Analysts Say Trump Trade Wars Would Harm the Entire US Energy Sector, From Oil to Solar

This story originally appeared on Inside Climate News and is part of the Climate Desk collaboration.

The Trump administration’s ever-changing policies on tariffs and trade have injected chaos into the global energy economy.

On Wednesday, a federal court blocked President Donald Trump from being able to adopt tariffs under an emergency-powers law. The administration is appealing the ruling. This sets up additional legal wrangling in addition to the conflicts over trade that were already happening.

Analysts at the research firm Wood Mackenzie gave themselves the task of predicting where US tariff policy may be heading. The result is a report issued this week, “Trading Cases: Tariff Scenarios for Taxing Times,” that shows the huge gap in outcomes between a trade war and a trade truce.

My main takeaway from it is that everyone loses in a prolonged conflict. Even the oil and gas industry, which has close ties to the Trump administration, would face falling prices for its products at the same time that the costs of much of its equipment are rising because of tariffs.

The US renewable energy and battery industries stand out for the potential severity of their downturns because development here relies heavily on components made in other countries. The Biden administration sought to encourage manufacturers to build in the United States, but those efforts are still in their early stages, and many of the government incentives are now on the chopping block.

Under a “trade truce” scenario, in which tariffs return to 2024 levels, the global economy would grow by an average of 2.7 percent between now and 2030, the report says. The “trade tensions” scenario would mean that tariff barriers increase compared to last year, but the economy would still grow, albeit at a lower rate. The most damaging is the “trade war” scenario, with the United States maintaining an effective tariff rate of 30 percent or more, leading to a global recession.

The report says the middle forecast, “trade tensions,” is the most likely to occur.