In just two days, President Trump’s tariffs, presented as Making America Great Again, seem to have done exactly the reverse. Wednesday night’s announcements in the White House Rose Garden wiped $5.4 tn off U.S. stocks.
With the Nasdaq Composite down more than 20 per cent from its mid-December peak, the gauge has tipped into “bear market” territory. Europe’s Stoxx 600 shed 8.4 per cent on the week, and the UK’s FTSE 100 fell 7 per cent. And as China hit back with its own charges, MSCI’s Asia index fell 4.5 per cent.
For clean tech companies, trade wars are bad news, particularly when it comes to securing key parts and minerals for use in renewable energy and electric vehicles as supply chains become further disrupted.
That said, it’s pretty uncharted territory for just about everyone after almost a century of free trade.
Trump has already undermined many parts of the U.S. clean energy industry, but now he risks derailing the country’s sustainable energy transition as well.
MIT Technology Review argues that Trump’s tariffs will deliver a big blow to climate tech. This comes on top of uncertainty about U.S. policy towards renewables with a lack of clarity around ongoing subsidies. The U.S. clean tech industry in particularly is likely to be badly hit with the cost of key components such as lithium ion batteries. The U.S. imported $4 billion worth of lithium-ion batteries from China during the first four months of last year.
A win for China?
“With US automakers struggling to compete, Chinese electric vehicle companies will likely gain a stronger position,” said Dr Kyle Chan from Princeton University. “The impact on China’s electric vehicle industry in particular will be consequential, albeit less direct.”
Trump’s measures may also prove something of an own-goal by favouring other nations where subsidies and pro-clean energy policies are more oriented towards climate goals, such as some parts of the renewable energy sector within the EU and China.
Chan adds, “Chinese electric vehicle imports to the US, which were already minimal, will not be significantly affected by Trump’s new tariffs.”
Trump’s measures could theoretically prove something of an own-goal by favouring other nations where subsidies and pro-clean energy policies are more oriented towards climate goals, such as some parts of the renewable energy sector within the EU and China.
The wind industry, already suffering under the Trump administration, is likely to face further setbacks. Wind turbines rely on components from around the world, even if they’re usually assembled in the U.S.
The same is true for solar panels and batteries. Endri Lico, an analyst at Wood Mackenzie, told The New York Times that a 25% tariff on imports could raise the cost of building onshore wind turbines by 10% and renewable energy overall by 7% — and many of Trump’s tariffs exceed that 25% threshold.
However, there are also fears that China may redirect its exports towards more open EU markets. This risks the survival of clean-tech industries even though EU is trying to support and them.
It’s uncharted territory. After almost a century of free trade and a half century of globalisation, even the experts are unsure quite how it will all pan out, although the tariffs announced appear to be worse than expected, judging by climate tech experts and the stock markets.
Steely Response
Eileen Torres Morales from the Stockholm Environment Institute argues that the effects of Trump’s tariffs on the global transition to green iron and steelmaking are still uncertain and it will take some time to see the impact, if any, such as increased steel prices in the short term.
Steel tariffs have forced exporting countries to rapidly reconsider how to stay competitive in the US market. “The tariffs might benefit steel producers in the US, but a likely outcome is that both public and private consumers within the US will face rising steel prices regardless of whether the steel is green or not,” says Morales.
Although the imposition of tariffs by the US may temporarily shift attention away from international competition and policies focused on heavy industry transition, this should not distract from progress in establishing a market for low-carbon products.
Policy instruments, such as the EU’s emissions trading system (ETS) and CBAM, should continue to be prioritised. Such tools can support the construction of a strong internal market for green steel, thus steering attention away from tariffs, back to driving innovation in low-carbon technology and emissions reductions that contribute to global climate action.
Nevertheless, most clean tech businesses require deep, long-term investment. The climate created by President Trump’s tariffs is far from conducive to investment confidence. In Trump’s first term of office, Donald Ducks became a popular bath toy. Perhaps it’s time to replace with Black Swans.
