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Where climate hawks meet China hawks.

Why are relations between China and the United States deteriorating? Why does the global outlook feel like it’s darkening? A few weeks ago, Brian Deese, President Biden’s former top economic aide, offered a theory on Shift Key, the podcast I cohost with Princeton engineering professor Jesse Jenkins.
We started by asking Deese whether the U.S. should import the cheap electric cars that Chinese companies are beginning to churn out by the millions.
He began by politely disputing the premise of our question. It was wrong to assume, he said, that China is a “market-based economy and a market-based actor.” It would even be wrong to assume we’re in “a balanced and sustainable global trading” system.
He continued:
In terms of the global trading system, we have this enormous imbalance because China has this enormous excess savings. And what they’re trying to do to try to solve the acute economic challenges that they face is to plow that into manufacturing with the explicit goal of trying to dominate — not just try to gain competitive edge, but dominate particular industries. And when they do that … they flood markets with cheap goods.
These “excess savings” impose their own burden on the United States, he said, so we can’t just accept the cheaper consumer goods and move on. “We, the recipient countries, end up paying a lot of the cost of those Chinese subsidies and those Chinese policies,” Deese said. “We end up paying by our own industries, our own capabilities being diminished and derogated in a way that they wouldn’t have that imbalance not existed.”
If these ideas seem to you to be coming out of nowhere, you are probably not alone. What could Chinese financial savings have to do with the success of its EV industry? But for people who have followed left-ish-wing arguments about trade and geopolitics over the past few years, what Deese is saying is immediately familiar. He is glossing a set of ideas argued most famously by the 2020 book Trade Wars Are Class Wars, by the finance professor Michael Pettis and the financial journalist Matthew C. Klein.
These ideas are widely understood in the world of heterodox economists who resist neoclassical approaches to the field but have received little airing in the broader press. Yet they are increasingly important to understanding how the Biden administration sees the world. As Dylan Matthews of Vox has noted, the Biden administration can sometimes seem like a perplexing alliance of left-wing economic thinkers and China hawks. The Klein-Pettis book is the intellectual mortar fusing those two camps.
The book’s argument is nuanced and wide-ranging, but here is a brief summary. The global economy, Klein and Pettis argue, suffers from a destabilizing and dangerous imbalance, which, if left unchecked, could spiral into a global war. The cause of this imbalance is that since 1991, a handful of countries — notably China and Germany — have passed policies that depress their workers’ wages. These actions have included higher taxes, welfare cuts, lower environmental standards, and sometimes open graft, but they all achieve the same end: They impose great costs on the working class, artificially suppressing citizens’ income and reducing their quality of life, to the benefit of each country’s industrial leaders.
This, the “class war” of the book’s title, has rippled across the global economy in several ways. It has, first, allowed China and some European countries to build up a disproportionately large share of the world’s manufacturing industries. Since workers there are paid so much less than they would be elsewhere, companies are happy to relocate their factories to profit from cheap costs and (in China) low environmental standards. But because Chinese and German workers are systematically underpaid, they cannot afford what they are producing, thus forcing other countries to buy their artificially cheap finished goods. These are the titular “trade wars.”
This is not the end of the story. According to Klein and Pettis, China’s “class war” policies — such as its hukou system, which has created a roving migrant class within the country who lack access to welfare benefits — has artificially enriched its wealthy elite. These industrialists, executives, and officials cannot spend their money as fast as they earn it, meaning that they must save it. Specifically, they seek to save it in U.S. dollars, the world’s reserve currency, snapping up dollar-denominated bonds, stocks, and mortgages. This, in turn, drives up asset prices and generates artificial credit bubbles in the United States and its ally countries, as the world’s extra cash seeks a productive outlet somewhere in the American economy. And because global demand for U.S. financial products pushes up the cost of a U.S. dollar, it makes any goods produced in America more expensive, which further dings the competitiveness of American manufacturers versus their Chinese or German peers.
