Motivated by a desire to save the planet, we are ending the ICE Age and embarking on the EV Era. By itself, I doubt this new transportation revolution will much affect the Earth’s climate. But it will certainly unleash new and surprising trade conflicts, unexpected social and political changes, and novel geopolitical shifts. ICEs run on petroleum, and the swing producers with the power to set the oil price still reside in the Persian Gulf region. EV batteries, by contrast, require a combination of critical minerals, particularly lithium, nickel, cobalt, and graphite. China accounts for more than half the global processing capacity for three of those. (In the case of nickel, it is only around a third.) Moreover, China is scrambling to increase its control of lithium, nickel, and cobalt mining. (It already dominates graphite mining.) In the past two years, according to the Wall Street Journal, Chinese companies have spent $4.5 billion acquiring stakes in nearly 20 lithium mines, most of them in Latin America (for example, Bolivia) or Africa (Zimbabwe). Related: Can Volkswagen Win Back China? and Your Next Electric Vehicle Could Be Made in China
- Date Posted:
- June 5, 2023
US imports from southeast Asia are clearly up. But how much has that really reduced US dependence on China? The Trump tariffs clearly had two effects a) they created an incentive to move final assembly to SE Asia; b) they created an incentive to avoid the US tariff (small value shipments/ de minimus) being the most obvious case. As a result, China's reported exports to the US now exceed recorded US imports from China by a significant margin (about 10%). China has lost a bit of market share over the last 12 months, so there is some evidence of a shift in the location of final assembly. In the Chinese data though the shift comes only after a rise in China's market share during the pandemic (lots of imported electronics). The bigger question (unanswerable by the trade data) is how much Chinese content is embedded in the United States rising imports from SE Asia? The US bilateral deficit with China was exaggerated in the past because China relied on a lot of imported chips and high-end components from Korea, Taiwan, and Japan. The same argument now applies to SE Asia. Chinese components don't just appear in the data for China.