President Trump’s trade war has begun, with tariffs against all Chinese imports going into effect today. Levies against Mexican and Canadian imports were paused at the last minute, for 30 days, after Trump said both countries had offered concessions to his demands, though how significant these were is unclear.
But the threat of steep tariffs against the United States’ closest trading partners remains. The effect of these disputes is already being felt worldwide. Global markets gyrated on Monday, and China retaliated with penalties of its own. Before the tariffs were paused, Mexico and Canada had also pledged to retaliate.
And though most industries are set to be affected, the U.S. energy sector, including fossil fuels and renewables, is particularly vulnerable to trade disputes. Not only are oil and gas major imports and exports, but the complex supply chain needed to produce clean energy technologies is deeply reliant on global trade.
To help make sense of a complex economic and geopolitical puzzle, I called up Kelly Sims Gallagher, the dean of the Fletcher School of Law and Diplomacy at Tufts University. During the Obama administration, she was the senior China adviser in the office of the Special Envoy for Climate Change at the State Department.
Gas Exports
One thing about trade wars is that other countries often hit back. Already, China has announced a new 15 percent tax on coal and natural gas imported from the United States, and a 10 percent tax on crude oil.
Those levies could dampen U.S. exports. “We have U.S. oil and gas exports going all over the world now, and those are in jeopardy,” Sims Gallagher said.
China’s tariffs could also slow global efforts to reduce planet-warming emissions. While natural gas releases potent greenhouse gases when burned, it is cleaner than coal. And in recent years, as the United States has become the world’s largest exporter of natural gas, it has become a major supplier to countries that are replacing coal with gas.
So far, Trump hasn’t made good on his threats to impose tariffs on European imports. But if he does, the same dynamic could play out in Europe, which has becoming increasingly reliant on U.S. gas imports as it seeks to wean itself from Russian energy.
“Countries have options,” Sims Gallagher said. “A country like China could increase its gas imports from Russia rather than continuing to import from the United States.”
Oil imports
The tariffs on Canada were set to include a 10 percent tax on energy imports. Given that roughly 60 percent of the oil that the United States imports comes from Canada, such levies would have had major economic consequences.
Most analysts say they would raise gas prices at the pump for consumers. The pain could be most acutely felt in the Midwest, where much of the oil imported from Canada is refined into gasoline and diesel.
“We would be very likely to see those increased gasoline prices at the pump in certain regions that depend primarily on Canadian oil,” Sims Gallagher said.
On Sunday, before the implementation of the tariffs were paused, Irving Oil, a Canadian company, said it was raising prices for U.S. customers. “The majority of the product produced at our Saint John refinery is bound for the U.S. market,” the company said. “This tariff will result in price increases for our U.S. customers and have impacts on energy security and the broader economy.”
Renewables
The effect of tariffs on oil, gas and electricity is relatively straightforward. What’s harder to predict is the myriad ways that a trade war could affect the complex supply chains that make it possible for companies to produce solar panels, batteries, electric vehicles and wind turbines.
In recent years, the United States has become a major manufacturing hub for clean energy technologies, thanks in large part to the incentives provided by the Inflation Reduction Act, Joseph Biden’s signature climate law. American companies have expanded production, and many foreign corporations have invested in new facilities in the United States as well.
The Chinese tariffs will now raise costs for companies that need Chinese parts, and the imposition of tariffs on Canada and Mexico would do more of the same.
Sims Gallagher said that companies that have invested in building renewable energy facilities in the United States could be spooked by the sudden impediments to trade between the United States, Mexico and Canada. “They invested in supply chains across North America, and those investments are now jeopardized,” she said.
Electricity imports
In addition to sending oil to the United States, Canada is also a major supplier of electricity. Hydro-Québec, a Canadian power producer that operates huge hydroelectric plants, sends electricity to New England and New York. If those electrons were subject to Trump’s tariffs, prices would probably go up for customers in those regions.
Jason Grumet, chief executive officer of the American Clean Power Association, said in a statement that he was “concerned that increasing the costs of energy production inputs will put upward pressure on consumer energy costs.”
China
In recent years, under both Biden and Trump, the United States has introduced a series of levies on imported Chinese solar panels. While that dampened sales of Chinese solar panels in the U.S., plenty of other countries around the world were willing to buy the cheap Chinese exports.
A similar dynamic may play out this time around, but on an even grander scale. The global market for batteries, solar panels, electric vehicles and wind turbines is booming. But if it gets more expensive and onerous to manufacture renewable energy products in the United States, other countries are very likely to pick up the slack.
That could mean other countries would simply buy more clean energy technologies from China, Japan and Korea, Sims Gallagher said. “It is puzzling why the United States would want to cede those markets to China and Japan,” she said.
No more palm trees, and six other ways L.A. can protect itself from wildfires
Fire and wind are certain to shape the future of Los Angeles as the world warms. Los Angeles had started taking steps to prepare. But there are lessons it can learn from other cities adapting to extreme fire weather: managing yards, taking care of neighbors, making it easier to get out of harm’s way.
One big challenge, among many, is that plans like these need to be widely adopted. One home is only as safe as the home next door.
Neighbors matter. Building codes and zoning rules matter. But perhaps most of all, money matters. Building for an age of fire can be expensive, and often out of reach for many homeowners living in fire-prone communities. — Somini Sengupta
More climate news:
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In a Times opinion piece, Abrahm Lustgarten highlights a new report on how climate change could affect home prices. “Soaring home prices in the United States may have peaked in the places most at risk,” he writes, “leaving the nation on the precipice of a generational decline.”
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State Farm Insurance, the largest homeowners insurance provider in California, asked state insurance regulators on Monday to urgently approve a 22 percent average rate increase, the Times reports.
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