In short, over the past few decades, “the world’s rich were able to benefit at the expense of the world’s workers and retirees because the interests of American financiers were complementary to the interests of Chinese and German industrialists,” Klein and Pettis write. But note that there is a destabilizing cyclical mechanic to this story too: As China takes more global manufacturing, its excess savings build up further, which slosh around the global economy and generate larger and larger credit bubbles.
This is what Deese was referring to when he condemned China’s “enormous excess savings,” and this is why he identifies those savings as a key driver of China’s manufacturing boom. In the Klein-Pettis worldview, the underlying cause of the destructive tendency in the global economy is the way that its economy systematically steals from the poor and enriches the wealthy. As Deese told us:
China needs to decide if it loves this unsustainable, unbalanced, in many cases, illegal manufacturing strategy more than it hates the kind of domestic reforms it would actually need to take to boost domestic consumption, produce more balanced growth as it becomes a more mature economy.
This intellectual strain has long been present in the Biden administration’s thinking, but recently it has taken on a new prominence. On Wednesday, Treasury Secretary Janet Yellen warned China against flooding global markets with cheap green technology exports while speaking at a Georgia solar factory. “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers, as well as firms and workers around the world,” she said.
Biden himself has even begun to sound this note. You can see the soft influence of Trade Wars thinking in his promise that Chinese electric vehicles will not overwhelm American automakers. “China is determined to dominate the future of the auto market, including by using unfair practices,” he said in a statement last month. “I’m not going to let that happen on my watch.”
For Klein and Pettis, and presumably for the Biden administration, these “unfair practices” can be relieved only by China allowing the consumption share of its economy to rise. They argue that China must stop plowing money into unsustainable investment projects and instead allow its economy to be piloted by consumers, not party officials.
That this would require revising the country’s political system, which concentrates power in the hands of the economic elite, is what makes it so unlikely. On the other hand, if China fails to reform its system, then the consequences could be even more painful: Klein and Pettis suggest that a similar dynamic among the late-19th century Great Powers led to World War I.
Ultimately, Trade Wars Are Class Wars does not predict what will happen. The authors are clear that America’s and China’s economic growth are not necessarily in conflict; only the current dynamic makes it seem so. But the book also suggests a few ideas that it does not fully articulate — presumably because Pettis, who is a professor at Peking University, lives in Beijing.
The biggest of these is that China’s political economy could metastasize into far more malign forms than it holds today. If you think about a country’s politics and economy as necessarily growing and changing together — its politics taking a form that its economics can tolerate, and vice versa — then China’s politics and economy are not necessarily destined to grow along a consumer-friendly path. Today, China produces more solar panels and electric cars than it can consume, and it must find a way to get rid of them. But there are other lines of business — and political styles — that have a demonically self-disposing tendency.
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Current conditions: Tropical Storm Simon is expected to intensify into a Category 4 storm as it tracks northeast into Mexico and Texas from the eastern Pacific • Further north in the Pacific, Tropical Storm Rachel is barreling toward Southern California and northern Mexico • Hurricane Isaias, the first major storm of the Atlantic hurricane season, is poised to make landfall as a Category 2 sometime between 8 p.m. ET and 1 a.m. and somewhere between Alabama’s Dauphin Island and Destin, Florida.
With swells topping 7 feet, Hurricane Isaias has forced almost two-thirds of U.S. oil output in the Gulf of Mexico offline, as the storm cuts a path through one of the most productive regions of the sea. Of the 371 manned drilling rigs in the Gulf, 121 were evacuated as of Thursday night, representing a third of all platforms, according to data from the Department of the Interior’s Bureau of Safety and Environmental Enforcement. But those rigs represent 1.3 million barrels per day of production, or roughly two-thirds of the Gulf’s crude output. Almost 1.2 million cubic feet per day of gas production, representing over 57% of U.S. production in the Gulf, is also offline.
Meanwhile, an attack on an oil tanker near Qatar, in an area The Wall Street Journal described as deep inside the Persian Gulf, has triggered fears among traders that Iran plans to broaden its strikes on vessels traveling beyond the Strait of Hormuz as the U.S. Navy loosens the Islamic Republic’s grasp over the narrow waterway. The price of Brent crude, the key global benchmark for oil, spiked more than 4%.
