The upheaval of the global economy by Donald Trump has sparked concerns that climate initiatives could become collateral damage in the ongoing trade conflict.
In the week following what has been termed “liberation day,” economic analysts have cautioned that the extensive tariffs might instigate a worldwide economic downturn, which could have significant repercussions for investors, particularly those involved in the green energy projects essential for achieving climate objectives.
Concerns regarding a potential prolonged global recession have also driven down oil and gas prices, making pollution less expensive and complicating the justification for investing in cleaner alternatives like electric vehicles and low-carbon heating for financially strained households.
However, the most pressing worry revolves around Trump’s aggressive imposition of trade tariffs targeting China – the world’s leading manufacturer of clean energy technologies – which jeopardizes green investment in the US, the second-largest carbon emitter globally.
‘A tragedy for the US’
The US is projected to fall even further behind other nations in developing clean energy technologies as it limits its access to affordable, clean tech developed in China. This represents a significant setback for US green energy developers, who are still grappling with the previous administration’s pledge to dismantle the green incentives established during the Biden era.
Leslie Abrahams, deputy director at the Center for Strategic and International Studies (CSIS) in Washington DC, stated that the tariffs would likely impede the expansion of clean energy in the US and push the country to the periphery of the global market.
The tariffs are expected to increase the costs of developing clean power, as the US has relied heavily on importing clean power technologies. “And not just final goods imports. Even the manufacturing we conduct in the United States relies on imported components,” she noted.
The US government aims to bolster its manufacturing base by establishing new factories which could provide these components domestically. However, this process is likely to be time-consuming and costly, as the materials typically used to construct these factories – cement, steel, aluminum – will also be subject to tariffs, according to Abrahams.
“Additionally, there are broader global economic factors that could complicate access to affordable capital for construction,” she added. Investors who were previously keen on the US market under the pro-green Biden administration might hesitate in response to the White House’s overtly anti-green rhetoric.
Abrahams explained that this scenario would likely result in reduced investment in the expansion of green projects across the US and in R&D for future clean technologies, potentially diminishing the US’s standing in the global green energy sector and resulting in a “loss of market share abroad.”
Conversely, countries like China may pivot their clean energy technology sales away from the US and towards other nations enthusiastic about pursuing green energy, Abrahams said. “While this might catalyze the adoption of clean energy in those nations – a positive for emissions – it translates to lost market share for the US,” she explained.
‘Clean energy is unstoppable, with or without Trump’
It’s crucial to differentiate between the US and the rest of the globe, according to Kingsmill Bond, a strategist at the energy think tank Ember.
“The more the US isolates itself from the global community, the more progress the rest of the world will make, leaving the US behind. This is tragic for the clean energy sector in the US, yet for others, opportunities are emerging,” he stated.
Analysis from the climate advocacy group 350.org has revealed that despite rising costs and declining green investments in the US, Trump’s trade war will not hinder the global shift towards renewable energy.
The group asserts that the US is already “just a footnote, not a key player” in the urgent transition away from fossil fuels. Only 4% of clean tech exports from China are directed to the US, with a trade sector that grew approximately 30% last year.
“Trump’s tariffs won’t impede the global energy transition – they will solely disadvantage regular Americans,” remarked Andreas Sieber, an associate director at 350.org. “The shift to renewables is inevitable, regardless of his involvement. His recent actions make minimal impact on the thriving clean energy market but will isolate the US and escalate costs for American consumers.”
Workers assemble wind turbine blades on a production line in Jilin province, northeast China. Photograph: Xinhua/Rex/Shutterstock
A senior leader at a prominent European renewable energy firm expressed that while developers will continue to advance existing projects in the US, future investments are more likely to be directed towards other markets.
“We won’t be doing less work, simply redirecting it elsewhere,” shared the executive, who opted to remain anonymous. “Demand for clean energy projects is thriving globally, so our ambitions will not diminish. Furthermore, excluding the US might simplify the management of already stretched supply chains.”
Countries poised to benefit from renewed interest from renewable energy investors encompass emerging markets in Southeast Asia, where fossil fuel dependency continues to be high and energy demand is surging. Australia and Brazil have also surfaced as nations likely to gain from this shift.
“In challenging times, countries will increasingly seek domestic solutions,” Bond stated. “This necessitates clean energy and local supply chains. Beyond the climate imperatives for going green, there are now national security motivations as well.”
For governments eager to leverage the opportunity presented by the diminishing US green presence, the challenge lies in reassuring concerned investors that they can provide a secure investment landscape for the climate agenda.
Dhara Vyas, CEO of Energy UK, the industry’s trade organization, noted: “Certainty has always been the key that investors seek. The UK is viewed as a stable nation with a reliable government, but especially now, we must intensify our efforts to provide certainty to investors.”
“Investors do prioritize certainty,” Bond concurred. “However, they are equally drawn to growth and opportunity, which is why there is optimism that they will persist in allocating capital to this sector.”
‘The US still matters’
While the slowdown in green investment may primarily impact the US, it still raises alarms for global climate progress, according to Marina Domingues, head of new energies at consultancy Rystad Energy.
“The US is a significant emitter. Therefore, its actions remain crucial to the global energy transition and CO2 accounting,” she stated. The US ranks second among the world’s polluters, with China producing nearly three times its carbon emissions. The US’s retreat into fossil fuels comes at a time when it planned to significantly increase its domestic energy requirements.
After years of relatively stable energy demand, Rystad forecasts a 10% increase in US electricity consumption, spurred primarily by the rise of AI data centers. The economy is also poised to demand more energy to support an increase in domestic manufacturing as imports from China decrease.
Without a flourishing energy sector, this growth in demand is expected to be met with fossil fuels, leading to an uptick in climate emissions. The US is likely to utilize its abundant shale gas while also planning to increase its coal usage in the future.
In the same week that Trump unveiled his tariffs, he also issued four executive orders aimed at preventing the US from phasing out coal, which climate advocates at 350.org labeled an “abuse of power.”
Anne Jellema, the group’s executive director, argued, “President Trump’s latest push to promote coal in the US reflects a perilous fantasy that jeopardizes our health, economy, and future.”
