With Donald Trump having won a second term as US president, a series of policy proposals targeting China is anticipated; and with the lower-than-expected growth of the Chinese economy, it is likely to suffer further from any additional US tariffs and technology or chip sanctions. However, amid this expected challenge, the eastern giant has a new opportunity to cement its global leadership position in the green and sustainable sectors.

Trump’s new policies will primarily focus on trade, climate change, the war in Ukraine, electric vehicles (EVs), US taxes and illegal immigration. Trump, who will take office in January 2025, is expected to pull the US out of the Paris climate agreement for a second time and roll back current US President Joe Biden’s EV mandates, along with other policies aimed at reducing auto emissions.

As well, the president-elect will most-likely end EV subsidies and tax credits. Thus, if Trump effectively withdraws from the energy transition space, it presents China with a significant opportunity to press its advantage in the renewable energy and EV sectors globally.

Trump has already announced his intention to impose a blanket tariff ranging from 10% to 20% on all imports, along with additional tariffs of 60% to 100% on products imported from China. And vehicles imported from Mexico may face tariffs of up to 200%.

EVs

BYD, a leading Chinese EV player, was planning to invest in a plant in Mexico to capitalize on market opportunities in the country – which has Latin America’s second-largest population – and to use the country as a gateway to expand into the US market. However, BYD paused its Mexico factory plans ahead of the US election due to policy uncertainties. If Trump’s policies are implemented, it will reduce the advantages of exporting EVs from Mexico to the US, even though the two countries, along with Canada, have a free trade agreement.

Although China’s exports are likely to face headwinds after Trump officially imposes tariffs, Chinese EV manufacturers remain resilient due to strong domestic consumption. For example, major car manufacturers, such as BYD, NIO and XPeng, derive only 10% to 25% of their revenue from exports, with the majority of their revenue still coming from domestic consumers.

Chinese EV manufacturers, in contrast to the challenges of exporting to the US and growing their market there, are finding significant growth opportunities in Southeast Asian countries, where affordable and reliable EVs are in increasing demand as these nations commit to reducing carbon emissions. Chinese EV manufacturers play a major role in these markets, with their collective market share in Southeast Asia, according to Counterpoint research, jumping from 38% in 2022 to nearly 75% in 2023.

Renewable energy

Beyond EVs, the renewable energy sector is another battleground where China is already at the forefront and aims to solidify its position as the global leader, with Chinese companies projected to account for 60% of global renewable energy capacity by 2030.

As well, the country is expected to host within its borders one out of every two megawatts of all renewable energy capacity installed worldwide by 2030, having surpassed its end-of-decade 1,200-gigawatt target for solar photovoltaic (PV) and wind power generation six years earlier than planned.

Since China ended its feed-in tariffs in 2020, its cumulative solar PV capacity has nearly quadrupled and wind capacity has doubled, according to an October report from the International Energy Agency (IEA), driven by cost competitiveness and supportive policies.

The European Union and the US, the IEA report points out, are both forecast to double the pace of renewable capacity growth between 2024 and 2030, while India is expected to have the fastest rate of growth among large economies. However, with Trump’s “anti-ESG policies” in effect, the US transition to renewable energy may slow or become stagnant in the short term.

China, with its strong commitment to renewable energy, stands out with its vast domestic market, substantial government support, technological leadership and the advantage of exporting to other countries at competitive costs through strategic partnerships like the Belt and Road Initiative.