Covering a Trump administration can be tricky at times, especially for those writing a weekly piece. Your columnist began writing this week’s note on Friday. In the 72 or so hours that followed the President: said he would announce ‘reciprocal tariffs’ in the coming week, announced 25% tariffs on steel and aluminum imports would be in place at some (for the moment) unspecified time in the near future, and speculated to reporters that evidence of fraud had been found in the Treasury market suggesting that perhaps US debts were lower than currently believed. That last one was rather quickly walked back by senior aides.
And whilst it may already feel like it was a long time ago, it has only been seven days since Mexico and Canada were to be subjected to immediate 25% tariffs, announced over a weekend, which were then postponed for a month on Monday. 10% tariffs on China are now in effect.
Just in the realm of economic policy, the first three weeks of the second Trump administration have seen a blizzard of policy announcements and actions. Last week the Clark Center’s US and European Expert Panels looked at the likely impact of some of the early Executive Orders coming out of the White House. In particular, they zoomed in on those EOs focussed on climate and energy policy.
The President has declared that the United States faces a national emergency due to insufficient energy production. As his Executive Order put it, ‘The United States’ insufficient energy production, transportation, refining, and generation constitutes an unusual and extraordinary threat to our Nation’s economy, national security, and foreign policy. In light of these findings, I hereby declare a national emergency.’
The US Experts Panel was unconvinced. Asked whether “insufficient energy production, transportation, refining, and generation constitute a substantial threat to the US economy”, 83% of respondents (when weighted by confidence) either disagreed or strongly disagreed.
One of the White House’s proposed solutions to what it sees as insufficient energy production has been to remove the need for a ‘social cost of carbon’ calculation from Federal permitting and regulatory decision-making when it comes to giving the green light to new energy production projects. The US Expert Panel was asked whether such a change would substantially improve the international competitiveness of the US economy. Weighted by confidence more than 80% of respondents either disagreed or strongly disagreed.
In his response, Kenneth Judd of Stanford, alongside other panelists, noted that US energy production was running at an all-time high and had been rising strongly since around 2010. It is indeed hard to see any evidence of a national energy emergency in the data or any signs that calculating the social cost of carbon has hamstrung production.
Finally, the US Expert Panel turned to the Executive Order which has captured the most attention outside of the United States, withdrawal from the Paris Agreement under the United Nations Framework Convention on Climate Change. The White House argues that this agreement has held back US growth. The experts were asked if “Withdrawal from the Paris climate agreement will deliver a measurable boost to US economic growth over the next four years.”.
79% either strongly disagreed or disagreed, with another 17% – weighted by confidence – uncertain. Several of those responding noted that given that the Agreement was non-binding in any case, the withdrawal should be seen as pure symbolism. Micheal Greenstone, of the University of Chicago, who believed that withdrawal could increase US growth explained his reasoning as: “In isolation, the withdrawal probably has little impact on growth. But, difficult to separate from other efforts to remove penalties (subsidies) for carbon emissions (zero carbon energy sources). So, likely increases growth in next 4 year & increases future climate change”.
Interestingly, the European Experts also considered whether US withdrawal from the Paris Agreement would measurably boost US economic growth in the coming years and were far less uncertain on the likely impacts. Weighted by confidence, 62% either disagreed or strongly disagreed that it would, whilst 36% (twice as high as the US results) were unsure.
The European Experts were more certain when asked about the wider impact of US withdrawal progress towards tackling climate change. Asked whether “US withdrawal from the Paris climate agreement will have a measurably negative impact on international progress on mitigation of global warming”, 47% strongly agreed and another 41% agreed (again weighted by confidence).
As Franklin Allen of Imperial College, London explained “Already Argentina and Indonesia are talking about also withdrawing. Many other countries, while not withdrawing, may reduce their efforts.”. Jean-Pierre Danthine of the Paris School of Economics added “The largest economy must be an integral part of the indispensable multilateral efforts to address a global challenge if these efforts are to be fully effective”.
The broad consensus of the Experts then, across two Panels, was that the United States does not face an energy crisis and that the Executive Orders on climate and energy are unlikely to have any measurable impact on US economic growth in the coming four years. But whilst they may not meet their stated objectives, they have a serious potential to measurably negatively impact global efforts to mitigate climate change.