Last month, OpenAI provided investors with figures indicating that it expected to rake in $70 billion in annualized revenue as of the end of September. But updated financial documents show a $20 billion shortfall in the ChatGPT maker’s books. The gulf between the two numbers amounted to what the Financial Times called “a massive gap likely to damp optimism about the growth of AI demand” at a moment when investors are diverting billions from factories, healthcare, and housing into data center infrastructure.
Shares in companies whose values are linked to rising demand for electricity, such as the utility Constellation Energy, the nuclear startup Oklo, and the geothermal developer Fervo Energy dipped on Thursday, along with chipmakers Nvidia and Micron.
First off, let me just say, this is quite a stirring way for a national government to begin a press release touting a policy on energy efficiency: “The world is changing rapidly. In response, a confident Canada is choosing to build.” In the name of slashing bills in a country where 7 million households “still heat their homes with oil, propane, diesel, electric baseboards, or outdated furnaces,” Prime Minister Mark Carney launched a nearly $1.5 billion (in U.S. money, not loonies) program Thursday aimed at delivering a million home retrofits. The first part of the program will provide a national heat pump rebate of up to $12,000 for up to 820,000 households. The second part will support the Canada Mortgage and Housing Corporation and the Canada Infrastructure Bank to renovate 280,000 units over the next eight years to make homes more airtight and energy efficient. Combined, the measures are expected to reduce Canada’s emissions by 25 million metric tons, equal to taking 8.5 million cars off the road for a year.
While my colleague Katie Brigham had a really sharp guide to making your home more efficient back in 2024, when federal money was flowing into such projects through tax credits, U.S. support for home retrofits has fizzled since President Donald Trump returned to office. But as the effects of wildfires worsen, the market for DIY fire protection is booming, our colleague Jeva Lange wrote this week.
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Polskie Elektrownie Jądrowe, the state-owned company building Poland’s first nuclear station on its Baltic coast, has begun ordering long-lead items for its planned trio of Westinghouse AP1000s. That typically involves heavy forgings and castings for pressure vessels, World Nuclear News reported, as well as steam turbines and generators, and marks a major milestone for a project that has started gaining new momentum after years of bureaucratic back and forth.
Urenco USA, the American division of the European nuclear fuel giant, announced Thursday that its new enrichment facility in the U.S. is now 75% complete. “We are consistently delivering new capacity to help fuel the U.S. nuclear industry and allied nations, and our teams are doing it ahead of schedule and on budget,” Jody Blackshear, Urenco USA’s managing director, said in a statement. “This experience will support our larger capacity programs in the years ahead as we look to increase our enrichment production by more than 50% to meet the needs of our customers with traditional and advanced reactors.”

El Niño is here, and it’s threatening below-average rainfall across the northern parts of South America and above-average precipitation in areas such as southern Brazil, Paraguay, and Argentina. That, according to a new International Energy Agency analysis, poses a problem for a continent that depends heavily on hydropower for electricity. “While countries across the region have accumulated significant experience in managing hydrological stress due to El Niño and other climate-related risks, preparedness measures are often focused on specific events, rather than embedded within specific and comprehensive risk-management frameworks,” the report stated. “With climate-related disruptions likely to become more frequent and severe, there is increasing value in adopting a systematic approach to assessing and strengthening emergency preparedness for the electricity sector.” Among the steps the IEA recommended: More interregional power connections, more diverse power mixes, and more dispatchable power units.
QuantumScape has long been a frontrunner in the race to commercialize solid-state batteries that are lighter, more efficient, and ultimately cheaper than the lithium-ion packs that dominate the market today. Now, much like other developers who were previously locked into electric vehicles, the San Jose-based startup is getting into the data center business. On Thursday, the company announced the launch of its QS PowerBlock, a battery unit for behind-the-meter power users. The modular system “can deliver four times the power density and five times the runtime” of the data center industry’s current standards for batteries, the company said in a press release. “Solid-state battery technology offers an unmatched combination of energy, power, and safety for many different applications, from electric vehicles to AI data centers and beyond,” Siva Sivaram, QuantumScape’s chief executive, said in a statement.
