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Climate economist Gernot Wagner argues that Donald Trump’s tariffs will cause higher inflation and make everyone poorer. He also suggests that Trump’s tariffs are detrimental to the US economy and competitiveness, particularly in the context of the clean energy transition. Despite Trump’s efforts to hinder clean energy, Wagner remains optimistic about the global energy transition and praises the European Union’s Carbon Border Adjustment Mechanism, which he views as a step in the right direction.
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Gernot Wagner, a climate economist at Columbia Business School and faculty director of its Climate Knowledge Initiative, recently shared his views on the economic implications of President Donald Trump’s tariffs, particularly in relation to the net zero movement.
Trump’s Comment on the Indian Economy
Wagner expressed skepticism about Trump’s characterization of the Indian economy as “dead,” characterizing the president’s 50% tariffs on India and Brazil as the latest instance of economic arson. He pointed out the uncertainty around the duration and extent of these tariffs, as well as the unpredictability of exemptions. He argued that such uncertainty could harm both the US and global economy.
Economic Impact of Trump’s Tariffs
The climate economist argued that the primary consequence of Trump’s tariffs is increased inflation, resulting in a decrease in wealth for everyone. He noted that while there are situations where tariffs could be beneficial—such as in a climate context with carbon tariffs like the European Union’s Carbon Border Adjustment Mechanism (CBAM)—Trump’s tariffs do not fall into this category. He pointed out that the recent deal between the EU and the US led to increased tariffs and, consequently, increased prices for both US and European consumers.
Impact on US Manufacturing and Competitiveness
Wagner challenged Trump’s claim that his tariffs would improve US manufacturing and competitiveness. He noted that the tariffs were accompanied by measures that could potentially damage US competitiveness and manufacturing. He cited the example of the recent removal of incentives under the Inflation Reduction Act of the Biden administration that had previously aided in relocating the solar manufacturing supply chain to America. He lamented the Trump administration’s dislike for wind turbines and solar panels, suggesting that this stance undermines the US clean energy transition.
Global Energy Transition
Despite his concerns about the political situation in the US, Wagner was optimistic about the global energy transition, pointing to the net zero goals of India and China.
Views on the EU’s Carbon Border Adjustment Mechanism (CBAM)
Wagner addressed the recent rejection of the EU’s CBAM by BRICS, which described it as unilateral and discriminatory. He argued that despite the objections of countries on the receiving end of CBAM, the mechanism expands the group of nations willing to implement effective climate policies and nudges things in the right direction. He suggested that countries and industries, such as the steel industry of South Korea, could benefit from CBAM. He encouraged India, with its advanced climate-oriented policies, to view CBAM as an opportunity rather than a threat.
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