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This Energy Explained post represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece may be subject to further revision. Contributions to SIPA for the benefit of CGEP are general use gifts, which gives the Center discretion in how it allocates these funds. Rare cases of sponsored projects are clearly indicated.
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President Biden has merged the nation’s climate and trade policy strategies, with tariffs as a defining feature.[1] Duties have been imposed on imports of solar panels, steel, aluminum, electric vehicles (EVs), and batteries. Amidst shifting domestic and global policy landscapes, a new presidential administration will have the opportunity to reassess these tariffs next year. Former President Trump would likely pursue drastic changes, including a greater reliance on tariffs and less of a focus on climate goals.[2] In contrast, Vice President Harris is unlikely to pursue major changes to the Biden administration strategy. This post suggests that in the event of a Harris presidency, small and targeted changes to current Biden administration policies – like adding phaseout schedules to existing tariffs and pursuing multilateral agreements rather than new unilateral tariffs – have the potential to lower prices for consumers, boost economic competitiveness, and strengthen international climate cooperation.
To be sure, a compelling case can be made for climate-related tariffs. The vast economic opportunities of clean energy technologies and the existential threats to fossil fuel-dependent communities has led to the widespread adoption of “green industrial policy” strategies that support strategic domestic industries. Whether the goal is energy dominance, a green new deal, or national security, US policymakers are intent on making American firms and workers global leaders in emerging clean technologies and supply chains. Tariffs can play a useful role in these strategies, particularly as stopgap measures when domestic industries face imminent but perhaps temporary threats from foreign competitors.
However, other factors that motivated the pursuit of climate-related tariffs were specific to the time when President Biden took office. In 2021, the COVID-19 pandemic had led to fragilities in global supply chains that made onshoring production a priority. In the wake of the Trump administration, tensions with China had reached an all-time high. Laws like the Inflation Reduction Act (IRA) with large-scale support for domestic clean energy industries faced uncertain prospects in Congress, meaning executive actions may have needed to play larger roles in industrial strategies. Stronger climate-related tariffs were plausible solutions for each of these problems.
If some of the justifications for the Biden administration’s tariff-heavy approach to climate and trade policy no longer apply, an incoming administration may want to consider policy changes because tariffs impose costs on Americans. Tariffs hurt consumers by raising prices — a study by the Congressional Budget Office in 2020 (prior to the Biden administration) estimated that tariffs put in place by the US and its trading partners reduced the average real household income of Americans by over $1,200.[3] Poorer households are disproportionately harmed by tariff-induced price increases.[4] Tariffs can also hurt American producers by raising the costs of their inputs to production and by instigating trade wars. US farmers were severely impacted when China, in retaliation to Trump-era US tariffs, imposed tariffs on American agricultural products, leading to a significant drop in exports.[5]
Indeed, an incoming President Harris would face a different political and economic landscape in early 2025—with at least a temporary reprieve from the pressures of elections and pandemics, and a boom in manufacturing construction easing concerns about domestic competitiveness in critical industries.[6] To adjust to new realities, a Harris administration could consider the following three policy tweaks.
Instead of a broad climate-tariff, the Harris administration could pursue more collaborative “climate clubs” – international coalitions committed to phasing out carbon-intensive variants of internationally traded products.[9]Similar to the success of the Montreal Protocol in phasing out chlorofluorocarbons (CFCs) to protect the ozone layer, climate clubs could combine commitments to transition to carbon-free products with financial support for lower-income countries and penalties for non-compliance. While tariffs might have a limited impact on reducing emissions, climate clubs could be game-changing solutions for decarbonizing industries like steel, cement, and chemicals, which together account for over 25 percent of global carbon dioxide emissions.[10]
President Biden’s tariff-heavy climate and trade strategy was, to some extent, a product of its time and a consequence of unique political and economic challenges. A recalibration of this strategy could embrace a more balanced approach that avoids the pitfalls of excessive protectionism and puts the county in a better position to be a global leader on climate action, all while retaining the aspects of the Biden strategy that support American firms, workers, and communities.
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Anonymous
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Arjun Murti
Ray Rothrock
Kimberly and Scott Sheffield
[1] https://www.whitehouse.gov/briefing-room/speeches-remarks/2024/04/16/remarks-as-prepared-for-john-podesta-columbia-global-energy-summit/
[2] https://www.pbs.org/newshour/economy/trump-favors-huge-new-tariffs-how-do-they-work
[3] https://www.cbo.gov/publication/56073
[4] https://www.piie.com/blogs/trade-and-investment-policy-watch/tariffs-hit-poor-americans-hardest
[5] https://www.ers.usda.gov/amber-waves/2022/march/retaliatory-tariffs-reduced-u-s-states-exports-of-agricultural-commodities/
[6] https://www.atlanticcouncil.org/blogs/econographics/the-ira-and-chips-act-are-supercharging-us-manufacturing-construction/
[7] https://home.treasury.gov/news/press-releases/jy1872
[8] https://www.washingtonexaminer.com/policy/energy/3066372/podesta-floats-idea-of-carbon-pricing-on-imports/
[9] https://www.foreignaffairs.com/united-states/green-gridlock
[10] https://www.canarymedia.com/the-tough-stuff-decarbonizing-steel-cement-and-chemicals
This Energy Explained post represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece...
This Energy Explained post represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece...
This Energy Explained post represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece...
This Energy Explained post represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece...
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