Many nonprofits representing the environmental and climate movement are split.
This is Heatmap Daily, an evening digest written by our executive editor.
It’s now been just over a week since a gang of four bipartisan senators released the Bipartisan American Affordability and Jobs Act, or BAAJA. The permitting reform proposal would make too many changes to federal law to summarize cleanly here — read our explainer for that — but suffice it to say it creates a messy group of winners and losers. Utilities, data centers, and the Trump administration would lose; electricity ratepayers, clean energy companies, long-distance transmission lines, and natural gas pipeline builders win. (As would geothermal startups, virtual power plant providers, and a few other climate tech subsectors that my colleague Katie Brigham recently detailed.)
In the ensuing week since its release, we’ve gotten a better sense of the battle lines over the bill. The hardhat unions largely support the proposal (although the International Brotherhood of Electrical Workers, which is often aligned with utility executives, has stayed notably silent on it.) Clean energy trade groups, such as the American Clean Power Association, back it, too, as do fossil fuel lobbying groups, such as the American Petroleum Institute.
Groups representing the environmental and climate movement are more split, and some of the most influential nonprofits have yet to render a verdict. Earlier today, the Sierra Club published its first take on the proposal, which it described as a “hard look” at the bill. The Natural Resources Defense Council asked its own “hard questions” last Friday. Neither document rejects the proposal outright, although both are critical, and both suggest that future statements are coming.
To some degree, the statements say what you might expect: The groups like all the parts of the compromise that Democrats fought for (such as those that will encourage transmission) and dislike what Republicans wanted (such as those that will ease some pipeline permitting). That is what a compromise means — and for congressional procedure reasons too tedious to explain here, permitting reform will likely always need to be passed as a bipartisan compromise, because it will always need to overcome a 60-vote Senate filibuster.
The Sierra Club’s assessment divides the bill into “green flags,” which will make “long-overdue changes to protect consumers and level the playing field for proposed transmission,” such as by making it easier to plan long-distance power lines, protect ratepayers from utility and data center freeloading, and clarify who in the government can approve power lines. It also names four “red flags,” including the “hollowing out” of court authority over some permits, the removal of a Clean Water Act provision that lets governors block pipelines and power lines, and the option to delegate partial Endangered Species Act enforcement to state governments.
This is a helpful scheme, and I hope the Sierra Club continues using it. But I think it would be a mistake to analyze the bill solely through this metric, because it implicitly assumes we are starting from a neutral baseline — or that every additional “unit” of policy support, so to speak, helps an insurgent industry as much as it might aid an incumbent industry. To be clear: Although I’ve endorsed the idea of permitting reform in the past, I’ve been careful not to endorse or reject this particular permitting bill yet; I hope to write a more comprehensive take on this legislation — and whether I think it’s a good idea — before senators ultimately vote on it.
So for now, let me say that I think everyone should keep in mind that the baseline around U.S. energy permitting is, in fact, not neutral today. By this, I do not merely mean that natural gas pipelines already have a one-stop shop for federal permits, but transmission developers have to go hat in hand to every state government; nor that fracking is already carved out from some federal environmental review laws, but enhanced geothermal technology isn’t.
The mismatch goes deeper than that. Many of the discussions of the bill that I’ve seen seem to fear that the United States might witness some enormous and unprecedented fossil fuel buildout were the bill to pass. But make no mistake: We are already witnessing such a buildout. The United States is slated to add more than 60 gigawatts of new natural gas generation capacity by 2030 under its existing laws.
The existing system of laws, regulations, and procedures is failing to avert an enormous fossil fuel buildout. The existing system has proven itself completely inadequate to manage an era of electricity demand growth and the data center boom without surging fossil demand and sky-rocketing electricity prices. The existing system of laws is pushing hyperscalers and developers to burn natural gas on site, often through rudimentary jet engines.
