IRA Subsides for EVs, Import Tariffs, and Domestic Industry

Grant description:

This study seeks to compare the Inflation Reduction Act and tariff approaches by quantifying how each policy affects the new vehicle market and domestic manufacturing activity. The authors will evaluate how these policies affect purchase decisions and welfare of different consumer groups (by income, geography, and other demographics), as well as the production and profits of different manufacturer groups (based in the United States versus abroad) and the incentives each policy creates to expand U.S. industrial capacity. The authors will use an existing model of the electric vehicle market to examine the impact of switching from IRA subsidies to tariffs on EV prices, the impact of switching from IRA subsidies to tariffs on short-run domestic production and profits, and the impact of IRA subsidies on long-run investments in capacity and production.