By Jean Philippe, Board Advisor for Corporate Governance and Sustainability at Ultima Markets
The 2025 U.S.–China trade war is becoming more than an economic conflict — it is accelerating climate risks. New U.S. tariffs on clean technologies such as electric vehicles, solar panels, and batteries are disrupting the global clean energy transition. We’re already seeing the consequences: higher emissions, delayed renewable energy projects, increased costs, and fractured international climate cooperation.
Now, all of this is not new to us. We’ve seen this before. During the trade war of 2018 to 2020, tariffs led to delays in clean energy deployment, disrupted supply chains, and increased global emissions. Tariffs on solar and steel pushed up costs and reduced access to low-carbon infrastructure. Manufacturing was relocated to higher-emission regions, driving up global carbon intensity. The Chinese yuan depreciated, triggering forex instability across emerging markets. Green investments slowed as policy uncertainty increased. Reports from Brookings and the World Bank confirmed that these trade disruptions directly undermined global climate progress.
The story is now repeating itself — but at a much larger scale and speed.
The latest tariffs target core components of the clean energy transition — lithium batteries, electric vehicles, and solar modules. These technologies are essential to reaching our net-zero emissions targets by 2050. But instead of accelerating deployment, the tariffs are raising prices and reducing access. Emerging markets, which rely heavily on affordable green tech imports, are being hit the hardest. In April 2025, the U.S. Trade Representative confirmed tariffs on over $100 billion in Chinese goods, with clean energy explicitly listed. The International Energy Agency has already warned that this will discourage adoption and delay national climate goals.
At the same time, supply chains are shifting and emissions are rising. Manufacturers are moving operations out of China — but often to more carbon-intensive countries with weaker environmental regulations. This shift leads to increased emissions and greater logistical inefficiency. A Rhodium Group report from the earlier trade war found the same pattern — trade friction caused a net rise in global emissions. In 2025, rerouting and stockpiling of clean tech components like lithium-ion cells, inverters, and solar-grade polysilicon are adding even more emissions to the system. Many of these operations are shifting to countries like India and Vietnam, where coal-heavy grids and weaker standards increase the carbon footprint of production. Environmental traceability is also being compromised, making ESG compliance harder for global firms.
Meanwhile, climate finance is being undermined. Clean energy developers and ESG investors depend on predictable regulatory environments to manage project risk. But tariff uncertainty is inflating costs, derailing timelines, and weakening financial confidence. Lenders are either repricing climate risk or pulling back to safer markets. In the first quarter of 2025, the Global Sustainable Investment Alliance reported a 12% drop in climate-aligned capital flows, driven by tariff-related volatility. This drop is especially visible in infrastructure projects across Southeast Asia and sub-Saharan Africa, where margins are thin and project pipelines are vulnerable to shocks.
Currency volatility is also making the clean energy transition more expensive. Tariff escalations are fuelling foreign exchange instability, especially in emerging markets. Depreciating currencies are making USD- and CNY-priced imports like batteries and solar components harder to afford. FX swings are impacting debt servicing and increasing the cost of hedging for long-term renewable projects. According to the Institute of International Finance, $18 billion in capital has exited emerging markets since the tariff announcements, and hedging costs have gone up by 20%. Market specialists, including analysts at Ultima Markets, have also observed that sustained FX volatility could widen the green finance gap, making climate-linked investments riskier and more expensive in vulnerable economies.
Despite all this, the climate–trade–forex nexus is still being ignored. Despite clear interdependencies, policies are being made in silos. Tariffs are being implemented without consideration for their environmental fallout or their financial ripple effects. The world’s most climate-vulnerable economies are being hit the hardest — and they have the fewest buffers to respond. The United Nations Environment Programme has repeatedly called for climate-aligned trade frameworks, but the gap between ambition and execution is only growing.
In a Bloomberg article published in April 2025, the IMF’s expected downgrade to global growth projections was highlighted. The article also pointed to stress in PMI indicators across the U.S., Japan, and the EU. But like much of the media coverage, the piece overlooked the climate impact of Trump’s tariffs. These climate risks could prove more damaging and persistent than the headline GDP effects.
So what needs to happen now?
Trade and climate policies must be aligned. We need to take urgent steps — including exemptions for carbon-critical technologies from broad-based tariffs, coordination of carbon-adjusted trade frameworks that support emissions goals, and the elevation of climate–trade integration to the top of global forums like the G20, the IMF, and the COP. Countries could pursue multilateral green exemptions through WTO mechanisms or build fast-track bilateral lanes for climate-essential technologies. The G20’s Trade and Investment Working Group and models like the EU’s CBAM are examples of what coordinated action could look like.
Finally, the longer this 2025 tariff war continues, the further behind the world will fall on climate timelines. Clean tech protectionism will create sustainability setbacks that may become irreversible. And this is no longer just a trade issue. It’s a systems issue. Policymakers, investors, and global market leaders must treat trade, climate, and currency as one interconnected system — not as separate agendas.
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