Global Trade Policy Threatens Climate Progress

Why This Matters: 

• The growing trade imbalance between the US, EU, and China in green technologies is potentially putting climate progress in a precarious place. 

• Progress is already currently stalling, with key players like China and the EU late to submit their Nationally Determined Contributions for 2035 under the Paris Climate Agreement. 

• Short-term reactions to tariff hikes and similar stressors often compromise climate progress for economic recovery—a strategy likely to backfire as intensifying climate consequences inevitably threaten economic health. 

Private Sector Momentum and Public Roadblocks 

The conclusion of 2024 and first half of 2025 has piloted a wave of reconsidered and reinvigorated climate action for the private sector. Corporations understand that current climate risk is real and growing. Thus, serious players continue working towards quantifying risks, taking action, and transitioning to net zero as efficiently as possible.  

The Allianz Trade Global Survey 2025 found that 84% of responding companies report active ESG engagement by senior management, a 7% increase from 2024. Additionally, 84% of companies say they are on track to reach net-zero emissions—up from 74% last year—reflecting a rising corporate confidence. 

Key drivers of this confidence include: 

• Tax incentives (48% cite tax breaks for green production as the most effective form of support) 

• Removal of tariffs on green products (46%) 

• Decreasing costs of green technology (44% 

However, amid this general increase in broad engagement and confidence, corporate targets for reductions in CO2 emissions are somewhat diminishing. Companies aiming for reductions greater than 5% have dropped, 31% to 22% over the past year, with Spain, Poland, and China fostering the largest drops. Despite, or perhaps in accordance with this shift, corporations targeting modest cuts of 1-3% have increased by 13%.  

Recent global economic policy, and its implications for climate progress, in part contribute to such moderated expectations. Trade conflict between the US and China, notably the imposition of tariffs from both countries and retaliatory restrictions on critical mineral exports from China, jeopardizing the flow of materials and investments central to climate progress. Green technologies like electric vehicles, batteries, and solar panels are expected to bear this particular strain. Similarly, as supply chains also bear the brunt of it, global climate commitments will become more uncertain. 

The US in particular stands with much to lose. The nation relies heavily on China for the building blocks of physical climate solutions—the US clean tech trade deficit was -USD77.7bn in 2023, contrary to a Chinese surplus of USD148bn. In an attempt to bring back balance, the US has introduced 90 new measures on critical material imports since 2024. In comparison, China has responded with nine tariffs and export restrictions.  

Figure 1: Trade balance in clean technology products (USDbn)

Far from all green technology in the US is reliant on Chinese suppliers, however, a large portion of it is. In fact, a quarter of China’s lithium-ion battery exports in 2024 were destined for the US. Moreover, most solar manufacturers in Southeast Asia, who make up the remaining majority of exports to the US, still rely on Chinese components. Finally, export controls on rare earth minerals, critical for global clean-tech production, are also cause for significant concern, generating a great web of direct and indirect risk exposure. 

Recently paused and increasingly unreliable disbursements from the US federal government add insult to injury. Already at the risk of losing primary global suppliers of green technology, national support for climate progress; despite it being pioneered with record-setting green investment in the Bipartisan Infrastructure Act, now seems to be disappearing as well. 

A Path Forward 

The candle is burning at both ends for green technology in the US, with international supply being compromised and domestic support increasingly becoming unstable. Yet despite these headwinds, corporations are continuing to push forward. The march to net zero goes on; it cannot be stalled by short-term political or economic fluctuations. 

Action Items for Corporations and Business Leaders: 

• Diversify clean tech supply chains: Private and public investment in domestic and diversified suppliers across allied nations can reduce overreliance on any one country. 

• Raise Ambition, Do Not Retreat: Corporations should resist backsliding on emissions goals, even in the face of economic uncertainty. Modest reductions are not enough to stay within 1.5°C. 

• Plan for Policy Impacts: ESG strategies should include scenario planning for trade-based risks to supply chains, production timelines, and investment decisions, accounting for a range of government policy options in risk analysis.  

Climate progress cannot be a casualty of geopolitics. Bold, coordinated action—both public and private—is required to keep the net zero transition on track and ensure that global economic shifts support, rather than hinder, a livable future.