OPINION:
Americans are already skeptical of the renewable-energy mandates that the Biden-Harris administration has been foisting on them for the last 3½ years. Imagine what they’d say if more of them were aware that their tax dollars are enriching the world’s biggest producer of electric vehicles: China and its Communist Party leaders.
A recent Heritage Foundation report, “How the Forced Energy Transition and Reliance on China will Harm America,” exposes how America’s growing reliance on China for renewable energy is not just an economic misstep, but a strategic blunder that compromises our national security and economic stability.
China’s decades-long strategy of economic manipulation and intellectual property theft has allowed it to dominate and exploit global markets, often at the expense of human rights, property protections and global economic stability. In 2023, for example, the U.S. government estimated that China steals $600 billion in American intellectual property annually — a clear sign of the economic warfare being waged on the United States.
Central to China’s strategy is a massive government subsidy regime that directs nearly 5% of its gross domestic product — about $400 billion annually — into its industrial sectors. These funds, now managing over $1.5 trillion in assets, are designed to secure technological dominance and China’s manufacturing supremacy.
Although this approach comes at the expense of a slowing economy and burdening nonsubsidized sectors, China hopes that the strategic gain will pay off in the long run.
The United States should use Section 201, 232 and 301 tariffs to counter Beijing’s subsidies and reduce dependency on Chinese products, and to encourage reshoring or near-shoring of key industries. Those efforts should focus on industries with national or economic security concerns, such as semiconductor manufacturing. But as the Heritage report notes, that isn’t enough.
Long before China set out to destroy our economy, the federal bureaucracy did. If the United States is to win this new Cold War, it must undo the economic penalties it has imposed on itself. These penalties come in the form of bad tax, regulatory and subsidy policies.
Perhaps shockingly enough, the tax code is fiscally irresponsible and discourages American companies from investing. The deployment of capital, such as the building and equipping of a new factory, is effectively taxed twice, which means capital investments are taxed first on the initial expenditure and second on each product those investments will yield.
While daily expenses are deducted from taxable income in full and immediately, that is not the case with investment. Instead, expenses related to business expansion are subject to convoluted depreciation schedules that draw them out for years or even decades.
If the U.S. wants to be more competitive with China, it must provide permanent full and immediate expensing for all capital investments to remove this double tax, or we cannot hope to regain competitiveness.
In addition, U.S. environmental regulations hinder the expansion of domestic mineral, radionuclide and hydrocarbon extraction. These overly stringent regulations push these critical processes into countries with lax environmental and labor standards.
The U.S. must ensure access to robust domestic and allied nation sources for critical minerals. Coupling deregulation with allowing more mining and processing permits is essential for high-tech and defense industries and for securing our supply chains.
The U.S. should also repeal green tax credits and subsidies, especially those in the Inflation Reduction Act, that redistribute wealth from profitable ventures to those the government picks as winners. These subsidies bolster industries that rely on Chinese supply chains while suppressing U.S. economic growth. (The EV tax credit is a prime example of this racket.) Repealing these subsidies will help unleash America’s abundant hydrocarbon and power-dense nuclear industries.
To further decouple from China, the U.S. should propose trade agreements with nations in the Global South. Strategic partnerships with resource-rich countries in Africa and Latin America would help diversify supply chains away from China in a fair and responsible manner. This approach would allow the U.S. to reduce its reliance on Chinese minerals and foster mutually beneficial trade relationships.
To achieve true energy independence and escape China’s energy handcuffs, the U.S. must implement significant policy reforms that can no longer wait. Americans are counting on their government to protect their security and prosperity for generations to come.
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Richard Stern is director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation. Miles Pollard is an economic policy analyst at Heritage’s Center for Data Analysis.
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