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As Trump’s 20 January inauguration draws near, more details on the President-Elect’s approach to climate policy and trade tariffs trickle in. While campaigning, Trump floated a 10% to 20% flat tariff rate on all imports. There are also plans to impose 25% tariffs on imports from Canada and Mexico, but China would possibly take the biggest hit with a 60% or higher rate. Here’s a round-up of how the upcoming policies may impact sectors essential to the global green transition.
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ELECTRIC VEHICLES-
EV support on the chopping block? The Trump transition team is recommending a sweeping reversal of Biden’s EV policy, calling for scrapping funding and subsidies for charging infrastructure and EV production, as well as the USD 7.5k tax credits designed to spur consumer demand for EVs, Reuters reports, citing a transition document it has seen.
The breakdown: There has already been a 100% tariff on Chinese EVs since September, and Trump intends to slam car imports from Japan, Korea, and Europe with a 10% tariff, and imports from Canada and Mexico with a 25% tariff, SP Global said.
The Trump transition team’s plan may also reverse emissions and fuel-economy standards, allowing automakers to produce more gas-powered vehicles. The plan suggests reverting to 2019 standards, which would permit about 25% more emissions per mile and reduce average fuel efficiency by 15%. The proposal also recommends blocking California from setting stricter vehicle emissions standards.
The impact of deregulation could be long-lasting: The new relaxed environmental requirements will put less pressure on US automakers to electrify their fleets, leading to slower EVs adoption rate. Such delay could leave the US automakers at permanent disadvantage in the EV global market and would slow the US EV adoption from 40% to 30% of the market by 2030, SP Global said. Such delays and disruptions in EV adoption could have “ripple effects” across the world, SP Global warned.
The US auto industry isn’t happy: While the move threatens legacy automakers like Ford and General Motors, Elon Musk’s Tesla stands to benefit. Musk, who supports the move, believes it will boost Tesla’s competitive edge as the only US automaker currently profiting from EV sales due to its lower cost of production, Reuters reported last month. Legacy automakers — already struggling to compete — have relied on the credit to spur sales and offset EV production costs. Without it, they may scale back EV manufacturing, potentially limiting consumer choices and allowing Tesla to dominate further.
Other countries like the UK may benefit: With tariffs set to make cheaper imported EVs expensive for the US consumers, car makers could repurpose their supply to other markets. Experts from the UK are hoping that the British market could see a flood of affordable EV options, especially from China, boosting uptake, Motor Finance reported.
CRITICAL MINERALS-
The Trump administration plans to continue supporting the batteries and critical minerals sector, citing its importance for security and defense rather than the climate transition. To that end, the administration will sustain tariffs under national security provisions on batteries and critical minerals while also waiving the federally required environmental assessments for battery recycling and mining and processing projects. Export controls on US tech in these sectors were also floated.
Mostly good news for the US’ extractive sector: The tariffs would make importing these minerals more expensive. Coupled with sustained funding, the country is set to expand nickel and lithium mining and processing, reinforcing the US’ bid to shield its supply chain from China, according to MIT Review. However, slowing the EVs sector could limit the profit margins for critical minerals and mining projects, according to an analysis by law firm Herbert Smith Freehill.
THE GLOBAL IMPACT-
Protectionist policies threaten global growth and slow the green transition: China has led the development of new energy technologies, now dominating manufacturing in key sectors like solar power and EVs, according to a report (pdf) by DNV. China’s low-cost exports, particularly in solar and battery technologies, support global energy transitions, DNV found. Protectionist policies in North America and Europe, aimed at creating local supply chains, could slow progress and raise costs.
Souring relations: The tariffs could further strain relations between the US and China, two of the world’s largest economies, at a time when international cooperation on climate change is crucial.
China’s importance in numbers: In 2023, China accounted for 58% of global solar installations and 63% of new EV sales. EV sales surged by 50% last year and are projected to reach 25% of global passenger vehicle sales by 2025, with a 50% share by 2031.
The EU’s green businesses are also in the fireline: “These tariffs could redirect trade flows towards the EU, creating overcapacity and putting European companies at a disadvantage due to higher production costs and lack of subsidies compared to their US counterparts,” BusinessEurope deputy director general Luisa Santos told Politico. The EU’s stringent sustainability requirements, such as the Corporate Sustainability Reporting Directive, already pose challenges for businesses. With the US potentially becoming less cooperative on climate issues, the EU might find itself isolated in its green agenda.
Setting a dangerous precedent: Other countries that become competitive in green technology, including India or Indonesia, could also face trade barriers from the US. This would raise global inflation, slow economic growth, and undermine global climate goals.
