President Trump has shown minimal enthusiasm for addressing climate change. One of his top officials even suggested assessing if a warmer climate is beneficial to humanity, aiming to weaken environmental regulations.
However, while he pushes for increased oil and gas output, Trump’s economic strategy might unintentionally lead to a decrease in greenhouse gas emissions due to reduced consumption caused by a global trade conflict.
Any temporary relief for the environment may be short-lived. In the long run, the negative economic impact of retaliatory tariffs is likely to slow progress, as the deployment of clean energy relies heavily on international supply chains and public support for climate initiatives tends to wane during financial hardships.
Carbon emissions, primarily a result of travel and manufacturing, are closely linked to economic expansion. Experts are increasingly predicting that Trump’s proactive tariffs could push the economy toward a recession, leading consumers and businesses to spend less due to rising costs of imported products.
“In a typical recession scenario, people travel less, purchase fewer items, and there’s reduced investment in capital goods,” commented Alex Heil, a senior economist at the Conference Board focusing on energy and climate. “A general slowdown in economic activity usually leads to lower carbon emissions.”
This was observed in the last two recessions when global carbon emissions fell slightly before rising again. (In the U.S., emissions continued to decrease after 2008 as inexpensive natural gas replaced coal, suggesting a similar trend might soon occur worldwide.)
Signs of an economic slowdown are already emerging: Airlines are projecting decreased traffic, and the housing market is witnessing fewer new constructions. Once the consumer rush before tariffs settles, retail companies expect sales to drop as customers tighten their budgets. Ending the de minimis exemption, which previously allowed goods worth up to $800 to enter the U.S. without tariffs, may greatly reduce the number of inexpensive, trendy clothing items imported from overseas.
Interestingly, U.S. environmental advocates have long pushed for a carbon tax to discourage polluting products and promote cleaner alternatives. While tariffs deter purchases of foreign goods, many of which also have high carbon footprints, a carbon tax would be a more direct way to reduce emissions. Still, broad tariffs may still offer some climate benefits.
Globalization has significantly contributed to the rise of greenhouse gas emissions by enabling wealthier countries’ citizens to fill their homes with inexpensive toys, furniture, and vehicles. As environmental regulations in the U.S. and Europe became stricter, many polluting factories relocated to developing nations with looser regulations.
However, it’s uncertain whether a trade war could reverse this trend, as it complicates the economic landscape. Even with U.S. tariffs, the flow of goods might simply shift instead of diminish overall.
“The question is whether we’re genuinely seeing a significant drop in international trade or just shifts in trade routes,” remarked Ethan Zindler, chief policy analyst at BloombergNEF. “Different trade routes can lead to varying emission levels, making it challenging to assess the overall impact.”
Even if international shipping were to decline and consumption shifts toward domestically produced goods, emissions may not necessarily decrease. Much of the emissions related to global freight occur in the last stage of delivery from ports to warehouses and retailers.
Furthermore, if countries returned to focusing more on domestic purchases — which is uncertain — establishing new factories that may not be as efficient as China’s massive industrial zones could potentially raise the carbon footprint associated with producing everyday items.
In the medium term, a significant factor influencing emissions will be how trade limitations and an economic downturn affect the development of new energy sources.
Recessions typically lead to lower gas prices, a trend already seen due to fears surrounding Trump’s economic policies. Tariffs on steel and aluminum are also raising the costs of deploying oil rigs, which has slowed drilling activities.
However, tariffs impact energy production in two ways, and renewable energy sectors might face greater challenges. Solar panels, wind turbines, and electric vehicles rely on components sourced internationally, such as batteries and turbines, many of which are now subject to tariffs of at least 10 percent. Some solar panel duties are even higher. China’s export restrictions on rare earth minerals essential for clean energy technologies are further complicating matters.
The Biden administration aimed to bolster domestic production of solar panels, batteries, and other essential parts for renewable energy with substantial subsidies. While they also utilized tariffs to protect some of these industries, domestic production is currently insufficient to meet demand.
“As we construct these factories, we still need the necessary equipment, which requires a lot of steel,” explained Eric Van Nostrand, former economic policy director under President Biden. Tariffs on steel pose challenges, and as high-interest rates loom and potential cuts to clean energy tax credits emerge, investment in this area is already diminishing.
Additionally, trade barriers impede the ability to respond to climate-related emergencies. In the event of a drought ruining wheat or soybean crops, being able to import without steep tariffs can help mitigate damages. Recovering from hurricanes or wildfires becomes much more expensive without access to imported materials like lumber, cement, and appliances.
Economic downturns also strain average consumers, leading to job losses and reduced hours. While they may attempt to limit energy expenditure by doing fewer laundry loads, affording investments like electric vehicles or heat pumps becomes increasingly challenging, particularly if Congress withdraws Biden-era subsidies for those technologies.
“During recessions, people aren’t usually keen on spending money to upgrade appliances like washing machines for better energy efficiency,” explained Brian Prest, a fellow at Resources for the Future, which is an energy-focused think tank. Delaying these upgrades might help keep emissions from rising as much as they could in a booming economy.
However, the significant repercussions of a trade war and subsequent recession would start to manifest over a longer timeframe, and none of those effects are beneficial for the environment.
Firstly, the move towards reducing carbon emissions heavily relies on the pace of technological advancement. As trade barriers increase, it becomes harder to export to other countries. This limits the market opportunities for entrepreneurs, which diminishes their motivation to take risks and invest.
Secondly, even if a more environmentally conscious president and Congress are elected in the near future, recessions usually don’t favor ambitious environmental initiatives. Immediate economic relief often becomes the priority, noted Jonas Meckling, a climate fellow at Harvard Business School.
“If economic growth declines, we know that climate issues won’t be at the forefront for voters; instead, the focus will shift significantly toward stimulating the economy,” said Dr. Meckling. This trend is already evident in Canada: facing rising unemployment and soaring costs, the country has retracted its consumer carbon tax.
This pattern is also true globally. Economic uncertainty makes countries more self-focused, while tackling climate change demands global cooperation. Ongoing international conflicts are causing leaders to allocate more resources to military enhancement, which means less funding for transitioning to low-carbon energy, industrial methods, and agriculture.
This is why climate economists find little comfort in the potential carbon benefits of an upcoming recession.
“Emissions might decline slightly due to reduced economic activity,” remarked Brian Copeland, an economics professor at the University of British Columbia. “However, I believe it complicates the long-term shift to a society with lower carbon emissions.”
