Sometimes writers can tweak a trend of their moment to produce a darkly dystopian future, as with George Orwell’s omniscient tyranny in 1984, Margaret Atwood’s institutionalized misogyny in The Handmaid’s Tale, or Ray Bradbury’s book-burning autocracy in Fahrenheit 451. And ever since H.G. Wells’s novel War of the Worlds (about technologically advanced Martians invading this planet) was published in 1898, space has been a particularly fertile frontier for the literary imagination. It has given us Isaac Asimov’s seven-part galactic Foundation fable, Frank Herbert’s ecological drama Dune and Philip K. Dick’s post-nuclear wasteland in Blade Runner, opening us to possible technofutures beyond our mud-bound presence on this small planet.  

From the time that Henry George published his influential futuristic treatise Progress and Poverty in 1879, inspiring many of the Progressive Era’s key reforms, American writers across the political spectrum have used the future to frame an agenda for present-day political action, sometimes progressive, sometimes violently regressive. Published in 1938, Ayn Rand’s second novel, Anthem, was a futuristic saga whose hero, named “Equality 7-2521,” rejected the socialist society that raised him and struggled to rediscover his inherent individuality, articulating libertarian ideals that would inspire generations of American conservatives. And amid the social turmoil of the 1970s, William Luther Pierce’s The Turner Diaries imagined a future armed revolt against the US government that has provoked violence from generations of White nationalists.

So, with some trepidation, let me venture into the immediate future and imagine what the United States will be like when President Donald J. Trump finally leaves office (if, of course, he does) in January 2029. To keep such projections within the bounds of possibility, let’s clip the wings of our imaginations and hew closely to Trump’s policies and policy statements.

America’s place in the world of 2029

In just 11 action-packed months since his January inauguration, President Trump has already demolished the fundamental geopolitics that have undergirded US global hegemony for the past 80 years. Even if he simply persists in his policies for another 37 months, his impact on the American version of a world order will undoubtedly prove so profound that it will strain the limits of language.

To grasp something of the scope of his impact, it’s necessary to briefly outline the world order Washington built over those 80 years. After fighting for four years and sacrificing 400,000 lives during World War II, Washington captured vital bastions at both ends of the vast Eurasian land mass and spent the next 40 years of the Cold War ensuring its control of that strategic continent with circles of steel — military alliances like NATO, hundreds of overseas military bases, powerful naval fleets and a massive armada of nuclear-armed aircraft and missiles.

With the Sino-Soviet communist bloc largely trapped behind what came to be known as the Iron Curtain, Washington crushed most of their attempts to break out of geopolitical isolation with deft covert operations. As the communists flailed, the US continued to build a global order, while patiently waiting for those socialist economies to implode.

When the Cold War finally ended in 1991, Washington got busy knitting the world into a unified market through massive capital exports, free-trade agreements and a grid of global communications, thanks in part to satellites and fiber-optic cables.

Beyond its awesome array of raw economic and military power (and the distinctly less than successful wars that it fought), Washington prettied-up its intrusions into sovereign societies worldwide through its advocacy of universal human rights, its commitment to the rule of law (unless it got in the way of American interests) and its support for international institutions like the United Nations that assured inviolable sovereignty for even the smallest of countries. Thanks to a delicate balance of force, beneficence and self-interest, the United States would enjoy both great national wealth and historically unprecedented global dominance.

Washington’s world order, like any complex global system, was distinctly flawed, and its failings were (to say the least) legion, but its achievements weren’t inconsequential either. After two world wars that left 100 million dead, there has not been a major global conflagration for 80 years (though from Korea and Vietnam to Afghanistan and Iraq, there were all too many disastrous American-inspired local or regional wars). The share of the world’s population living on less than a day dropped markedly from 43% in 1990 to just 11% in 2020.

Reflecting those improved conditions, average worldwide rose sharply for the first time in , from 46 years in 1950 to 72 years in 2020. Similarly, the world climbed from 66% in 1976 to 87% in 2020. Whether from choice or necessity, we humans have enjoyed increasing freedom of movement, with the number of migrants globally reaching a record in 2024, representing nearly 4% of the total global population.

Not only did the US have the largest economy and military budget, but until recently, it was the world’s for public health and poverty eradication, sparing many millions of the world’s poor from the worst kinds of hunger and disease. All of those significant improvements in the human condition had complex causes, but the fundamental fact remains that they were products, direct or indirect, of Washington’s world order.

Then came President Donald Trump. From the first day of his second term in office in January 2025, he set out to tear down the US global order and transform America’s place in the world. With billionaire Elon Musk serving as his in-house wrecking ball, he quickly demolished the US Agency for International Development (USAID), slashing more than of American nutritional and medical aid in ways expected, by 2030, to lead to a staggering extra deaths globally (including more than 4.5 million children). The misery now being inflicted on poor people crowded into cesspool camps from the Congo to Bangladesh defies description.

In addition, by shutting down Voice of America broadcasts along with those USAID programs, the US has committed what one former NATO official “soft power suicide,” clearing the way, as political scientist Joseph Nye put it, for China “to fill the vacuum that Trump is creating.”

Throughout the Cold War and its aftermath, a key US force multiplier was its global network of alliances — the Rio Pact for the Americas, five key bilateral pacts along the Pacific-island chain from Japan to Australia and, above all, the extraordinarily effective NATO alliance for Europe. In 11 short months, Trump has already ruptured all the alliances that assured America’s security for some 75 years. On April 2nd (or what he called “liberation day”), the president also slapped on imports from loyal allies, ranging from 20% for the European Union to 24% for Japan.

Reflecting his longstanding hostility to the NATO alliance, particularly its Article Five mutual-defense clause, Trump’s recently released National Security Strategy () states that Europe faces “the stark process of civilizational erasure,” battered by “regulatory suffocation,” multi-racial migration and “cratering birthrates” that raise the question of whether its nations will stay “strong enough to remain reliable allies.” Through their supposed “subversion of democratic processes,” the president has also claimed that European governments are resisting US attempts “to negotiate an expeditious cessation of hostilities in Ukraine.”

To save Europe from itself, in that NSS, the Trump administration came out for the growth of “patriotic European parties” (in other words, far-right ones), while discouraging the very idea of NATO “as a perpetually expanding alliance.”

In case anyone missed the meaning of that message, Trump told a on December 8 that some European leaders are “real stupid” because their tolerance of immigrants from places like the “prisons of the Congo” will ensure that key European nations like Germany “will not be viable countries any longer.”

The Trump Corollary to the Monroe Doctrine

More broadly, President Trump has put forward a tricontinental geopolitical vision for the world’s major powers — with Russia dominant in the old Soviet sphere, China acting as an Asian hegemon and the US securing the Americas. By claiming , branding Canada “the ” and threatening to the Panama Canal during his first weeks in office, Trump articulated a strategy grounded not in global hegemony, but in geopolitical dominance over the Western Hemisphere.

Formalizing that strategy in the recent , the White House proclaimed a ”Trump Corollary to the Monroe Doctrine” aimed at a “potent restoration of American power” to achieve an unchallenged “American preeminence in the Western Hemisphere.” To that end, the US will reduce its “global military presence to address urgent threats in our Hemisphere,” deploy the US Navy to “control sea lanes” and use “tariffs and reciprocal trade agreements as powerful tools” to make the Western Hemisphere “an increasingly attractive market for American commerce.” It will also push out “non-Hemispheric competitors” (think: China), giving the US distinctly preferential access to the region’s “many strategic resources.” In essence, according to the NSS, “the United States must be preeminent in the Western Hemisphere as a condition of our security and prosperity.”

In reality, Trump was miming the convoluted Victorian rhetoric of President Theodore Roosevelt’s famed corollary to the Monroe Doctrine. In a December 1904 to Congress, Roosevelt disdained any “unmanly” inclination to a “peace of tyrannous terror, the peace of craven weakness, the peace of injustice.” Instead, he embraced the manly duty of the “great civilized nations of the present day” to ensure that the countries of the Western Hemisphere remain “stable, orderly, and prosperous.” Cases of “chronic wrongdoing … may … force the United States, however reluctantly … to the exercise of an international police power.” Faced with the “intolerable conditions in Cuba” (then under Spanish rule), Roosevelt proclaimed it “our manifest duty” to take “justifiable and proper” action “in asserting the Monroe Doctrine.” (Think Venezuela at the moment!)

