What Does the Trump Election Mean for CBAM?

This week has been politically turbulent in several respects. On the one hand, the government in Germany has fallen apart. On the other, elections were held in America.

American Elections

The Republican Party, with Donald Trump as their candidate, won the election. They not only secured the highest office in the country but also managed to gain or maintain majorities in both the House of Representatives and the Senate. This allows Donald Trump to govern with considerable authority. This raises the question of what impact this will have on Europe and our green trade policy.

Climate Policy Agenda?

Donald Trump is known for his skepticism toward climate policy. During his first term, he withdrew the U.S. from the Paris Climate Agreement and pursued a growth-oriented economic policy favoring fossil fuels. It’s expected that he will adopt similar measures in his second term, possibly weakening or dismantling existing U.S. climate initiatives.

Impact on International Trade

If the U.S. under Trump focuses on fossil fuels and a less regulated climate policy, this could disadvantage European companies, which pay a carbon price for goods production. From a European perspective, this would not only create a competitive disadvantage but also pose a risk of carbon leakage. This could lead to a shift in greenhouse gas emissions, along with the relocation of industrial sites and jobs.

CBAM as a Countermeasure to Unfair Competitive Advantage

To prevent this while continuing to pursue its own climate goals, the EU will need to increase taxes on U.S. products – particularly those from carbon-intensive industries such as steel, aluminum, and chemicals. This is already planned for 2026 with CBAM. However, it should be noted that Trump is highly sensitive to trade barriers that disadvantage America, which means CBAM could strain transatlantic relations.

Republican Initiative

On the other hand, there are also supporters within the Republican Party for carbon pricing on imports. For example, the Foreign Pollution Fee Act. Its proponents emphasize the protectionist element of such a measure rather than its climate policy goal. If the new administration responds not with a simple tariff but with a similar import fee, this would align with EU goals and climate objectives.

CBAM as a Response to Trump

CBAM can be seen not only as a strain on international relations but also as the right answer to Donald Trump’s reelection. His return to office could have far-reaching consequences for European climate policy. Climate protection will more than ever become an issue of global economic and trade policy, potentially forcing the EU to act more independently. A strong independent stance, however, requires a robust carbon border adjustment mechanism.

Support

If you need support dealing with these new measures, adapting to new processes, or assessing what these developments mean for your business, feel free to reach out to us directly (helge@kolum.earth). We’ll gladly prepare you for the new framework conditions in international trade! Best regards, Helge Wieggrefe