On the Fourth of July – America’s 249th birthday – President Donald Trump signed into law a bill that could very well cede the country’s position as the leading global economic superpower to China.
As the nonpartisan energy think tank RMI has argued, the world is in the midst of a transition from the Information Age, which the United States led by dominating the development of new software and information technologies, to the Renewable Age, in which the development and deployment of electric and renewable energy technologies will drive the global economy.
This transition is dominated by insurgent clean technologies, such as solar, wind, electric vehicles, and batteries, whose prices are falling rapidly and whose growth is exponential.
Chinese manufacturers have invested heavily in those technologies. To help the U.S. economy better compete in the clean tech sector, Democrats passed the Inflation Reduction Act, or IRA, in August 2022. That law included incentives to spur domestic manufacturing of these key clean energy technologies.
And it was working.
The U.S. experienced a clean energy manufacturing boom over the ensuing two years. But Republicans’ new budget reconciliation law, called the “One, Big Beautiful Bill Act,” guts those incentives and pulls the rug out from under nascent domestic clean energy industries.
On America’s birthday, President Donald Trump could not have given the Chinese economy a more generous gift.
Chinese manufacturers are dominating the EV market
The United States has the world’s second-largest car market, but EVs account for less than 10% of the country’s new auto sales. That can give U.S. residents the mistaken impression that EVs are unpopular.
In fact, more than one in five new passenger cars sold around the world in 2024 were electric. BloombergNEF, a market research firm, forecasts that this share will rise to about one in four new cars this year. That could rise to four out of every 10 by 2030, according to the International Energy Agency. In other words, the global auto market is increasingly electric.
China has the largest domestic auto market in the world, and half the new vehicles sold in the country today are EVs. And Chinese automakers are dominating the global EV market, offering a wide array of affordable and advanced cars. The electric car giant BYD’s cheapest model, the Seagull, is priced at less than $10,000, dramatically undercutting U.S.-based companies like Tesla.
Ford CEO Jim Farley recently described Chinese EVs as “far superior to what I see in the West.” He added that if his company loses the EV market to Chinese automakers, “We do not have a future Ford.”
Former President Joe Biden placed a 100% tariff on Chinese EVs to protect the U.S. domestic industry. And U.S. demand for EVs was expected to grow rapidly in the coming years as the result of federal tax credits for American-made electric cars and U.S. tailpipe pollution regulations.
But Republicans’ new budget law will terminate the former on September 30, and the Trump administration has gutted the latter.
As a result, energy systems modelers at Princeton and BloombergNEF project that only about half as many U.S. residents will buy EVs over the next five years as previously expected. By 2030, only about 27% of new car sales in the U.S. are now expected to be electric, compared to 80% in China.
Chinese firms are winning the solar market, too
The story is similar for solar panels. Solar energy is cheap, fast to deploy, and produces virtually no pollution during its operation. It accounted for about 70% of all new global power generation capacity added in 2024, including nearly 60% in the United States.
Chinese firms control over 80% of the global solar panel manufacturing supply chain, according to the International Energy Agency.
The IRA aimed to bolster the U.S. solar manufacturing industry, in part through clean electricity tax credits. But as a result of the Republican budget law’s rapid phaseout of those incentives, the U.S. will deploy about 40% less clean energy over the next decade, according to modeling by experts at Princeton. Companies like U.S. solar manufacturer Talon PV have already begun pausing or canceling U.S. projects in anticipation of the clean energy tax credit repeals, as well as other uncertainties like Trump’s unpredictable tariffs.
When the IRA became law, there was a surge in planned battery, EV, and solar manufacturing investments, according to a project to track clean energy manufacturing announcements by a team at Wellesley College. That was followed by a steep decline since last November’s elections and associated threats to clean energy incentives.
Energy Innovation, a Yale Climate Connections content-sharing partner, anticipates that the repealed clean energy tax credits will cost 760,000 jobs by 2030 and reduce the country’s gross domestic product by nearly a trillion dollars.
The budget reconciliation law gives the Chinese economy other advantages
The big budget law will likely cause a tremendous number of other negative impacts. Because clean energy deployment will slow down at a time when power demand is rising rapidly and natural gas turbines are facing years of delivery backlogs, experts warn it will create energy scarcity. American companies will likely be left scrambling to find enough supply to meet rising power demand, which will lead to higher electricity bills and put U.S. artificial intelligence developers at a disadvantage in their high-stakes race against their Chinese competitors.
Increasing the country’s reliance on fossil fuels will also result in more air pollution and sicker U.S. residents, coinciding with at least 17 million people losing their health coverage and more than 300 hospitals facing the risk of closure, the result of other provisions in the GOP’s new law.
The Senate made the bill 25% less damaging to the climate
As harmful as the final law is, it was very nearly considerably worse for the climate. The version initially passed by the House would have effectively immediately gutted the clean electricity tax credits. It was so damaging that 13 House Republicans pleaded with their Senate colleagues to fix the bill they had all just voted for.
The Senate Finance Committee did indeed make some improvements, softening the requirements for clean electricity to qualify for the tax credits and significantly extending their timeline for sources other than solar and wind.
Republican Senators Lisa Murkowski (Alaska), Joni Ernst (Iowa), Chuck Grassley (Iowa), and John Curtis (Utah) reportedly negotiated a last-minute amendment to the bill that added a one-year runway for new solar and wind projects to begin construction and still qualify for the full clean electricity tax credits.
The Princeton modelers estimated that compared to the status quo, the House version of the bill would have added about 2.7 billion tons of climate pollution to the atmosphere while increasing average U.S. household energy bills by more than $2,000 over the coming decade. The final bill passed by the Senate and signed into law by Trump is projected to instead add 2.1 billion tons of climate pollution and cost U.S. households a bit under $1,700 in higher energy bills over the next decade.
That’s about 25% less costly than the House version – both to pocketbooks and to the climate.
But it’s considerably worse than the status quo of Biden-era policies and regulations, in which the accelerated deployment of cheap solar and wind energy was expected to reduce household energy bills by about $600 over the next decade.
And on its new course, the U.S. will exceed its 2030 Paris commitment by 7 billion tons of climate pollution, according to an analysis by Carbon Brief.
Given the slimmest of margins by which the bill passed the Senate, any Republican senator could have sent the bill back to the drawing board by simply voting no. Sen. Murkowski instead chose to cast the deciding vote after extracting a variety of concessions for her state and clean energy incentives, before pleading with the House to further fix the bill whose passage she had ensured.
A bill everyone dislikes, except Chinese manufacturers
Because of the sprawling nature of the big budget law, it has something for just about everyone to dislike. And indeed, polls have consistently found that Americans oppose the bill by a nearly two-to-one margin.
Whether it be higher energy costs, lost domestic manufacturing, jobs, and economic growth, the ballooning of the national debt, energy scarcity, drastic cuts to the social safety net, exacerbated income inequality, or an extra 2 billion tons of climate pollution, there may only be one group that loves the big budget bill. As Energy Innovation’s Senior Director of Modeling and Analysis Robbie Orvis put it:
“To sum it up, this bill is a GIFT to China, which must be smiling right now watching what’s happening. We are gifting them the industries of the future, making the U.S. an eminently harder place to invest in, and decreasing our energy security.”
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