Though he promised the use of only a restrained “police power” in the Western Hemisphere, Roosevelt opened the door to decades of US interventionism, with the Marines occupying Nicaragua for (1912-33), Haiti for 19 years (1915-34) and the Dominican Republic for (1916-24). Just as Trump’s chatter about making Canada the “51st state” has sparked “” in America’s closest ally, so his proclamation of a Trump Corollary to the Monroe Doctrine, exemplified by his recent devastating in the Caribbean Sea, is likely to inflame the anti-imperialist sentiment that lies just beneath the skin of Latin America, thereby corroding relations with our southern neighbors.

Trump’s Asia-Pacific policy

While Trump’s posture toward Latin America is grimly clear, his Asia-Pacific policy seems muddled by ambiguity, if not outright confusion. In early October, oblivious to the rapid erosion of US hegemony in Asia, Trump declared a “trade war” with China, imposing a on its imports and a complete ban on exporting “critical software” to that country.

By month’s end, however, he had to swallow his bravado after Beijing retaliated by barring the export of strategic needed for the US military’s weaponry (and so much else). That forced Trump to “” during his October 30th summit with China’s President Xi Jinping in South Korea — quickly rescinding his high tariffs and removing the ban on the export of Nvidia’s that China desperately needs for Artificial Intelligence.

In the seven years since Trump’s last trade war with China in 2018, as the Wall Street Journal , that country has pursued “greater self-reliance in food and energy … for an era of sustained hostilities with the US” According to the New York Times, the vivid diplomatic defeat at that South Korean summit was a historic , showing that “China could now face America as a true peer” and had already become “America’s geopolitical equal.”

Trump’s delusions of dominance over China pervade his recent . Amid all its self-indulgent palaver, it displays a dangerously willful ignorance about fast-changing geopolitical realities in the Asia-Pacific region. By the time Trump leaves office in 2029, China’s gross domestic product will already be than America’s, and it’s expected to become 36% bigger in the years to follow.

Trump’s domestic legacy

Just as Trump’s “” foreign policy is damaging the country’s diplomatic relations with Asia, Europe and Latin America, so his domestic policies are likely to cripple this country’s economic competitiveness. Despite his stated commitment to building “the world’s most robust industrial base,” his energy policy is damaging, if not destroying, the country’s largest industry — automobile manufacturing.

In 2024, the US produced 3% of the country’s gross domestic product, created more than 8 million jobs, supplied transport for 92% of all American households and accounted for $1.6 trillion in consumer finance, second only to home mortgages.

By his aggressive attack on the very idea of climate change and on America’s once-promising green-energy infrastructure, President Trump is inflicting serious damage on Detroit’s future capacity to compete against China’s rapidly rising production of electric vehicles (EVs). According to the International Energy Agency, EV purchases will reach in 2025, or one-quarter of world auto sales, and are on track to hit 40% by 2030, with China already accounting for 70% of global EV production. While EVs are still 30% more expensive than gas vehicles in the US, in China, they are less expensive and now account for 60% of that country’s car sales (compared to just 11% in the US).

With massive robotic factories cranking out EVs by the millions, a fleet of dedicated ships to carry those low-cost cars to global markets, and new factories opening in Asia, Africa, Europe and Latin America, China seems poised to conquer the global car market with models like BYD’s self-driving Seagull EV priced at only . Just as making an iPhone in America now seems almost unimaginable, by the time Trump leaves office, the US automotive industry could find itself incapable of producing a competitive EV, potentially losing access to half the world’s auto market. “I have 10,000 dealers around the world,” said Jim Farley recently. “Only 2,800 are in the US, so you do the math.” And given Trump’s costly tariffs on steel and aluminum imports (among other things), that core American manufacturing industry is likely to be in truly unsettled shape by 2029.

More broadly, the Trump administration is crippling this country’s overall economic competitiveness by cutting its scientific research and conducting a shotgun wedding between fossil fuels and the nation’s electrical grid. According to the International Renewable Energy Association, in 2024, solar power was less expensive (and onshore wind 53% less) than the cheapest form of fossil fuel. When backed by cost-effective storage batteries, those alternative energies now provide the quickest, most affordable means to expand electrical infrastructure in developed and developing nations.

But by slashing EV tax credits, blocking offshore wind farms and opening yet more federal lands for oil and natural gas drilling, President Trump is using the full powers of his presidency to derail America’s adoption of cost-competitive green energy. And keep in mind that he’s doing so at the very moment when a boom in energy-intensive data centers for AI is straining the national grid, while simultaneously electricity costs for households and businesses. By the time he leaves office in 2029, American industry, still wedded to costly fossil fuels, could be paying double the price of foreign competitors for energy, rendering its products unaffordable, even at home.

Through a mix of ignorance and arrogance, the Trump administration is also hampering this country’s ability to conduct basic scientific research, the seedbed of its economic innovation for more than a century. Although immigrants have won of the country’s Nobel Prizes in science over the past 125 years, the White House has now restricted H-1B visas for skilled immigrants and imposed a nearly in foreign graduate students at US universities.

By denying university science labs such critical student workers and slashing the nation’s budget for basic science by up to , the Trump White House is the world’s most successful research industry and effectively ceding the rest of the twenty-first century to China.

A witch’s brew of failure

Since the start of his second term, Donald Trump has used a seemingly random mélange of policies to mix a malevolent brew. Think of it as akin to the one that the witches in Shakespeare’s cast into their cauldron to see the future, as they chanted: “Eye of newt and toe of frog, wool of bat and tongue of dog … For a charm of powerful trouble, like a hell-broth, boil and bubble.”

Indeed, by 2029, Trump’s inept mix of foreign and domestic policies will confront American workers with a “hell-broth” of powerful economic troubles not seen since the Great Depression of the 1930s. By 2030, Trump’s tariffs will have US consumption by a projected 3.5% and, over the longer term, are likely to reduce average wages by 5% and GDP by 6% — a major change for an economy that has long enjoyed steady growth.

With AI data centers projected to consume as much as of the nation’s electricity by 2029, and Trump blocking the green energy that’s the only quick fix to meet rising demand, consumers could face an average increase in their electric bills by 2030 (and a possible 25% rise in states with data centers). While AI might raise living standards over the long term, its unchecked expansion, as mandated by one of Trump’s , could contribute to the loss of full-time jobs globally and negatively impact two-thirds of all employment in the United States.

Worse yet, his demolition of the Biden administration’s attempt at a green energy revolution will have untold consequences for the US economy (not to say for the planet itself). As China, with its low-cost, high-efficiency EVs, conquers the global auto market by 2030 (and the larger green-energy as well), it will become the world’s largest economy, with exports surpassing its present record-breaking and its currency increasingly dominant in global trade.

With the US global retreat leaving China and what’s likely to become its satellite state, Russia, dominant on the Eurasian land mass, home to 70% of the world’s population, Washington will be forced to fall even more fully back on the Western Hemisphere (where its welcome is already wearing ever thinner). With its presence certain to shrink across the planet, the dollar’s role as the global reserve currency will, as J.P. Morgan in a recent study, certainly “come into question.”

With erratic US government policies undermining “the perceived safety and stability of the greenback” and US tariffs causing “investors to lose confidence in American assets,” there are already clear market signs of a global “de-dollarization” that will raise the cost of servicing this country’s national debt and cut into every aspect of the American economy.

By 2030, the sum of those changes — compounded by a increase in , soaring health care costs and a “white collar bloodbath” as AI kills off half of all — will have distinctly begun to reduce the quality of life in this country.

