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Inside episode seven of Shift Key.
Few people have shaped Bidenomics more than Brian Deese. From 2021 to 2023, Deese led the National Economic Council at the White House, serving as President Joe Biden’s top economic aide. He’s now an Innovation Fellow at MIT, where he helps lead the new Clean Investment Monitor project.
In part two of Shift Key’s conversation with Deese, we discuss electric vehicles, the future of U.S.-China trade relations, and whether the Big Three automakers can survive.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: I recently traveled to Australia in December. And there's a country that basically ceded its auto industry in the 1990s to early 2000. They basically said, you know what, we're done trying to compete and keep our domestic manufacturing sector alive. And as a result, now have very low tariffs for imports, everything's imported, and have embraced Chinese imports of vehicles, not just EVs, but also, you know, I was surprised to see all kinds of, you know, Chinese badged brands like SAIC and Great Walls Motors and Haval and others on the roads there.
So I guess the question, maybe just to frame it this way, you know, I have my thoughts on the answers too, but I'd love to get your direct answer is like, why don't we want Chinese cars on the roads here? Why don't we want a $16,000 EV, as opposed to in the same category as the Chevy Bolt EUV, which costs $10,000 more than that. Wouldn't that be good for American consumers, good for decarbonization? Talk through the thinking about how to balance those kinds of concerns.
Brian Deese: Yeah, so I've heard this expressed and in ways that was less thoughtful than your T up recently around, you know, damn it, we just need to decide if we like cheap electric vehicles more than we hate China and that's, you know, that's just, you know, as climate as climate forward thinkers, that question is stated as a leading question.
And I do think to really understand this, I think that that question starts from the wrong premise and then it ends up reaching the wrong conclusion implicitly in what it suggests, right? Because it starts from the premise that China's a market-based economy and a market-based actor, but more importantly, it starts from the premise that we're operating in a balanced and sustainable global trading regime and that why can't we just take the benefit of lower cost goods?
But if we step back, in terms of the global trading system, we have this enormous imbalance because China has this enormous excess savings. And what they're trying to do to try to solve the acute economic challenges that they face is to plow that into manufacturing with the explicit goal of trying to dominate, not just try to gain competitive edge, but dominate particular industries. And when they do that and then through explicit status strategies, they flood markets with cheap goods, we, the recipient countries, end up paying a lot of the cost of those Chinese subsidies and those Chinese policies.
Jenkins: What do you mean by that? Paying in what way?
Deese: We end up paying by our own industries, our own industries, our own capabilities being diminished and derogated in a way that they wouldn't have that imbalance not existed.
So I like to flip the question, right? And actually say, like China needs to decide if it loves this unsustainable, unbalanced, in many cases, illegal manufacturing strategy more than it loves the kind of, or more than it hates the kind of domestic reforms it would actually need to take to boost domestic consumption, produce more balanced growth as it becomes a more mature economy, and as it becomes a larger anchor of the global economic system.
And I don't have any illusions that China is going to engage in that, but I think some of the approach to this issue in the past has been predicated on the idea that if we in the United States operate by ignoring those realities and by trying to engage with by lowering trade barriers, that might induce China to move in that direction. And that, I think, is, that's an unsupportable hypothesis at this point.
Robinson Meyer: Where do you see this ending? Because what you're describing, I agree, is very well supported. The phenomenon you're describing where China's excess savings cause it to have all these manufactured goods that Chinese people can't buy and so therefore it has to export them to the world. That's like a flaw in the post-1945 global economy we set up, right? Because you are punished as a country if you have excess spending by your bondholders, by financial institutions. You are not punished as a country if you have excess saving. And so I think what worries people is that, well, we shut down our market to China in some regards, where does this eventually lead? Like, how do we eventually force a Chinese structural adjustment, it just starts to go quite dark places quite fast. So I guess where do you see this process that we're engaged in ending up?
Deese: I think the destination and the goal should be toward a more sustainable equilibrium, which doesn't mean a perfect equilibrium, but more sustainable equilibrium. And I think the answer to that for American policy, I think is some version of the policy mix that the Biden administration has put together: invest domestically in industrial capacity, impose costs on China where they're actually clearly in unfairly seeking to perpetuate that balance or to accelerate that balance by dominating in particular industries and also protect core technologies that are dual use and have national security implications.
That is hard, it's not easy, but it's possible to put an approach like that in place, and also to recognize that the goal of the strategy is not then to have China-free supply chains.
And when, again, President Biden's predecessor goes out and says he wants to eliminate imports from China over four years, that's utterly infeasible and shouldn't be our policy goal. It shouldn't be the way we think about what we're trying to accomplish. It shouldn't be the way we engage with the Chinese in terms of finding a more sustainable equilibrium.
But it is totally possible in the electric vehicle market for there to be a global market that is not so dominated by China that then there's no room to build competitive alternatives, right?
And we see this in the United States as well. I take your point, Jesse, about the Bolt that you made previously — $10,000 more than a BYD equivalent — but I bought my Bolt a year or two ago and it was sticker price equivalent with the ICE equivalent in the U.S. market before you take into account total cost of ownership.
You know now that particular car and the trajectory since then and we could get into we could get into company-specific decisions …
Jenkins: You can put that aside, yeah.
Deese: But you know, it's possible. I mean, Tesla as like, as a phenomenon, right? And we should be for creating the space for competition and for innovation and for the United States to maintain an important, resilient share in that. Now, that's hard.
This episode of Shift Key is sponsored by…
Advanced Energy United educates, engages, and advocates for policies that allow our member companies to compete to power our economy with 100% clean energy, working with decision makers and energy market regulators to achieve this goal. Together, we are united in our mission to accelerate the transition to 100% clean energy in America. Learn more at advancedenergyunited.org/heatmap
KORE Power provides the commercial, industrial, and utility markets with functional solutions that advance the clean energy transition worldwide. KORE Power's technology and manufacturing capabilities provide direct access to next generation battery cells, energy storage systems that scale to grid+, EV power & infrastructure, and intuitive asset management to unlock energy strategies across a myriad of applications. Explore more at korepower.com.
Music for Shift Key is by Adam Kromelow.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.