We’ve become accustomed to buying cheap products from China: items made of glass, plastic, and metal come to the US by the ship-load, approximately $600 B worth last year, the highest from any country. Labor isn’t cheaper in China, certainly not when compared to Mexico or India, nor are the machines that make the products more advanced. What’s behind China’s ability to produce at their low prices is cheap energy—specifically, coal and nuclear-based electricity. While the US and most western countries have shut down coal plants to stop global warming, and have even shut working nuclear reactors for no obvious reason, China has aggressively expanded coal and nuclear energy production. The result? They are the largest single source of CO2, and have some of the lowest electricity prices in the world, Chinese electricity prices are about 1/4 of European, and 2/3 of U.S.
In recent years, the U.S. and Europe have increasingly relied on renewable energy sources like wind and solar. While these can work in certain areas, they require far more land than nuclear or coal, and expensive infrastructure because the power is intermittent, and generally not located close to the customer. The UK and Germany, countries with long periods of cloudy, windless conditions, have switched to solar and wind, leading to soaring electricity prices and a moribund industrial sector. Germany shut down all of its nuclear plants, 17 of them, largely to rely on electricity imported from its neighbors, and coal-fired sources that are far more polluting and unsafe than the nuclear plants they shut. The UK shut 5 nuclear reactors since 2012.
Meanwhile, China continues to build nuclear and coal plants. China is the largest user of coal power, and is planning to build 100 more coal-fired plants this year. Beyond this, China is building nuclear power rectors, including the world’s first 4th generation reactor (a pebble bed design). China has built 20 nuclear plants since 2016, and has 21 under construction. With this massive energy advantage, China produces things at low price for export: appliances, clothes, furniture, metal and plastic goods, all at a fraction of our cost. By selling us the things we used to make, China imports our jobs and exports pollution from their coal plants.
Many people instinctively understand that outsourcing production to China is harmful to both US employment and world pollution. Yet, until recently, US politicians encouraged this transfer through trade agreements like the TPP. Politicians bow to high-spending importers, and to environmental activists. It seems we prefer cheap goods to employment, and we’re OK with pollution so long as we don’t see the pollution being made. But, by outsourcing production, we’ve also outsourced control over critical industries, we’ve limited out ability to innovate, and we make ourselves dependent on China. Likely, that was part of China’s intent.
Russia has followed a similar path, keeping electricity costs mostly through low through coal, but also nuclear power, exporting their goods mostly to the EU. Before the Ukraine war, Germany in particular, relied on Russian gas, electricity, and fertilizer, products of Russian cheap power. By cutting off those energy, Germany has dealt a severe blow to its economy. Not everyone is happy.
The incoming Trump administration has decide that, to compete with China’s manufacturing power, we need to develop our own through tariffs, and we need to increase our energy production. Tariffs can help balance the budget, and bring production back home, but without more energy, our industries will struggle to produce. I’m generally in support of this.
US production is more energy efficient than Chinese production, and thus less polluting. Besides, making things here saves on transport, provides jobs, and helps to build US technology for the future. I’m happy to see us start to build more nuclear power reactors, and restart some old plants. Solar and wind is good too, but is suited to only in some areas, windy and sunny ones, and even there, they need battery storage so that the power is available when needed.
Robert Buxbaum, January 21, 2025