As Shakespeare’s witches saw the future in their cauldron’s bubbling brew and said of Macbeth, a man who would be king (whatever the cost), “Something wicked this way comes,” they also caught our Trumpian moment so many centuries later.

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Rare earths (the general term encompassing all REEs) are typically divided into light and heavy categories. While light REEs like cerium and lanthanum are more abundant, it is the heavy ones — dysprosium, terbium, neodymium and others — that are essential for permanent magnets used in high-temperature environments, such as electric vehicle motors, fighter jets and missile guidance systems.

Magnet strength declines significantly at high temperatures if lighter REEs are used alone. Thus, high-density rare earths must be mixed in to maintain performance. China controls of heavy REE processing, not just because of resource abundance, but because it has developed and protected its technical edge in separation processes. Moreover, Chinese firms often operate at a loss but are supported by state subsidies, which allows them to drive out global competition.

China’s rare earth dominance and the strategic supply chain asymmetry

Despite large-scale investment — over from the Department of Defense since 2020 — the United States remains dependent on Chinese magnets. For example, MP Materials, the leading US producer, plans to produce just 1,000 metric tons of neodymium-boron-iron (NdFeB) annually by 2025. That is less than 1% of China’s .

Even promising breakthroughs, such as USA Rare Earth’s 99.1% pure dysprosium oxide in early 2025, remain at the pilot stage. Commercial viability is years away. In the meantime, Chinese production continues to scale. In 2024 alone, China produced an estimated of NdFeB magnets. The US’s goal of an independent REE supply chain by 2027 remains aspirational, not assured.

China’s advantage lies in its vertical integration, from mining to refining to magnet production. It has built and subsidized its REE ecosystem through environmental externalization, industrial policy coherence and technological investment. In doing so, it has created a monopolistic grip on the midstream and downstream segments of the supply chain. This control gives Beijing strategic leverage, which it has exploited several times. In 2010, Beijing exports to Japan over maritime disputes, and in 2023–2024, it implemented licensing restrictions to retaliate against US semiconductor export controls and tariffs. These measures have not been wholesale bans but targeted, calibrated interventions designed to inject uncertainty, pressure adversaries and reassert industrial dominance.

The nature of this dominance reveals a deeper structural asymmetry: China is able to play a long game, enabled by centralized political authority and strategic continuity. Democracies, meanwhile, struggle to maintain long-term consistency across administrations. In game-theoretic terms, China acts as a high-commitment actor in a repeated, asymmetric game.

Without equivalent institutional coherence, the US and its allies are consistently reacting to Beijing’s initiatives rather than shaping the trajectory of the REE landscape.

Rare earths and US tariffs

In response to sweeping US tariffs in 2025 — up to on Chinese imports — Beijing strategically restricted the export of several rare earths, including dysprosium and neodymium. This move intensified concerns across global industries, with automakers and defense contractors warning of severe production disruptions due to limited alternative suppliers.

The tit-for-tat escalated until the two parties a provisional deal in London. China agreed to resume shipments of rare earths and magnets to the US in exchange for tariff reductions to 55% and the easing of restrictions on Chinese students studying in America. US President Donald Trump victory, stating that the “full magnets, and any necessary rare earths, will be supplied, up front, by China.” However, details remain vague and enforcement mechanisms unclear. Both sides characterized the deal as a “framework” still awaiting final approval from Chinese President Xi Jinping and Trump.

Despite this temporary truce, the rare earth dispute underscores the strategic risks of supply chain concentration. The US continues to rely heavily on China for processed REEs, especially heavy rare earths critical to defense. Unless structural diversification is achieved through domestic production, allied partnerships or technological alternatives, the geopolitical leverage China holds through its dominance in rare earths will remain a persistent vulnerability for the US and its allies.

US vulnerability and the emerging strategic response

of this strategic vulnerability has grown in Washington, especially given defense-sector . An F-35 fighter jet requires over 900 pounds of rare earths; a Virginia-class submarine demands more than 9,000 pounds. Yet despite years of warnings, the US remains almost entirely dependent on Chinese REE refining and magnet production. While upstream mining projects exist, such as in California, the absence of domestic separation capacity means that most US-extracted ore is still shipped to China for processing. In response, the US has initiated a patchwork strategy aimed at diversifying supply.

However, Greenland’s mining is constrained by structural limitations: limited infrastructure, complex permitting requirements and indigenous land rights. Moreover, mining in Arctic conditions is capital-intensive and environmentally risky. To succeed, US-led efforts must not only provide financial support but also demonstrate political maturity and long-term commitment. Greenland is, in effect, a test of whether democracies can engage in high-stakes resource development without compromising transparency or environmental integrity. Its trajectory will reveal whether values-based industrial policy can function at scale in strategic sectors.

Japan’s deep-sea initiative and the role of scientific autonomy

Japan’s experience offers a parallel yet distinct response to Chinese dominance — one rooted in scientific capacity and technological self-sufficiency. Following China’s 2010 embargo, Tokyo moved rapidly to secure alternative supply lines. It established recycling capabilities from electronics, formed bilateral mineral partnerships with countries such as Vietnam and India and launched intensive research and development (R&D) into seabed resource potential.

These efforts culminated in a landmark 2024 : Japan discovered over 230 million tons of cobalt- and nickel-rich manganese nodules within its exclusive economic zone near . China is preparing to test for rare metals in the Pacific Ocean, in waters near Japan’s island. This signals a bold move into seabed resource competition in the region.

While these nodules do not contain large concentrations of traditional rare earths, their richness in battery-critical minerals, namely cobalt and nickel, and the heavy REEs could dramatically enhance Japan’s strategic position in the broader clean energy supply chain. Equally important is the technological accomplishment of accessing resources at depths of 5,200–5,700 meters. Only a handful of countries possess the capability to conduct extraction operations at such depths with precision and environmental control. Japan’s pilot project, slated for initiation in 2025, aims to extract up to tons of nodules annually — potentially enough to meet its battery mineral needs for decades.

What makes Japan’s approach noteworthy is not only its innovation but its from China’s model. Japan is pursuing resource security through scientific rigor, environmental standards and alliance-building rather than through monopolistic or coercive tactics. If its deep-sea initiative succeeds, it could become a model for how technologically advanced democracies can secure strategic resources without replicating the extractive externalities that have defined China’s dominance.

Allied coordination, fragmentation and the limits of decentralized strategy

Despite individual national efforts, fragmentation remains a persistent obstacle to building a resilient non-Chinese REE supply chain. Australia, for example, hosts the project, which is one of the most promising sources of dysprosium outside China. Japan and Vietnam have increased collaboration on REE separation and materials R&D, and the European Union has launched its Critical Raw Materials to spur investment. Yet even the leading Western processor, Rare Earths, still sends intermediate products to China for final-stage processing. As China tightens export controls, Lynas’s shares surge, which reflects investor anticipation that global automakers may seek more secure, non-Chinese alternatives amid mounting supply chain vulnerabilities.

The underlying problem is the lack of full-cycle infrastructure coordination. A strategic REE supply chain requires not only mining capacity, but also processing facilities, magnet manufacturing plants, recycling systems and logistics integration across multiple geographies. The current system remains siloed, underfunded and inefficient. Moreover, without harmonized standards and cross-border investment frameworks, allied countries risk duplicating efforts or falling prey to lowest-common-denominator policies — compromise policies that reflect the minimum agreement among allies. These compromises often sacrifice ambition, efficiency or strategic coherence for the sake of consensus.

What is required is a high-level governance mechanism, possibly embedded in the Quad, Five Eyes or a NATO-adjacent security structure, to formalize critical minerals cooperation. This should include pooled investment funds; technology-sharing agreements; Environmental, Social and Governance standards alignment and industrial policy synchronization. In an age of resource competition, no single democracy can independently match China’s vertical integration. Only through coordinated decentralization with shared institutional scaffolding can the West generate sufficient strategic redundancy and resilience.

