Trade Wars versus Climate: Rising Carbon Intensity under Renewed US Protectionism

Abstract

The recent turn towards protectionism in the U.S. has renewed concerns about the environmental costs of trade fragmentation. While the economic impacts of tariffs have been studied, their effect on global carbon intensity (GHG emissions per unit of GDP) remains unclear. Here, we analyze the impact of the U.S. tariffs as implemented on August 7th, 2025, using a state-of-the-art multi-country, multi-sector production network model calibrated with recent data. We find that these broad tariffs cause substantial GDP contractions, particularly for the U.S. and China, and especially under global retaliation. Critically, the tariffs increase carbon intensity across all modeled scenarios in the U.S., China, and globally, indicating a structural shift towards more emissions-intensive production. This increase is driven by sectoral shifts and is particularly pronounced in the U.S. (up to a 1.0% increase in an expanded trade war scenario). These findings reveal a potential conflict between unilateral protectionist policies and global climate mitigation goals, suggesting that the resurgence of trade wars could inadvertently yield a ‘dirty recession’.

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