Former US Treasury Secretary Janet Yellen has voiced strong concerns regarding the economic repercussions of tariffs imposed by President Donald Trump. She reiterated that these tariffs would seriously damage large swaths of the economy, especially manufacturing. She specifically called attention to the vulnerabilities that exist for businesses that depend on critical mineral supply chains that originate in China.
Her warning came in the wake of the United States’ growing reliance on China for crucial minerals. These minerals, including lithium and cobalt, are crucial for the development and deployment of clean energy technologies. This reliance is highly problematic. High tariffs could upend global supply chains for critical materials like lithium, cobalt, and nickel, and hamper efforts to transition away from carbon-heavy energy sources. The effects of these tariffs go beyond short-term expenses, threatening to seize progress toward achieving long-term sustainability objectives.
The clean energy sector is at a unique inflection point. Our nation’s once-in-a-generation commitment to reducing carbon emissions and increasing investment in renewable energy. Access to affordable and reliable materials is critical for meeting this goal. Yellen’s warnings highlight a growing concern that these tariffs may inhibit innovation and investment in green technologies. For companies to succeed, they require a consistent supply of critical minerals. Without these resources, they might not be able to make things that go into electric vehicles, solar panels and other sustainable products.
For instance, nearly 40% of all goods imported into the United States are the very essential inputs that support domestic production. Many of these items are currently subject to hefty tariffs. This remarkable figure means that hundreds of US industries would be subject to rising costs through new tariffs. Industries that depend on these imports for their production processes will have to be prepared for increased costs. They may even need to reconsider their whole business paradigms.
Industry leaders are sounding notes of strong agreement with Yellen’s pronouncements. They argue for more strategic and consequential application of trade policies that prioritize economic sustainability along with environmental objectives. They claim that their tariffs are meant to save American jobs. These tariffs might inadvertently dampen expansion in industries that are increasingly important to our long term economic and environmental sustainability.
The challenges posed by these tariffs are not just academic. Firms are beginning to complain about rising costs and supply chain disruptions, which will eventually get passed on to consumers in the form of rising prices. If these trends continue, they will worsen inflationary pressures that the economy is already experiencing.
Furthermore, Yellen’s concerns exemplify the wider fears within the economic community over the impacts of continued trade strife with China. China continues to dominate the global supply chain for critical minerals. Any break in this supply chain — or even just the perception of one — could send shockwaves through sectors in every state in the US and globally.
While we debate the merits of TPA, the Biden administration is still figuring out its trade policies. It needs to take a long view on how tariffs will affect clean energy endeavors. By reconsidering our approach on the ground, we can make progress toward mitigating harms Yellen identified. This type of approach will go a long way toward advancing a clearer highway to economic prosperity and fiscal responsibility.