Over time, Trump’s tariffs may indeed compel companies to bring more of their manufacturing operations back to the US and help diversify the global supply chain for crucial goods, UC San Diego’s Victor says.
The tariffs are likely to fuel more mining and processing of critical minerals like lithium and nickel in the US, too, given both the increased costs on imported materials and the administration’s plans to roll back environmental and permitting rules.
“They love extractive sectors,” says Jonas Nahm, an associate professor at the Johns Hopkins School of Advanced International Studies.
But the “big concern” is that Trump’s plans to boost tariffs, cut government spending, and enact other policy changes could stall the broader economy, says Rachel Slaybaugh, a partner at DCVC, a San Francisco venture firm.
Indeed, the combined effects of Trump’s proposals, including his pledge to deport hundreds of thousands to millions of workers, may drive up US inflation more than 4% by 2026 while cutting gross domestic product by at least 1.3%, according to an analysis by the Peterson Institute for International Economics, a nonpartisan research firm in Washington, DC.
The tariffs alone could cost typical households an extra $2,600 per year. They may also trigger retaliatory measures by other nations, including China, which could impose their own steeper fees on US products or cut off the flow of crucial goods.
Slaybaugh expects to see a continued slowdown in venture investments into cleantech companies in the coming months, as investors wait to see how aggressively the Trump administration implements the various pledges he made on the campaign trail. That pause alone will make it harder for startups to secure the capital they need to scale up or sustain operations.
Even if the tariffs do eventually push US businesses to produce more of the goods currently being delivered cheaply and efficiently from elsewhere, it leaves a big problem when it comes to the clean energy transition: Given the higher expenses of US labor, land, and materials, it will simply cost far, far more to build the modern, low-emissions energy and transportation systems the nation now needs, Nahm says.
At this point, after China has spent decades and vast sums locking down global supply chains, scaling up production, and driving down manufacturing costs, it’s foolhardy to believe that US businesses can easily step in and crank out these essential goods in relative global isolation, as Victor and his colleague, Michael Davidson, argued in a recent Brookings essay.
“Collaboration and competition, not hostility, are how we can catch up to the world’s largest supplier of clean technology products,” they wrote.