Political time horizons and the future of industrial strategy

The rare earths challenge lays bare a fundamental difference in political time horizons between autocracies and democracies. China’s one-party system enables decades-long planning, patient capital deployment and a stable industrial policy trajectory. The US, by contrast, suffers from electoral discontinuities, congressional gridlock and an industrial base shaped by short-term shareholder pressures.

To bridge this institutional gap, democracies must develop new mechanisms that insulate critical minerals policy from political volatility. This could involve establishing independent national critical minerals authorities with multi-cycle mandates, creating bipartisan legislation for industrial strategy permanence or structuring supply chain agreements through treaties that bind successor governments. Without such reforms, the long-term credibility of Western REE strategy will remain vulnerable to disruption.

The rare earths struggle is not simply about materials — it is about institutional capacity and statecraft. It is a contest over who gets to shape the technological platforms of the future, under what rules and with what environmental and political tradeoffs. China has shown that industrial strategy can be wielded as a tool of global influence. The question now is whether democracies can build equally powerful yet norm-conforming strategies in return.

The map of rare earth production is being rewritten. Whether it reflects a pluralistic, resilient system or one beholden to coercive concentration depends not just on markets or geology, but on whether the political systems of the democratic world can adapt to the strategic logic of the 21st century.

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The desire to reform the global trading system and establish fairer competition for American industries has been a cornerstone of President Donald Trump’s agenda, rooted in decades of advocacy. The current international trade and financial systems are on the cusp of generational change, with structural economic imbalances driving the need for reform. At the heart of these imbalances lies persistent dollar overvaluation, driven by the inelastic global demand for reserve assets. This phenomenon prevents the natural balancing of trade and imposes disproportionate costs on the US manufacturing and tradable goods sectors, which bear the brunt of financing reserve asset provision and defense commitments.

The optimal tariff argument seems to provide a strong justification for current trade policies, but it rests on critical assumptions that may not align with modern trade realities. These models often assume symmetrical trade, where exports are not used as intermediate goods in production. They also downplay the role of services in international trade. However, these assumptions overlook key dependencies in global supply chains, such as the US’s reliance on Chinese graphite and germanium for electric vehicle (EV) production. Without access to these essential inputs, producing EVs domestically becomes a significant challenge, exposing a critical gap in the argument. This highlights the importance of considering the interconnected nature of modern trade and the potential unintended consequences of protectionist policies.

Historic use of tariffs in US economic policy

The US has a long history of using tariffs as a tool for economic protection and policy, with notable examples being from the administrations of President William McKinley and President Herbert Hoover. McKinley’s Dingley Tariff of 1897 was designed to protect American industries during a period of rapid industrialization by imposing the then-highest tariffs in US history. The goal was to shield domestic manufacturers from European imports and foster economic growth within the country. This protectionist approach reflected the broader economic priorities of the late 19th century, where tariffs were a central strategy for supporting emerging US industries and securing economic independence.

Similarly, Hoover’s Smoot-Hawley Tariff of 1930 was another significant moment in US tariff history, though its consequences were far more controversial. Enacted during the early years of the Great Depression, it raised tariffs on over 20,000 imported goods to protect American farmers and manufacturers from foreign competition. However, this policy backfired by triggering retaliatory tariffs from other countries, leading to a collapse in international trade and exacerbating the global economic downturn.

Decades later, Trump’s first administration revived protectionist policies through , particularly targeting China, to address trade imbalances, intellectual property theft and currency manipulation. While Trump’s trade war was framed as a modern and bold strategy, it echoed these historical precedents, demonstrating that tariffs have long been employed as tools for economic protection and negotiation in US policy.

Dollar trends and fluctuations

From 2008 to 2023, the US dollar experienced significant fluctuations driven by global crises, monetary policy shifts and geopolitical events. During the 2008 Global Financial Crisis, the dollar strengthened as a safe-haven asset despite deflationary pressures. From 2008 to 2014, the Federal Reserve’s Quantitative Easing (QE) programs initially weakened the dollar before it rebounded in the mid-2010s, due to the US economy recovering more strongly than others.

From 2016 to 2020, the dollar saw notable volatility; the DXY index peaked at 103 in early 2017 after the US presidential election but weakened later that year as global monetary policies tightened. It regained strength in 2018, supported by Fed rate hikes, and remained stable in 2019 with the DXY around 96–98 amid trade tensions and steady growth. In 2020, the Covid-19 pandemic caused the dollar to surge above 102 as a safe-haven asset, though it declined to 89 by year-end due to aggressive monetary easing.

By 2021, the DXY started near 89–91, strengthened to 96 by year-end amid Fed tapering signals. It peaked at 114 in September 2022 following rapid Fed rate hikes to combat 9.1% inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), in June. The dollar retreated to 103 by late 2022 as inflation cooled. In 2023, as rate hikes slowed, the DXY fluctuated between 100 and 105 amid improved global conditions, with brief volatility caused by US debt ceiling concerns.

Nominal Broad US Dollar Index (2015–2024). Via .

How tariffs drive inflation

The Trump administration’s trade policy marked a significant shift toward protectionism, with the imposition of tariffs on imports from key trading partners, most notably China. These tariffs were implemented under the of reducing trade deficits, protecting domestic industries and addressing unfair trade practices. By increasing the cost of imports, tariffs had a direct inflationary effect on goods that were either fully imported or relied heavily on imported components.

For example, a by Amiti, Redding and Weinstein found that nearly the entire cost of the tariffs was passed on to US consumers and businesses in the form of higher prices. Consumer electronics, household goods and agricultural products were among the sectors most affected. Import-reliant companies faced increased input costs, which they often passed on to consumers. The inflationary impact was particularly pronounced for goods with limited domestic substitutes, such as specialized machinery or certain agricultural products.

The term “absurd inflation” might be hyperbolic in describing the overall economic picture during the Trump administration. However, it is applicable when considering specific cases where tariffs led to highly disproportionate price increases. Households reliant on tariffed goods bore the brunt of these effects. Studies that tariffs cost the average US household between $800 and $1,200 annually during this period. According to the US Census Bureau, the median household income in the US was approximately $68,700 in 2019, so the cost of tariffs to US households was between 1.2% and 1.7% of annual income.

The mitigating effect of dollar strength

The dollar’s value during this period acted as a counterbalance to the inflationary effects of tariffs. The dollar relative strength against other currencies, partly due to favorable interest rate differentials and the perception of the US economy as a safe haven. A stronger dollar makes imports cheaper, offsetting some of the cost increases caused by tariffs. However, the extent of this mitigating effect varied across sectors and depended on the elasticity of demand for specific goods.

For instance, while the strong dollar helped temper price increases in consumer electronics, where global supply chains are diverse, its effect was less pronounced in agriculture. Retaliatory tariffs imposed by China on US agricultural exports, such as soybeans, primarily reduced farmers’ revenue by making their products less competitive in the Chinese market. However, these tariffs also disrupted supply chains, forcing farmers to find alternative markets or adjust production strategies. These disruptions amplified costs for farmers through increased expenses for storage, transportation to distant markets, and inefficiencies in production. In turn, these elevated costs to higher food prices domestically.

Considering the impact of US dollar strength on inflation, estimated at 40–70 basis points, tariff effects on CPI would range between 0.3% and 0.6%. Annual inflation, as measured by the CPI, ranged from 1.3% to 2.3% during the period 2016–2020. Under stable economic conditions, such modest increases are likely to be temporary, not leading to sustained inflation. Real prices remain unchanged, but weaker exporting-country currencies reduce their real wealth and purchasing power. American consumers’ purchasing power is unaffected as tariff effects offset currency movements. If fully adjusted, the US government could generate revenue from tariffs without triggering inflation, although exports may suffer. Policymakers could partially mitigate the adverse effects on exports through aggressive deregulation.

Impact of tariffs and currency depreciation on inflation

A comparative lens further illustrates the interplay between tariffs, currency value and inflation. Countries with weaker currencies relative to the dollar experienced heightened vulnerability to US tariffs. For example, emerging economies reliant on exports to the US faced not only diminished demand but also increased costs for imported goods priced in dollars. Conversely, US with stronger currencies, such as the Eurozone, found it easier to absorb some of the tariff-related shocks.

