For the moment, the best suggestion I can offer is that everyone should be studying the effects of the Trump tariff madness for what it can tell us about climate and trade. So many exogenous effects!

And here concludes what turned out to not really be an especially short thread.

Carbon prices on imports can create real incentives to offshore production even if they are implemented perfectly (which they never will be). The clearest evidence of this is that when we just do what's good for business, we end up with negative carbon prices.

That's not to say we shouldn't do climate-linked trade measures. We definitely should. But we should consider how they will affect different stages of the supply chain differently. Because climate pollution and value add are inversely correlated, analysis base on averages can be very misleading.

And one of the things we can see is that this tariff structure can, in fact, be very bad for domestic manufacturing. According to the thread that started all of this, Ford is expecting a $3b hit to its 2025 profits from the new tariffs.

Back to Trump's "inversion". Weirdly, it works the same way that a carbon price on imports would. At least the sign of the effect is the same. Obviously, he's not a stealth greenie. He isn't doing climate policy. He's following his manias and we're learning what we can from the collateral damage.

Add this to my ever-lengthening list of things that we really should talk about more.

Like all the times we have accidentally almost nuclear bombed ourselves and that IEA thinks there is 70 million barrels per day of of oil that can be drilled for less than $10 per barrel.

One person who did notice was Joe Shapiro at Berkeley, who calculated the size of this effect a few years back. Our current average level of SUBSIDY for climate pollution in international trade is about a $100 per ton of CO2.

www.joseph-s-shapiro.com/research/Sha...

Wild, huh? My fellow climate nerds have spent so many millions of hours arguing about carbon border adjustment mechanisms, but very few of them have even noticed that we've all had border carbon subsidies in place in place all along.

Lower taxes (tariffs) at the beginning of the supply chain and higher taxes at the end means that you have lower taxes on high CO2 goods and higher taxes on low CO2 goods--a negative carbon tax!

That's right: pretty much every country in the world has a de facto negative carbon tax on imports.

One extreme example: for a concrete apartment building, making the cement might be 30% of all the emissions to build the building, but less than 1% the construction cost.

These tariff structures are not environmentally neutral, though. Making basic materials like steel emits vastly more carbon pollution per dollar than making finished goods.

It's probably also not great for "American competitiveness," regardless of how you define that term.

This is the "inversion" from the post above--Trump is doing the opposite. Today, the auto industry is facing the highest tariffs on basic materials, lower tariffs on car parts, and the lowest tariffs of all on the cars and trucks. This is very bad for car companies.

This means that the customer-facing firms are more profitable and with that comes more political power. They use that power to lobby for lower tariffs on their inputs (to lower their own costs) and higher tariffs on their competitors. So usually tariffs go up the closer you are to the customer.

Understanding this requires a little background on the typical structure of supply chains and tariffs.

In most supply chains, the closer you are to the customer, the higher your value-addition. Profit margins are a lot higher on cars than on steel, on clothes than on polyester chemicals.

The most interesting aspect of this is von der Leyen represents a continent without much oil & gas. The faster the world stops poking holes in the ground and pumping energy (and CO2) out, the better for Europe. It's in her interest to create maximum pressure to get off fossil fuels. And yet...