The world is moving to two prices in tech. Janet Yellen was in China complaining about overcapacity and dumping by China in green tech. This is another indication that the US and its allies want to grow their own industrial base for new markets. Such policies will create an inflation bubble for high cost producers in these high cost economies. The US’s green tech cost is at least 50% higher than China’s, with new parts and materials by the way. Europe’s wind tech is twice as high. The high cost will lead to lower demand and a smaller industrial base.

The rest of the world will likely go for the low price. It will lead to faster adoption of green tech, as it is becoming cheaper than fossil fuel. The economies with protected high prices will slow down green transition.

The two price phenomenon is spreading to EV market. Volkswagen already sells the same car in Europe for twice as much as in China. Explicit and hidden trade barriers make this possible.

Semiconductor could be another one. TSMC’s chip fab in the US has cost 40% higher than in Taiwan. It would require sustained protection by the US government to survive. China has lower cost in legacy chips - 70% of the market. If chip makers in high cost economies lose the legacy market, they won’t have the revenue base to sustain R&D. Hence, protectionism there is coming. When China breaks through in the high node chips, the story will be repeated there. Basically, the end result from the US’s chip war with China is its industry requiring protectionism at the end.

We could see the same phenomenon spreading to new markets like rocket launch or small modular nuclear reactors. Two prices are not in anybody’s interest. Some efficiency loss is inevitable. But the high price economies will fare worse.