Inflationary effects from currency adjustments can be significant. The International Price System that a 20%-dollar depreciation raises CPI inflation by 60–100 basis points. If deemed transitory, the Fed might treat this as a price-level fluctuation. However, if it permanently affects inflation rates, the Fed may raise overnight interest rates by 100-150 basis points under standard Taylor Rule guidelines.

The tariff-dollar nexus: balancing trade and geopolitics

The dollar’s status as the world’s reserve currency is central to international financial stability. However, this status also leads to sustained overvaluation, which widens trade deficits and imposes costs on US manufacturing and tradable sectors. Potential solutions include integrating the dollar into a broader adjustable currency basket or promoting the multipolarization of the international reserve currency system. These reforms could mitigate excessive reliance on the dollar and correct distortions in the US economic structure.

Prolonged trade deficits can undermine US national security. Declining strategic industries heighten supply chain vulnerabilities and reduce economic resilience in crises. Policies supporting domestic production in critical sectors and reducing external dependencies are necessary. In light of threats from geopolitical rivals such as China and Russia, the importance of a robust and diversified manufacturing base has been reaffirmed. National security depends on maintaining supply chains capable of producing essential weapons and defense systems.

The relationship between tariffs and the dollar reflects a complex interplay of trade policy, monetary strategy and geopolitical considerations. Advocates like Stephen Miran, a current member of the Council of Economic Advisers under Trump and a senior strategist at the hedge fund Hudson Bay Capital Management LLC (2024) that tariffs can correct the overvaluation of the US dollar, address trade imbalances and strengthen domestic industries. A devaluation of the dollar, achieved through currency and bond market interventions, could complement tariffs by making US exports more competitive globally.

However, such policies carry significant risks. Tariffs, particularly those applied in a “beggar-thy-neighbor” manner, can provoke trade retaliation and disrupt global economic stability. The Fed may need to intervene in bond markets to manage the inflationary and interest rate pressures resulting from such strategies. Furthermore, leveraging defense alliances — formal agreements or partnerships between the US and other countries to provide mutual security and military cooperation, such as NATO or bilateral defense agreements — to enforce economic policies could undermine global trust in US commitments, with implications for both economic and geopolitical stability.

Balancing currency policy and trade policy

If a currency agreement were reached, the removal of tariffs would likely act as a powerful incentive for trade partners to cooperate. A critical element of such an agreement would be securing the Fed’s voluntary participation under the International Emergency Economic Powers Act (). Historically, the Fed has deferred to the Treasury on currency policy, while the Treasury has respected the Fed’s autonomy on issues such as short-term interest rates and demand stabilization. Scholars have the history of currency agreements and their coordinated implementation, their theoretical potential to address imbalances. However, the question remains: What incentive does the US have to pursue such agreements when it can unilaterally influence the terms of trade through the imposition of tariffs? The ability to dictate trade shifts without negotiation may diminish the appeal of entering cooperative currency arrangements, particularly when tariffs have already proven effective in exerting leverage.

A coordinated currency agreement would require careful negotiation to align the interests of major economic powers. The Treasury and Fed would need to strike a balance between stabilizing exchange rates and maintaining domestic economic goals, such as controlling inflation and promoting employment. Ensuring that currency policies align with broader trade objectives, including tariff adjustments, would further enhance economic stability while reducing global trade tensions.

Proposal for the Mar-a-Lago Agreement

A multilateral currency agreement, similar to the , could contribute to economic stability under specific conditions. However, in the current geopolitical climate, achieving such an agreement is challenging. To gain cooperation from major reserve-holding countries like China and Middle Eastern nations, a different diplomatic approach would be required.

Globally, Europe and China show limited willingness to coordinate on currency policies. Europe faces sluggish growth, and protectionist measures dominate its response to Chinese export competition. Meanwhile, China’s weak domestic growth compels it to reinforce its export-driven model. Notably, China has emerged as the world’s largest car exporter, intensifying global trade tensions.

Top car exporters in the world. Via .

China’s dominance in the global EV market is a result of strategic government support, economies of scale and advances in automation. These factors have enabled Chinese companies to produce EVs at competitive prices, making them attractive to global consumers. Simultaneously, with weak domestic demand, China’s excess capacity has been absorbed by export markets. The country’s EV exports have grown significantly, with Chinese brands like BYD gaining recognition worldwide. This trend is to continue, solidifying China’s position as a leader in the global EV market.

By contrast, nations like Japan, the United Kingdom, Canada and Mexico may be more open to cooperation but lack sufficient influence to drive global outcomes. The Trump administration’s strategy of using tariffs as leverage could potentially lead trade partners to agree to currency pacts in exchange for reduced tariffs.

A potential agreement, the “,” might resemble historical precedents like the Plaza Accord but would require “harmony negotiation” in the spirit of a former Secretary of State and Treasury James Baker, rather than a blunt “carrot-and-stick approach,” given today’s complex financial landscape. This scenario differs significantly from the Plaza Accord era, as Japan’s trade relationship with the US then was largely centered on exporting finished goods. Currently, tariff policies also impact US manufacturers and retailers, highlighting underappreciated complementarities that are often overlooked in the present discourse.��

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The authors found that EVs, compared to non-electric models in the same car family, are financed with higher interest rates, lower loan-to-value ratios and shorter loan durations. That “financing gap” occurs because lenders price in the risks they perceive in obsolescence caused by rapid advances in EV technology, the paper explained.

“Our paper is the first step towards understanding financing barriers to EV adoption,” said Wharton finance professor , who co-authored the paper with University of British Columbia finance professors and . The paper noted that in discussions around the global transition to electric mobility, there is a lack of emphasis on the significance of consumer financing in EV adoption.

What causes the EV financing gap

The study showed that the primary driver of the “EV financing gap” is the technological risk associated with EVs. Lenders charge higher interest rates on EV loans because “the rapid and uncertain evolution of EV technologies accelerates technology obsolescence, diminishing the resale value of EVs,” the paper pointed out. The tighter financing terms for EVs have little to do with consumer demographics, lenders’ market power, or macroeconomic factors, it added.

EVs are an important part of the transition from traditional fossil fuels to clean energy, Tang noted. “However, during this transition period, the battery technology associated with EV innovation has not matured yet, which means the current generation of battery may become obsolete very quickly, maybe in one or two years,” she said. “Existing batteries have insufficient capacity and charge slowly, leading to unprecedented amounts of public and private funding being allocated to advancing battery technology research and development,” the paper pointed out.

The residual value of EVs is an important aspect of understanding lenders’ behavior. Lenders would get possession of the cars they finance either in the event of repossession if borrowers default, or at the end of a lease term. But the rapid development of EV battery technology could lower the market value of their EV loan portfolio.

“There’s also a lot of uncertainty in how much lower that market value could be, because we don’t know when the next generation of better technology will be born and commercialized,” Tang said. “So, to price in that risk or to cope with that risk, lenders charge a higher interest rate. They are passing through that risk to the household.” In vehicle leases, the study found that lenders attribute lower residual value estimates to EVs at the commencement of a lease.

In addition to technology risks, the paper listed other factors that might contribute to the high financing costs of EVs. Those include the potential of a default risk for EV loans; a relatively lower demand sensitivity with respect to price where buyers are willing to pay a higher price for their loans; and possible differences in lenders’ market power in the EV vs. non-EV loan market segments. “[But] these alternative explanations account for either little or only a small fraction of the EV spread,” the paper stated.

Key findings: EV vs. non-EV financing

The study used data covering 15 million car loans in 11 European countries, between January 2010 and August 2021 and securitized by European lenders. It focused on 10 brands of manufacturers that make both EVs and non-EVs: BMW, Ford, Honda, Hyundai, Lexus, Mercedes, Peugeot, Toyota, Volkswagen and Volvo.

