Written by Kate Logan, Director of the China Climate Hub
Mixed messages have become a defining feature of U.S.-China clean technology competition. Ahead of the recent Trump-Xi summit in Washington, rumors had flown that Xi would bring a delegation with clean tech CEOs – but he arrived without any such executives. No deals were announced, despite speculation about potential Chinese manufacturing investment in the U.S. following the May announcement of a “Board of Investment” intended to facilitate bilateral investment opportunities.
For his part, Trump has reiterated his support for China’s leading auto companies to make vehicles in the U.S., even as his transportation secretary lambasted Ford for partnering with a major Chinese battery firm. In response, Ford pointed out that the White House had praised its wholly owned Michigan factory producing batteries using that technology only a week prior.
The United States may be teetering between two divergent futures. In one version, despite a high-level détente, new restrictions will further constrain access to Chinese clean tech inputs and effectively create an isolated market. In an alternative scenario, political space may emerge for American companies to partner with Chinese firms. Where the United States lands may shape the range of future possibilities for America’s energy systems and industrial competitiveness as well as bilateral relations.
Despite a high-level thaw, restrictions are expanding
When Trump visited Beijing in May, the White House announced a so-called “Board of Investment” to discuss issues related to foreign direct investment. Some wondered if the new forum could be a channel for advancing joint ventures and other partnerships in the United States in certain clean tech sectors, especially EVs and batteries. But four months later, the Board has little progress to show, with this month’s summit only reaffirming its establishment and both the U.S. and China arguing that the ball is in the other side’s court. By comparison, in the months since it was stood up, its sibling Board of Trade identified $30 billion worth of non-sensitive goods for reciprocal tariff cuts from each country.
In the meantime, a wave of new policies addressing Chinese inputs into U.S. clean tech sectors has been announced or moved forward. The bipartisan Connected Vehicle Security Act advanced unanimously from committee in July after its introduction in late April, with the Senate expected to move quickly on it in November following the midterm elections. The proposed legislation would build on the Commerce Department’s January 2025 Connected Vehicles Rule (CVR) by enshrining restrictions on Chinese-origin vehicles, software, and other key parts into law. While Volvo has received a waiver to continue selling its vehicles in the United States despite the CVR, Polestar – which shares the same Chinese majority owner as Volvo and builds its vehicles on the same production line in South Carolina – was denied one, reflecting unexplained inconsistencies in the CVR’s implementation.
Outside of Congress, in late July, the Federal Communications Commission banned foreign power inverters that have not received pre-approval, a move expected to be targeted at Chinese manufacturers. The following week, the Commerce Department concluded its investigation into polysilicon imports under Section 232 of the 1962 Trade Expansion Act by imposing minimum price floors and ad valorem tariffs on polysilicon and other inputs spanning the solar supply chain, including ingots, wafers, cells, and modules. Later in August, the White House issued an executive order declaring a national emergency “to secure the United States bulk-power system” by prohibiting foreign-produced electric equipment from being connected to the American power grid.
While impacts may range, the overall signal is clear
These actions align to send a signal that Chinese inputs are not welcome, sometimes regardless of where they are produced. However, their substantive impacts may differ. For instance, some analysts believe the ban on inverters will be manageable for the industry, though others contend it could pose a greater threat to renewables development in the United States than existing Foreign Entity of Concern (FEOC) restrictions that prevent projects with material assistance from China from accessing certain clean technology tax credits. For solar, the new tariffs are expected to lock in a price differential that artificially favors domestically produced solar, which will raise the price of solar projects and may slow deployment. The Commerce Department has also moved to prevent stockpiling of polysilicon and related solar supply chain products ahead of when the new tariffs take effect in December.
The impacts of the executive order on securing the U.S. bulk-power system are still unclear but could be more consequential, especially for the U.S.’s ability to meet rapidly rising energy demand. The policy covers both software and hardware, despite research illustrating that certain “dumb” hardware components, such as batteries, pose little cybersecurity risk and may not warrant the same restrictions. The order also includes a removal clause that could instigate a large-scale “rip-and-replace” effort to remove and replace already-installed batteries, even with their role in balancing rapidly growing energy loads from AI data centers. Regardless of current tariffs, many developers are still purchasing Chinese batteries, which are often still cheaper or offer technological advantages over domestic ones that meet FEOC criteria to qualify for tax credits. The Department of Energy now has until late December to clarify the order’s implementation, including which equipment will be subject to restrictions and whether existing installations will need to be replaced. In the meantime, the range of uncertainty remains high, leaving many developers at a standstill.
Yet Chinese investment is increasingly seen as key to catching up
At the same time, a growing chorus of voices is publicly expressing support for Chinese investment in the U.S. on the grounds that it is essential for American competitiveness and industrial policy catch-up. Former Biden administration National Economic Council director Brian Deese recently made the case in Foreign Affairs that accepting some Chinese investment may be critical for rebuilding American firms’ competitiveness. An earlier Foreign Affairs article similarly assessed the cost of excluding Chinese investment from the U.S. market, particularly for American competitiveness. Both authors of that piece are members of a task force working group convened by UC San Diego that recently issued its findings on a framework for Chinese FDI in the United States, calling for the U.S. to “move beyond its current security-first approach to Chinese investment and become both more selective and more open.”
Importantly, these proponents are not arguing for opening the floodgates. Rather, they acknowledge that while Chinese investment could enhance American industrial competitiveness, related policies must be carefully constructed in order to deliver the intended benefits. Even so, questions linger over how Chinese companies might respond given Beijing is increasingly restricting corporate activities abroad. In early June, the State Council issued a new regulation on outbound investment, which went into effect on July 1. The regulation will elevate scrutiny on projects that involve technology transfer by further institutionalizing screening and approval, enabling Beijing to ensure that investments align with its national security and diplomatic interests. Still, the only way to test Beijing’s stance may be by putting actual investments on the table.
For the U.S., a potential China COP in 2028 adds complexity
Where the United States lands on its approach to Chinese clean tech may shape future possibilities for American industrial policy. Under a more decoupled scenario, understanding China’s industrial experience, particularly where it has succeeded, could still remain valuable as the United States builds alternative supply chains. An alternate case where political and policy space is maintained for U.S. companies to partner with Chinese firms and leverage their technologies may elicit a different set of questions: What, exactly, does the United States need from Chinese players that is politically viable back home? How transferable in practice are various technologies, learnings, and know-how? Will leveraging Chinese technologies as inputs create any critical national security risks? And how much will various technologies really help the United States innovate and catch up?
One further consideration is public reporting that China is considering hosting the UN climate conference in 2028, which would take place just after the next U.S. presidential election. While Beijing is merely weighing its options at this point, China’s consideration of hosting COP33 reflects how rapidly Beijing’s climate position has evolved, as well as the dynamic forces, both in China and the United States, that will shape the future of the bilateral relationship. Regardless of whether China hosts the conference, the options facing a new U.S. president in 2028 may depend on where the current administration lands on a more restrictive or more open approach to Chinese clean technologies, and how the next administration chooses to connect climate diplomacy with its trade and investment strategy.