Gernot Wagner is a climate economist at Columbia Business School. Speaking to Srijana Mitra Das, he discusses Donald Trump’s tariff measures — and what these mean in our era of global warming:Q. How will Donald Trump’s proposed tariffs impact the US economy?A . First, across-the-board tariffs are usually costly to businesses with global supply chains, to consumers, etc. Some supply chains might benefit while others won’t but, on average, tariffs cost a lot. They have larger effects than politicians often assume — Donald Trump might think, tariffs aren’t a tax on Americans and so, they won’t cost them. That is not the case.How will the US-China tariff tension likely play out?US tariffs on China will have a fairly sizeable impact, particularly on the low-carbon transition — China is the world’s largest exporter of several inputs and final products in supply chains which are instrumental in the clean energy transition, from solar panels to wind turbines and electric vehicles (EVs). So, the tariffs will be quite disruptive. Then, the Chinese response leads us to a real danger of an actual trade war, a beggar-thy-neighbour set of policies where each country will slap tariffs on the other, with no true winner in sight.What role could the European Union (EU) play here?Frankly, the EU could, in part, be a beneficiary — China will want to sell some products which won’t reach the American market as much. So, European consumers could benefit from that while European policy makers might get more worried about the perceived need to protect their own producers, possibly with their own set of policies.What does a worldwide tariff war like this imply for globalisation?It doesn’t bode well. There is a bigger political thrust in this direction as well — and it’s not coming only from the US but also from some European countries, China, etc., where we have seen the proverbial, and sometimes literal, building of walls — that’s certainly stepping backwards on global integration.Also, there is a big difference between across-the-board tariffs and potentially targeted tariffs. The Biden administration, for instance, had assessed 100% direct tariffs on Chinese EV imports and 50% on solar cells— but those came in conjunction with massive US subsidies for domestic production. From a political perspective, the combination of those two policies might make sense. I’d still argue there are better ways — for instance, the EU is doing rather well with tariffs on the carbon content of goods, called the Carbon Border Adjustment Mechanism (CBAM), linked to its emissions trading system. This basically serves to level the playing field — it’s the kind of tariff The Economist magazine, a great backer of free trade, can get behind as the CBAM aims to provide the same incentives to steel importers and domestic producers.In the US, with the proposed 25% tariffs on steel and aluminium, there could be the very real potential to see this tagged to t
Mer. Feb 12th, 2025