And the existing system of laws has shown that fossil fuel consumers will go to great lengths to move and obtain fossil fuels, even when dedicated transport options like pipelines are not available. I’ve heard fears that the permitting bill will make it easier to build natural gas pipelines. But pipelines, to a dedicated artificial intelligence customer, are no constraint: Oracle is now delivering natural gas to some of its data centers by truck when pipeline capacity isn’t available.
There may be reasons for green groups to reject this deal. (And there may be reasons for Democratic lawmakers to support it anyway, even if environmental groups oppose it.) But the perfection of our current environmental and energy legal regime is not one of them. Even if your sole goal were to reduce the carbon emissions produced by the American energy system — even if you set aside the problems with cost, conventional pollution, or monopoly control — the current system sucks.
Advanced nuclear will take a decade or more to hit commercial scale. Meanwhile, the hyperscalers need power now. Enter the uprate.
When America’s tech titans started plowing money into nuclear technology to power data centers in 2024, companies such as Google and Amazon opted to invest first in next-generation reactor startups. But electricity demand is soaring today, and those projects are still years away — at least — from generating power at reasonable commercial rates.
So the industry is hedging by betting on existing nuclear plants to pump out more electricity in the near term. Uprates — renovations that allow nuclear operators to produce more power from existing reactors — are all the rage this year.
In February, the Department of Energy issued its largest-ever loan to Southern Company to fund up to 6 gigawatts of uprates across the utility’s nuclear fleet. Last week, Amazon signed a deal with Constellation Energy, the nation’s largest operator of nuclear reactors, to uprate the Calvert Cliffs plant in Maryland to generate another 190 megawatts on top of its current 1.8-gigawatt output. Soon after, the Energy Department offered nuclear operator Vistra a $4 billion loan to uprate plants in Ohio and Pennsylvania.
Then on Tuesday, Google inked its own deal with Constellation aimed at wringing out 890 megawatts of new power from 11 reactors across PJM Interconnection, the nation’s second-biggest and arguably most overworked grid system.
“Everyone loves nuclear, but it takes a really long time to build,” Raiford Smith, Google’s head of power and energy for the cloud, told me yesterday. “The fastest way to get it is via uprates. It’s real megawatts, but the quicker, shorter-term approach.”
Building new reactors, he said, “is the intermediate term plan, and we see fusion as the longer term bet.” Given that “new data centers are coming on at a gigawatt a clip, that means even with all the uprates, there’s still more to come,” he added.
The investments into existing nuclear stations deliver a win for Constellation, whose chief executive, Joe Dominguez, has been among the more vocal C-suite skeptics of what my colleague Matthew Zeitlin described as utility executives’ “load growth mania” over the past two years. But the deals say as much about the shifting lines in the debate over how to expand the nuclear power fleet in this country — what size reactors are better, how to finance projects — as the disagreement over how much new generation is needed to supply the artificial intelligence boom.
The deal “is a win-win,” Emmet Penney, the director of energy and infrastructure at the think tank Foundation for American Innovation, told me. “Constellation and Google are revealing just how essential our nuclear fleet is to maintaining our energy dominance.”
America’s last attempt at a nuclear buildout ended in a series of financial boondoggles. The problems traced back to numerous factors: Decades without any nuclear construction atrophied the workforce. Electricity market reforms aimed at breaking up monopoly utilities left the industry with few players equipped with large enough balance sheets to take on megaprojects that would take years to build and billions of dollars of upfront capital. Increased competition from cheap natural gas.
The only two new reactors that made it over the finish line, Southern’s pair of Westinghouse AP1000s at the Alvin W. Vogtle Generating Station in eastern Georgia, came in billions of dollars over budget, in part because the developers erred in choosing a Nuclear Regulatory Commission licensing pathway that required long stops and costly delays every time the builders tweaked the design. Since those were the first AP1000s constructed in the U.S., there were plenty of last-minute design kinks to iron out.
