• China
• Lili Pike

March 3, 2025, 4:40 PM View Comments ()

In its first month, the Trump administration’s approach to climate policy has ranged from apathetic to adversarial. However, a recent proposal from Republican senators may prove more palatable.

The draft bill, the Foreign Pollution Fee Act, put forward by Sen. Bill Cassidy and Sen. Lindsey Graham in 2023 and revised in December, would set a tariff on imports that have a higher carbon footprint than goods made in the United States. By targeting relatively lax environmental regulation in other countries, the senators aim to level the playing field for U.S. companies.

During an event at the Carnegie Endowment for International Peace on Feb. 26, David Banks, a fellow at the Bipartisan Policy Center, said that a carbon tariff could appeal to the administration as one arrow in its trade war quiver. “I’m actually pretty optimistic about the possibility as long as you keep it separate from the climate agenda,” he said.

Across the world, governments are increasingly tying trade and climate policy together. The European Union has led the way with its carbon border adjustment mechanism, which is scheduled to go into full effect next year.

In the United States, senators in recent years have put forward several proposals for a corresponding U.S. policy. However, the Foreign Pollution Fee Act is notable because it is spearheaded by Republicans. The bill takes a cue from the EU, targeting the same six sectors that the bloc’s policy does: iron and steel, cement, aluminum, glass, fertilizer, and hydrogen. It would levy a baseline 15 percent tariff on all imports in those sectors and apply an additional tariff on top of that on imports that are more carbon-intensive than those produced in the United States.

This approach would play to the United States’ so-called carbon advantage—that is, its comparative advantage over other countries in manufacturing products that are less carbon-intensive. China is greening its heavy industries, but the United States still has a leg up due to its relatively strict environmental standards.

Take the steel industry, for example. Chinese steel is estimated to be two times more carbon-intensive to produce than U.S. steel. That gap, between the United States and each exporting country in each covered industry, would be used to calculate the final carbon tariff.

Because of Republicans’ historical hostility to climate policy, environmental advocates see this kind of climate-informed trade measure as their best hope under Trump. “Given the rising prominence of trade and tariffs, and the concerns on both sides of the aisle about the rise of China, hitching climate issues to trade policy could be one of the likeliest ways to get action on emissions in the next two to four years,” said Jason Ye, director for U.S. policy and outreach at the Center for Climate and Energy Solutions.

The Republican bill doesn’t include any domestic policy elements, so its climate impact would be limited to its effect on foreign countries. Experts are still modeling exactly how effective such a policy would be in reducing global emissions, but the argument from climate advocates is that the more countries adopt a carbon tariff, the more powerful the signal will be to exporters like China to make their industries less polluting.

The bill is still in the early stages of working its way through Congress. One of the big challenges, if it moves forward, will be whether Trump buys the logic.

In the first months of his second term, Trump has shown an interest in using tariffs to target specific issues, namely fentanyl. But so far, overseas pollution hasn’t exactly caught his eye. The forthcoming 25 percent steel and aluminum tariffs, which go into effect on March 12, will apply to all countries—friend and foe, carbon-light and -heavy alike. That reverses Biden administration efforts to form a global trade alliance for sustainable steel and aluminum.

“I have to be realistic, having watched the Trump administration over the last six weeks, that while he seems quite keen to impose lots of tariffs on America’s trading partners, he seems quite uninterested in basing those tariffs on greenhouse gas emissions,” said Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace who served as senior director for international economics under U.S. President Joe Biden. “So the question is really going to be: Will any of the folks in Congress who support proposals like this—an idea that could get quite a bit of bipartisan support and has gotten bipartisan support—will they be able to move him in this direction?”

There are some indications that Trump could get behind the idea, though, particularly as the new chapter in the trade war with China takes shape. The key architect of Trump’s trade agenda in his first term, Robert Lighthizer, has historically viewed uneven environmental regulation as a trade issue for the United States and supported carbon tariffs. And the new administration is currently pursuing Lighthizer’s broader trade vision: reviewing all trade policies with the idea of eliminating unfair advantages of all stripes and making U.S. trade “reciprocal.” Several Trump cabinet members, including Treasury Secretary Scott Bessent, also supported the idea in their confirmation hearings.

“Of course, the president is a climate skeptic. … It’s not a secret, but he’s not an ideologue when it comes to climate-related issues,” said Banks at the Carnegie event. “He’s always looked at climate policy through the lens of: What does this do to U.S. competitiveness, U.S. manufacturing? And so if you can flip the script … and you can create a policy design that actually allows the United States to monetize its relative carbon efficiency [or] carbon advantage, then it changes the entire conversation.”

Of course, even if Trump is convinced that a carbon tariff is the right way to boost U.S. competitiveness vis-à-vis China, it wouldn’t be a panacea.

Trump has thrown a wrench in the wider effort to make these industries more competitive in a decarbonizing world. By freezing Inflation Reduction Act funding, the administration has put billions in grants for greening heavy industry—such as grants for replacing coal-fired blast furnaces with electric furnaces for steel production—in limbo. Without such domestic policies, the U.S. “carbon advantage” won’t last long as other countries shift to cleaner technologies.

If the administration just pursued a carbon tariff, “I think you would basically be providing a subsidy to business-as-usual production” domestically while targeting foreign polluters, said Bentley Allan, an associate professor of political science at Johns Hopkins University.

“To me, it’s a great step forward because it’s half of the problem, but it’s also just half of the problem. So we would still need to have a coherent strategy for how we’re going to advance innovation, and that innovation should be clean.”