eventually they’ll replace internal combustion engine cars and trucks. For all the talk about slowing sales here or there, or range anxiety, or the slower-than-hoped-for building-out of charging infrastructure, EVs are the future of car culture — which isn’t going anywhere.

We could have a long discussion/debate/deliberation about passenger vehicles and climate change, better cities, public transit, and so forth — and I’d love to, I really would — but this post is premised on the assumptions that the personal vehicle is going to be around for years to come and that EVs are a better option for the climate (and therefore us) than the dinosaur-burning alternative.

The EVs that are coming need to be built somewhere. (That’s the kind of expert insight you pay for, folks!) The Canadian and US markets are sorting out who’ll those vehicles and where, with the Americans way ahead in deciding to protect their domestic auto manufacturing industry from foreign competition, particularly from China.

Last week, I wrote about all this for GZero as US tariffs on Chinese EVs are set to jump to over 100% in the months to come (Canada’s are 6%). The news broke as the world’s largest EV maker, China’s BYD, announced a hybrid that can manage a range of about 2,000 kilometres (that’s a lot). It also retails for US$14,000. That’s appealing stuff right there.

Affordable EVs and hybrids with great range are better for the planet and consumers. I get the climate crisis and I get that we should take it seriously. But in the short- and mid-run, we’re going to have cars and use them to get around. If anyone has a credible, politically palatable plan for a faster transition to dense cities in which no one needs a car — one that won’t produce a reactionary backlash that will undo the whole thing and then some — I’d love to hear it. But I’m not going to get my hopes up. For now, cheaper EVs and hybrids that can get people where they need to go are good.

The struggle here is that cheap imports pose problems for the domestic auto industries in Canada and the US, which means they pose a problem for workers, their families, and the economy. It’s easy to say “Of course, cheap imports all the way, they’re cheap!” but that comes at a cost.

The alternative is protectionist measures like those adopted by the Biden administration and, to a certain extent, the Trudeau government that encourage consumers to buy domestic-made EVs and protects space for manufacturers to build them. We need to take that approach seriously if the threat of state-subsidized cheap imports is real, which it seems to be.

Many economists will tell you tariffs and other protectionist measures aren’t the most economically efficient way to go about building and selling EVs, but a good chunk of them will also tell you state subsidies of industry are bad — the sort of subsidies China is pouring into its evolving auto industry. So, let’s not pretend anyone is playing a clean, non-strategic game here. China and the US are both jockeying to grow and protect their auto industries as we transition to EVs (not to mention related industries, including mining, software, etc., etc.). And behind these strategies are real people with bills and families. They aren’t abstract economic test cases. They’re people. If we forget that, we’re toast.

I don’t think the US or Canada should write a blank cheque to the automotive industry and let it coast. Competition, domestic and foreign, can spur better products and lower prices in certain circumstances (see, I can be nice to capitalism) while protecting industries can lead to higher prices, worse products, and contempt for consumers.

But the auto industries in Canada and the US aren’t optional. They employ millions of workers directly and indirectly, and they function as a linchpin in the broader economy. That means protectionist measures are probably a necessary, fair, and pro-worker response to cheap imports subsidized by other states, primarily China, that threaten domestic industry. This approach especially makes sense if the consequent higher prices for consumers are offset by subsidies — tax breaks or rebates — like the Trudeau government’s $5,000 rebate or the Biden administration’s US$7,500 tax credit (even though, notably, the Trudeau rebate applies to foreign-made vehicles).

I’m all for a rapid, aggressive transition for EVs and to whatever makes for a more climate-friendly suite of policies. Our approach won’t be perfect. It won’t undo the industrial and consumer climate damage of the past. We need to make big, fast changes to address climate change, which is an existential threat that isn’t just coming, but already arriving. But our approach to EV policy, and climate policy more broadly, must account for politics and economics on the ground, and that includes what it means for workers and their industries.

Failing to take the politics and real-world economics of our policies into account risks producing short- or medium-term political and economic devastation. Maybe even long-term (you want a bunch of Donald Trumps? Because that’s how you get a bunch of Donald Trumps). There’s a parallel with globalization here, which you can work out on your own no doubt.

Protecting domestic workers while making EVs as cheap as possible with state subsidies helps offset some of the pain that accompanies climate policies, it helps keep workers and their families fed, and it helps protect against a reactionary backlash that would undo even modest progress on important policies. This approach may be imperfect, but that doesn’t mean it’s not good.