In the meantime, the industry rallied behind the idea of small modular reactors. By making individual reactors roughly a third or less powerful than large-scale units such as the AP1000, the thinking went, developers would need to buy more, helping the technology slide down the cost curve through repeated construction and assembly-line manufacturing of components.
While Google and Amazon both backed fourth-generation startups whose designs use coolants other than water, such as liquid sodium or helium gas, the only such reactor operating in the world is in China, and America’s track record of running similar plants is poor. As such, government-owned utilities such as Canada’s Ontario Power Generation and America’s Tennessee Valley Authority have thrown their weight behind third-generation SMRs that essentially just shrink down existing water-cooled technology. The first of GE Vernova Hitachi Nuclear Energy’s BWRX-300s, a 300-megawatt design based on the boiling water reactors that make up about a third of the U.S. fleet, is now underway at OPG’s Darlington plant. In the U.S., meanwhile, the NRC just issued a construction license for the TVA’s first BRWX-300.
But the completion of the second AP1000 at Plant Vogtle demonstrated an uncomfortable reality proposed by researchers at the Massachusetts Institute of Technology: That the next, cheapest reactor to build in the U.S. would be another of Westinghouse’s flagship design. Vogtle Unit 4 came online in 2024 roughly 30% cheaper and faster than its slightly older twin, Vogtle Unit 3.
If that reduction seemed to justify the approach SMR companies were pursuing, a report by an economist and former antinuclear researcher raises new questions. The study by Charles Komanoff, which I covered here last month, suggests that the number of reactors required to achieve major cost reduction through “economies of duplication” pales in comparison to the price drop achieved through “economies of scale.” In other words, the nuclear industry’s time-tested approach to making reactors more economical — making them bigger — is still the best bet.
The Trump administration certainly agrees. The Energy Department laid plans for at least 10 new AP1000s last year, and put up another nearly $20 billion loan package for utilities that form joint ventures with Westinghouse to build one of the 1,100-megawatt reactors. South Korea is currently working out the fine print on a deal to help finance and build as many as six AP1000s and two APR1400s, the Korean rival to the Westinghouse reactor.
Whether any American utilities step up to help build any of those AP1000s remains an open question.
“There’s no way any utilities could consider building a large AP1000 because doing so could bankrupt the whole operation, and they don’t have enough confidence,” Chris Gadomski, the lead nuclear analyst at the consultancy BloombergNEF, told me.
The workforce that constructed the two AP1000s at Vogtle, he said, are now out building data centers. Unlike the Chinese, whose state-owned nuclear companies reverse engineered the AP1000 and made it relatively cheap to build by constructing as many as half a dozen at a time at one location, “we don’t have the wherewithal or sites in this country to build six reactors at once,” Gadomski said. “You’re lucky to build two at one site in this country.”
So fusion and next-generation fission remain years away. Current-generation SMRs come with big questions. And the leading large-scale design, the AP1000, is proving a hard sell to utilities. That leaves two options: Restarting decommissioned plants and uprating current reactors. The Energy Department has pumped billions in loans into projects to restart at least three permanently closed reactors: Holtec’s Palisades plant in Michigan, NextEra’s Duane Arnold facility in Iowa, and Constellation’s Crane Clean Energy Center, née Three Mile Island, in Pennsylvania. The consensus among industry experts is that those are the only three that remain intact enough to start back up; every other shuttered plant is at too advanced a stage of demolition.
That leaves uprates.
There are limits to how much power can be drawn from existing plants, said Jeff Jenkins, the founder and managing partner of Bernhard Capital Partners, an investment firm whose portfolio includes Allied Power, a contractor that has worked with Constellation on past uprates. “There’s still a few gigawatts out there,” he said. “And a gigawatt is a lot.”
But ultimately, the U.S. nuclear buildout needs options.
“It’s very much a hedge,” Gadomski said. “They’re spreading their bets. That’s a strength of Google’s strategy. They’re willing to place bets on advanced reactors, fusion, and still try to double down on the capacity of existing plants.”