Climate-based tariffs by US, EU on Chinese steel and aluminium would ‘set a concerning precedent for China’
- Biggest takeaway from the reported discussions is that ‘trade policy and climate policy are growing increasingly intertwined’, analyst says
- But it’s unclear whether the European Union will get behind the idea reportedly pitched by the Biden administration, as relationship with China could be affected
The imposition of climate-based tariffs on Chinese steel and aluminium – reportedly being considered by the United States and European Union – would set a concerning precedent for China, but the overall impact on those sectors should be limited, according to analysts.
And they say that such a concerted effort by the US and EU also serves as a warning to the world’s second-largest economy, as it reflects how climate change could become another battleground between China and the West.
“The tariff issue has lasted for quite some time,” said Lu Xiang, a US-China relations expert with the Chinese Academy of Social Sciences. “The US has no sincerity in cooperating with China on climate change.”
He also noted that products related to climate change, such as solar panels and lithium batteries, could be hit by such punitive measures that are commonly imposed in trade disputes.
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“If such an agreement were to come into place, it would set a concerning precedent for China,” said Alfredo Montufar-Helu, the head of the China Centre for Economics and Business at The Conference Board, a global non-profit think tank.
“It would institutionalise an alignment between the US and the EU to take concerted action on trade matters that could negatively impact the Chinese economy, and it could potentially be expanded to cover other carbon-intensive industries,” he told the Post.
Nicholas Burns, the US ambassador to China, told the American Chamber of Commerce in China early this month that both countries have a joint interest – and global responsibility – to work together on transnational challenges such as climate change.
“Our message to [China] is: let’s move forward when it is in our interest to do so … We are going to continue to compete with [China] to create a level playing field for US businesses here,” he said, adding that such competition should not veer into conflict.
Perhaps the biggest takeaway is that trade policy and climate policy are growing increasingly intertwined
Speculating under the assumption that climate-based tariffs would be levied on just steel and aluminium, both Lu and Montufar-Helu said the actual impact would be “negligible”.
According to figures from The Conference Board, China’s exports of steel and aluminium products account for less than 3 per cent of its total exports, year to date, in terms of value.
Stephen Olson, a senior research fellow at the Hinrich Foundation, said that the US and EU are likely viewing such jointly applied climate tariffs as a “test run”.
“If the agreement can be reached and the results are favourable, expect similar approaches to be considered in other sectors,” he said. “Perhaps the biggest takeaway is that trade policy and climate policy are growing increasingly intertwined.”
However, Olson added that it remains to be seen whether the US and EU can reach an agreement on a host of technical details, including the means for determining carbon emissions and the scope of the tariffs.
Shi Yinhong, a professor of international relations at Renmin University, also noted that “it’s difficult to make concrete estimations at this stage, especially as the legal procedures for ratifying the new climate-based tariffs will take a long time”.
It is unclear what legal authority the Biden administration would use to implement new tariffs, Bloomberg reported, adding that the proposal is still being worked out internally and in talks with the EU, as well as with industry representatives and members of Congress.
“Having said this, I think it is still too soon to say with any degree of certainty that the EU will agree to this proposal by the US government,” said Montufar-Helu at The Conference Board.