Analysis of that data revealed “a systematic gap” in the financing terms between EV and non-EV models within the same car family, across different lenders, different car makes and different countries. Specifically, the gaps were as follows:

• The interest rate on EV loans was 0.29 percentage points higher than that for non-EV loans, representing 6.5% of the average interest rate of 4.5% in the study’s sample.

• The loan-to-value (LTV) ratio for EV loans was 4.7 percentage points lower than that for non-EV loans, which meant that EV buyers had to make higher down payments than non-EV buyers. The loan component in EV loans was 6.7% lower than the sample average of 70%.

• The third difference was a 2.5-month shorter loan maturity for EV loans than that for non-EV loans. It was also 5.4% lower than the sample average of a little over 46 months. The average loan size was 13,890 euros (approx. $15,000).

Citing prior research, the paper noted that consumers are “highly sensitive” to both the prices of vehicles and the financing terms offered by auto loans. “[Notably], consumers mention a of affordability as the primary concern when considering the adoption of EVs,” the researchers added.

The authors measured the risks associated with EV-related technologies in terms of both “intensity” and “dispersion” of innovations by analyzing trends in patent awards and venture capital investments. They gauged the “intensity” of relevant battery technology innovations, based on the number of patents granted, the importance of those patents and the dollar value of VC investments in EV-related startups. The “dispersion” aspect captures the uncertainties about the directions of future advancements in EV and battery technologies.

Next, they devised a metric they called the “EV spread” to measure how innovations in battery technology impact interest rates. They found that a higher level of their measures of the intensity and dispersion of innovations in EV-related technologies is associated with a larger EV spread. A one-quartile increase in the intensity of clean patenting widens the EV spread by 0.148 percentage points, the paper stated. Similarly, a one-quartile increase in the dispersion of battery-related technological directions widens the EV spread by 0.136 percentage points.

Conducive policy environment

The policy push for EVs is unambiguously encouraging in both the European Union and the US, as the paper noted. The EU in 2023 adopted a law that requires carmakers to achieve a 100% reduction in CO2 emissions from new cars sold by 2035. That would effectively prohibit the sale of new fossil fuel-powered vehicles in the 27-country EU bloc. The law also calls for a 55% reduction in CO2 emissions for new cars sold from 2030 compared to 2021 levels.

In the US, the Biden administration has set a goal of EVs accounting for at least 50% of all new vehicle sales by 2030. Toward that end, through its initiative, it has issued a “call to action” to support that goal to the private and public sectors, including advocacy and community groups.

The Biden administration has attempted to ease the financing burden for EV buyers. Taxpayers who buy an eligible vehicle may qualify for a federal tax credit of up to $7,500, according to a Department of Energy . That breaks up into two credits of $3,750 each for vehicles that meet the critical mineral requirements and those that meet the battery component requirements; vehicles meeting both conditions are eligible for the total tax credit of $7,500. Various states also offer their own incentives to boost EV adoption; the DoE periodically updates on state-level incentives for EVs.

The paper noted that while most policy discussions focus on the affordability of EVs in terms of their purchase price, less attention is paid to the role of consumer financing of EVs. “Our research fills this gap and can inform public policies that aim at making EV financing more accessible,” the authors wrote.

“Along the whole supply chain, we have subsidies for the production and purchase of EV cars, but we have not seen any intervention related to the financing part,” Tang said.

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Italy has just it will withdraw from China’s Belt and Road Initiative (BRI), complaining that trade and investment have benefited China inordinately, while damaging the Italian economy.

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Brussels has called for an investigation into subsidization in the Chinese electric vehicle sector as European automobile companies are losing market share to cheaper, more advanced Chinese electric vehicles (EVs). Beijing wants to further the China-EU détente to maintain Europe as some form of counterbalance to its dependence on the US market and imports of US technology, but the barriers to this are high. European commissioners are demanding greater access to China’s domestic market while, in step with the US, banning exports of dual-use (civilian/military) technology to China, including advanced semiconductors, cloud computing, and artificial intelligence.

Meanwhile, European public opinion towards China has continued to sour due to China’s choice not to condemn Russia’s invasion of Ukraine. Many in Europe and the West do not consider China’s own need to maintain reasonable relations with Russia, with which it shares a border of nearly 4,200 kilometers (2,600 miles). As the war in Ukraine drags on, it appears that each side is too strong to lose and yet too weak to win, and European politicians will lean more towards Washington than Beijing.

The EU is unlikely to try to decouple economic links with China as ardently as the US, and European companies will invariably resist trade restraints. The global economy will suffer profoundly if China becomes estranged further from the world’s two great trading blocs. It is in the interests of smaller trading nations to resist pressure to pick sides and avoid adding to the larger players’ intemperate rhetoric.

Despite all of the considerable challenges, China will continue to offer the strongest and most investable market for the rest of the decade. All those nations, firms, and people around the world who benefit from peace and stability should not treat disengagement and conflict as our unavoidable future.

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The power demand isn’t going to slow any time soon. The advent of cryptocurrency and generative AI is creating an exponential rise in demand for more data centers and more electricity. We’re witnessing a revolution in electric cars, trucks and appliances. Electric companies will have to meet the demand while moving us toward a carbon-neutral world. We can do this by taking three key steps.

The first step is to accelerate the ongoing revolution in renewable energy.  In 2022, of all new energy added globally by utilities was renewable, and renewable energy is to surpass coal by 2025.

While the accessibility of renewable energy has increased, the better news is that costs continue to decrease. Solar manufacturing costs drop every year and will only get more competitive with fossil fuels.

Wind projects have decreased in costs by  over the last decade. The Inflation Reduction Act is an essential step in the right direction with an estimated  in incentives for clean technology by 2032. Clean energy is not only better for the planet, it’s becoming cheaper by the day.

Unfortunately, the sun doesn’t always shine, and the wind doesn’t always blow. That’s why advancing battery storage is a key bridge to a clean energy future. When I served on the board of Tesla in 2010, the energy cost for batteries was over per kilowatt-hour. This was part of why electric vehicles were prohibitively expensive. Just ten years later, the cost of battery storage had dropped by an order of magnitude to $137 per kilowatt-hour. Tesla has cut electric vehicle prices in 2023 alone.

Battery manufacturers are driving decreases in battery costs that are leading to a revolution in power storage. Tesla’s energy/battery division is a prime example, deploying   of power storage in the third quarter of 2023 alone. That’s to power all the homes in Chicago and LA combined. Expect to see some form of battery storage in most homes, offices and schools in the coming decades. Batteries are rapidly becoming a cheaper alternative to natural gas or nuclear, and they are a lot easier to permit next to a school or apartment building.

The toughest problem to solve will be building a resilient, multi-directional grid that will connect this new mosaic of storage and energy devices. This new grid will enable utilities and homeowners alike to generate power and store it when the wind is blowing and the sun is shining, as well as to transport it to the areas that need it the most based on the time of day. This will enable us to avoid building excess capacity and help us solve for those critical times of peak energy demand (both winter and summer) by saving up power when it’s cheap and using it during peak demand.

The electrical power grid is the largest and most important machine in the world. The Internet wouldn’t function without the power grid. Transforming the grid from a one-way transmission system to a multidirectional grid will enable everyone to play a role in slowing climate change.

Renewables, batteries and a new, multi-directional grid won’t solve all of our problems. We will still need to develop green hydrogen for energy-intensive industries like steel and cement. Over time, we will need more nuclear energy plants because of their efficiency and baseload power. California’sPacific Gas and Electric Company that electricity demand will increase by 70% over the next 20 years. Bill Gates and Elon Musk think it will be closer to 2–3 times that. But, in a race against climate change, renewables, batteries and the grid are the three best tools we have today. The world’s utilities are our best chance to help us win that race.

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To explain how Latin America can avoid this outcome, we must first explain how lithium goes from initial extraction to a consumer product. Then, we will discuss strategies for Latin American governments that find themselves at different parts of this chain.

The EV battery supply chain consists of :

— Upstream: raw materials, like cobalt, nickel and lithium, are extracted in the form of ores or brines.

— Midstream: raw materials are refined and processed into battery cells.

