What Happens to Global Decarbonization in a Trade War?

Donald Trump has implemented what is easily the most chaotic set of American economic policies in recent memory. First, the U.S. declared a trade war on the entire world, imposing breathtaking tariffs on many of the country’s biggest trading partners. He’s paused that effort — but scaled up punitive tariffs on China, launching what would be the 21st century’s biggest global economic realignment without any apparent plan. Now Trump says that more levies are coming on semiconductors and pharmaceuticals, no matter where we get them.

All of this is a disaster for the U.S. economy — but it’s also ruinous for any potential American role in decarbonization or the fight against climate change. Even more than Trump’s deregulatory actions, his trade war could spell the end of a long-held U.S. decarbonization dream.

On this week’s episode of Shift Key, Rob and Jesse chat about what Trump’s chaotic economic policy could mean for the global fight against climate change. What happens to global decarbonization if the U.S. no longer participates? If the U.S. kills its research sector, what happens next? And could China seize this moment to expand its clean tech sector? Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.

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Here is an excerpt from our conversation:

Jesse Jenkins: Just to put a pin in the second point you raised, too, on finance — this is such, I think, a critical piece of the potential role, as you said, of the United States and others in influencing development paths in emerging economies. In many cases, the sovereign risks of those markets — the risks related to the potential lack of rule of law or presence of corruption or currency risk and uncertainty or fiscal risk, other things that characterize these environments that, in contrast typically, historically, at least, to the United States and its stability — lead to higher financial costs for everything in these countries, whatever you’re trying to build. And since so many components of the clean energy transition are capital intensive assets — investing in a wind farm, or a solar farm, or manufacturing capacity, or new low-carbon steel production, these all require huge amounts of upfront capital investment.

And so if the U.S. and other international partners can help lower the interest rates and costs of financing that are needed for deployment of these technologies abroad, that has a pretty substantial influence on the actual competitiveness or relative competitiveness of this infrastructure and the ability of emerging economies to afford to deploy it. So that’s one of the kind of key levers that I think is often underappreciated in this stor, and I appreciated that you called that out.

Robinson Meyer: And I would say historically, it’s also something we’ve totally underperformed. It’s a hugely important lever, and it’s also something that Republican and Democratic administrations alike — Republican more than Democratic, but both kinds of administrations have really not contributed enough to the financial cause, here. And so the argument is that the Trump administration, with its broad array of policies, but also with this specific reckless, unplanned, and pretty idiotic trade war that it’s begun in the past two weeks, has undermined all of those advantages for the United States and undermined America’s ability to play any of those roles in a global context.

I would add to all of this that I think there’s another part of the story that I hint at, but don’t go into, which is that obviously the U.S. has withdrawn again from the Paris Agreement, or is in the process of withdrawing again from the Paris Agreement. Beyond Paris alone, climate change is a public problem for the world. It’s a problem of the global public. That’s not the only kind of problem it is — it’s also a developmental problem, as we’ve been discussing. But it is generally higher on the Maslow Hierarchy of Needs for governments than other things they might need to attend to. And so addressing climate change is only possible in a world that is peaceful, rule-following, generally ordered by norms and something approaching laws, rather than a simple imperial prerogative. And of course, the Trump administration’s actions — not only in this trade war, but also over the course of a few months — have been disastrous for that. I think that’s worth stipulating going forward.

Part of what I was trying to do with this piece was, we know that Donald Trump is waging war on the regulatory state. We know that he’s waging war on international climate treaties, and people are very used to thinking about that. But I think understanding this most recent imbecilic action, this trade war that he’s launched against the entire world and then kind of focused on China, also massively undercuts any kind of climate action. And we should be unafraid to say that — at least any kind of climate action that the United States would play a role in.

Music for Shift Key is by Adam Kromelow.