— Downstream: battery cells are assembled into modules that automakers can use.

— End of Life: spent batteries are recycled or reused. 

Currently, China, South Korea and Japan the midstream stage. Latin America’s largest —Argentina, Bolivia, Chile and Mexico—mainly operate in the upstream stage.

The danger is that Latin American mineral producers will find themselves merely selling raw unrefined lithium on the global market for quick cash and thus miss out on all of the added value that occurs at later stages of production. While they have the lithium resources, they will need to develop industrial capacities farther down the stream to capitalize any further.

Not every Latin American lithium producer has made the same amount of progress on this front. Chile, the world’s lithium miner, also has the most mature production capabilities in the region. Argentina, whose lithium supply is mostly managed by , is speedily increasing its production. Mexico is slowly attempting to catch up, while , hampered by political instability, is still taking its first steps into lithium exploration.

The US can be an investor and friend

In addition to large supplies of raw materials, Latin American countries have another advantage that they can lean on to develop their lithium industry: geographical and political proximity to the United States.

Current American trade policy prioritizes what US Treasury Secretary Janet Yellen termed  “,” which means reconfiguring global supply chains so that key manufacturing is located in politically friendly and reliable countries.

Another favorable policy is the , major legislation seeking to cut America’s greenhouse gas emissions . The US is the global emitter of CO₂ and will need to make significant investments in EVs to meet this goal. The transportation sector is the largest emitter of greenhouse gasses in the US economy, which will need to replace fossil fuel-burning vehicles with EVs in the coming years.

The US needs EVs, and it doesn’t want to make all of them in China. How can the Western Hemisphere work together to make this happen?

Lithium producers, from the relatively developed Chile to the fledgling Bolivia, should encourage that allows them to advance their domestic capacity beyond raw material extraction.

For Chile and Argentina, which have production operations than Bolivia and Mexico, this means motivating American companies to not only continue investing in upstream capabilities but also to invest in development of their midstream capacities. Current US policy provides both countries an opportunity to attract private-sector American investments that will allow them to develop refining and battery cell assembly facilities.

��󾱱���’s with the United States makes it an even better candidate for US investment, given that the Inflation Reduction Act requires a certain percentage of EV battery minerals be extracted and processed in a country with which the United States has such an agreement. Argentina’s relationship with the US is not as friendly, although some point to future cooperation between the two nations on green development in the future.

For Bolivia and Mexico, whose production operations are less advanced than Chile and Argentina, the goal should be to continue attracting investments to their upstream capabilities, which are still in the development stage. To exploit lithium deposits, Mexico , a state-owned lithium company, less than a year ago. The of Bolivia’s 21 million tons of lithium has not even been determined yet.

Both nations have taken a to production, with Mexico also making use of public-private partnerships where possible. Mexico’s openness towards public-private partnerships, along with its automotive-centric and neighborly ties with the United States, makes it a prime candidate for American investments in upstream operations. The Mexican government is just starting lithium exploration, but these factors offer it a in attracting investment that could rapidly advance its upstream production.

Although Bolivia’s lithium industry is still in its embryonic stage, it too will need to attract outside investment to develop its upstream and, eventually, midstream capacities.

Despite their differences in approach—from state domination of production (Bolivia) to full reliance on private-sector collaboration (Argentina)—all four lithium producers will need to attract investment in order to develop multiple stages of the EV battery supply chain. This will allow the localization of production and, in turn, spur local economic development through spinoff entrepreneurship and supporting industries. The political will behind reshoring ; Latin America must capitalize on the present opportunity before American companies turn back to relying on Asian inputs out of inertia.

If Latin American nations are not able to develop multiple stages of the supply chain, they will be doomed to simply be providers of raw materials without seeing significant benefits. If they are able to take advantage of the opportunity, however, they will balance Asia’s dominance of the industry, help meet the growing global demand for EV batteries and ensure that production nodes stay within the Western Hemisphere.

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The air pollution — not just in Delhi, but several northern Indian cities — has become a matter of public health concern nationally and internationally. Some politicians blame farmers for burning crop stubble and causing atmospheric pollution, while others point variously to cars, the lack of seasonal winds, heavy-polluting thermal plants and old trucks as the culprits.

Much of the media coverage has betrayed a lack of understanding of the issues. According to agriculture scientist M.S. Swaminathan, in southern India, stubble is not burned as there is economic value as animal feed. He advocates incentives to encourage farmers to convert rice stubble into income. But it is likely this burning contributes only 5-7% of Delhi’s problems, according to the director-general of Centre for Science and Environment (CSE), Sunita Narain.

Advocates for the odd-even car scheme in driving point to its success in bringing PM2.5 fine particulate matter levels down from the 17-times over WHO guidelines they were at in early November. But that is no long-term solution.

According to the , vehicle pollution is the cause of 28% of PM2.5 emissions in Delhi, of which trucks and tractors generate nine percentage points, two-wheelers seven percentage points, five from three-wheelers, and even less from cars, buses and light commercial vehicles.

E-Mobility Revolution

To address the vehicular problem more effectively, India needs to move with its heart and soul into an e-mobility revolution. China spent nearly $60 billion on the development of this sector in the last 10 years and today has more than 275,000 electric-vehicle (EV) charging stations. Shenzhen and Shanghai individually have more than any other country in the world apart from the US. India has a measly 350. India simply doesn’t have that capital, so its solutions have to be more contextualized.

Building an integrated, end-to-end supply chain in e-mobility means a holistic approach to the procurement of raw materials, manufacturing, encouraging consumer take-up of EVs, right the way through to providing charging infrastructure and adequate recycling facilities. Anil Srivastava, principal advisor to India’s government think tank NITI Aayog, said recently that government has been the one driving this sector, not industry.

According to Kaushik Madhavan, vice president of mobility in South Asia at market research firm Frost & Sullivan, EV will be a $5 billion market in India by 2025, with batteries making up 40% of this. The market in India will be driven by two and three-wheelers rather than cars or heavier vehicles.

The focus of the government over the last year has been to bring different stakeholders together and develop a roadmap for development. There is much more to do in the coming years, including rapidly investing in charging infrastructure, continuing and perhaps expanding the FAME II subsidies and bringing down the price of EV compared to internal combustion engine (ICE) vehicles.

Government and industry seem broadly aligned on these challenges. But given batteries are a major component of the future growth path of the EV sector, this seems to be a blind spot in India. There is little discussion on this, apart from at some leading industry forums, such as . Indian public policy and related discussion lean toward lithium-ion batteries, the current global market leader and one in which the Nobel Prize for Chemistry was awarded earlier this year.

And with good reason. The lithium–ion battery is the highest energy density battery technology currently in existence commercially, so it is the go-to battery if one requires a long driving range per charge. But this may not continue, leaving the growth of the sector vulnerable to global market forces.

At its core, current batteries contain materials such as lithium nickel-cobalt-manganese oxide (NMC). Such batteries are expensive because of the high cost of lithium resources and also the high cost of cobalt. Lithium is scarce and the forms of its production can be from brine (led by South American countries such as Chile) or mined from minerals where Australia is the leading producer. Such scarcity means that the supply of lithium will always be an issue, especially as demand increases.

Chinese company Tianqi Lithium recently became the second-largest shareholder in Chilean mining company SQM by investing $4 billion, effectively giving it control over nearly half of the global production of lithium. This is up from 20% just a decade ago. In the same period, the Japanese share of the lithium–ion battery market has  from around 67% to 26%.

Around 94% of the world’s cobalt occurs simply as a by-product of other minerals’ production. The world’s primary cobalt reserves are located in the geopolitically sensitive Democratic Republic of Congo in mines, which is also increasingly owned by China. Add to this the Chinese control of the refinement of lithium-ion cathode minerals and its status as the leading supplier of the graphite anode and electrolyte.

This means China controls a large part of the supply chain, so even if India was able to make a step-change in promoting indigenous lithium–ion cell manufacturing, the country would still be dependent on Beijing.

This poses an important geopolitical challenge for India. Despite Prime Minister Narendra Modi targeting India’s  reduction to 67% by 2022, the figure has increased each year since he has been in power, reaching 84% today. This dependency will not change any time soon.

As the EV market grows, India will additionally be reliant on China for lithium that some of the rest of its energy needs. Given how instrumental that import-led, oil-price inflation in 2013-14 was in sweeping Modi to power, subjecting India to a continued oil dependence on the Middle East and adding another dependency on China may not be in the country’s best interests. Just a few weeks ago, India’s last-minute withdrawal from the Regional Comprehensive Economic Partnership (RCEP) showed how jittery Delhi already is of China’s hegemony in regional trade.

Luckily, there are other alternatives to lithium, but they are not part of the EV discourse in India currently. There are a number of reasons for this: the relative maturity of lithium–ion batteries in the market, a lack of knowledge of alternatives and the lack of global capacity for other types of batteries.

Sodium–Ion Batteries

India should look at sodium–ion batteries more seriously. They work just like lithium–ion batteries, just with the lithium compounds swapped with sodium compounds. Sodium is one of the abundant elements on Earth, with vast global reserves of sodium minerals for example from seawater.

Research interest in sodium–ion batteries really took off from 2011. Until 2010, there were only 115 scientific papers ever published on such batteries by 2010. In the subsequent nine years, this number grew 50-fold to reach 5,804.

There are just a handful of companies working on this technology. The first to commercialize it, the UK-based , has filed multiple on sodium nickel and manganese-based oxide cathodes that do not contain any cobalt. Manganese and nickel are both abundantly available. The density of these sodium–ion cathodes has been shown to be almost similar (⁓80%) to that of NMC lithium–ion cathodes.

Sodium-ion batteries also have the significant advantages of being easier to recycle and transport. Lithium-ion batteries always need to be stored or transported at a partially or fully-charged state, where a battery is at its most unstable state. This is why there are global regulations that tightly dictate how lithium-ion batteries can be transported (why you can’t check-in such batteries in the luggage hold at the airport, for example).

The reason why China leads the world in lithium-ion cell manufacturing is that aggressive government support for supply-chain clusters by Japan in the 1990s followed by South Korea and China created a market dominance. Sodium ion’s level of technological maturity has been achieved in just the last eight years or so and is now approaching its hockey-stick moment. It now needs the focus of investors and forward-sighted governments to see it as the next big thing after lithium-ion. In a few years, the energy densities of such batteries commercially will be comparable to lithium-ion batteries.

For India’s public policy push to grow the EV market without an outright dependence on, or competition with, China for large parts of its supply chain, this presents a big opportunity. Just as India decided in 1958 to champion thorium over uranium in furthering its nuclear research capabilities, the country could become the world’s hotbed for sodium-ion battery manufacturing, supporting the existing FAME II EV subsidy scheme. This would make a great case study for Modi’s “Make in India” Initiative.

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At the beginning of 2018, Ford decided to double its electric vehicle spending to $11 billion. This led Reuters to that it was “part of an investment tsunami in batteries and electric cars by global automakers.” Reuters estimated that figure to be more than $90 billion. Analysts said that $19 billion was invested in the US, $21 billion in China and $52 billion in Germany. These investments have only grown since.

In January 2018, electric vehicle sales were less than 1% of the 90 million vehicles sold every year. In 2017, the dominant player in the American market was Tesla with sales of 100,000 vehicles. Globally, Nissan Leaf is the top-selling electric vehicle and China is the biggest electric vehicle market. In the first half of 2018, more than electric vehicles were sold in the Middle Kingdom. Most estimate the sales in 2019 to have increased significantly. Suffice to say, sales of electric vehicles are growing fast, especially in China.

On June 13, 2019, two dramatic pieces of news hit the wires. First, a Chinese “announced a massive $23 billion investment in the production [of] 1 million electric cars and 500 GWh of batteries per year.” Second, sleekly designed ultra-compact electric vehicle caught attention. More than its sleekness, analysts hailed the vehicle’s new batteries. Apparently, they eliminate the liquid electrolyte in batteries. This means that batteries lose bulk, last longer and become less likely to catch fire. It seems the battery revolution is on in full sway and Japan is leading the way.

India’s Rambo Response

Given that most countries in the world are adopting electric vehicles, India has belatedly made a push for them. It has promulgated a policy, an acronym for the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles Scheme. This policy measure seeks to foster greater demand as well as promote a greater supply of electric vehicles.

Launched first in 2015, FAME-India has achieved little to write home about. It turns out that about produced from April 1, 2015, to March 31, 2019, as a result of this policy were electric scooters. Manufacturers indulged in gross abuse of incentives and more than 95% of these scooters used antiquated lead-acid batteries instead of modern lithium-ion ones.

As a result of small enterprises gaming the incentives and large ones ignoring them, Indian policymakers hit back through a pincer move. Its Bharat Stage standards regulate the emission of air pollutants from motor vehicles. On April 1, 2017, the Indian government had made Bharat Stage-IV standards compulsory. The failure of its FAME-India policy made the government leapfrog Stage-V and move straight to Stage-VI emission standards last year. The Indian Supreme Court upheld the government’s decision that comes into effect on April 1, 2020. This might dampen demand for petrol or diesel automobiles going forward.

While the first jaw of the pincer was raising emission standards, the second jaw was a reconstituted FAME-India policy that most refer to as . This policy aims to have more than 30% of India’s vehicles powered by a lithium-ion battery in another 10 years. The Indian government has decided to drop support for mild hybrids and vehicles based on legacy battery technologies.

What Happens Now?

Like any policy, FAME-II will lead to winners and losers. The Japanese have bet big on hybrids. The likes of Suzuki, Honda and Toyota favor the gradual approach and prioritize hybrids over pure electric vehicles. Hyundai and local automaker Mahindra are gunning for the pure electric approach.

The Indian context is unique. Nowhere in the world is the population pressure so intense and urban congestion quite so bad. Traffic in India is terrible and leads to low fuel efficiency because vehicles crawl at low speed on poor roads in chaotic conditions. This means that vehicles invariably have high emissions and low fuel efficiency. New Delhi is now the in the world. Its thick, gray smog has achieved legendary status as air pollution in the city surges to “.”

With air pollution choking its people, the Indian government had no option but to act. However, it faces a big challenge in adopting electric vehicle technology. When the petroleum revolution occurred, India neither possessed the combustion engine technology nor any oil reserves. Till today, Indians drive cars with Japanese technology and Middle Eastern oil. In fact, the Indian economy yo-yos as per the price of oil because it imports around each year. It turns out that not only does India not have oil, but it also lacks cobalt and lithium, two key metals for new battery technologies.

The Indian government estimates its cobalt reserves to be . However, the government admits that “there is no production of cobalt in the country from indigenous ores.” In fact, production of cobalt declined in the early part of this decade from around 1,187 tons in 2010 to 1,300 tons in 2011 to 580 tons in 2012. India imported the ore to refine this cobalt and then imported more cobalt in refined form to meet domestic demand.

The include both China and Japan. They have been savvy in acquiring mines in different parts of the world and developing global supply chains. With its tiny diplomacy, lethargic bureaucracy and election-obsessed politicians, India has only belatedly woken up to its cobalt and lithium shortage. The government has finally instructed three state-owned companies to team up for a new venture. This venture will scout and acquire .

It is not only the lack of strategic minerals but also India’s weak industrial ecosystem that is a matter of concern. For decades after independence, Indians had to rely on antiquated Ambassadors and fusty Fiats to get around. Finally, Suzuki arrived in India in the form of Maruti and, after 1991, there has been a deluge of foreign brands in the country. Importantly, these automakers have relied on imports for both critical and non-critical components. They have also in India with outdated technology and lower safety standards. Until recently, Toyota was despite the availability of high-quality steel in India. Manufacturing domestic electric vehicles is not going to be easy. 

Feisty startups, such as that has developed an e-bike called Surge, are hampered by risk aversion from investors, preference for software over hardware opportunities and short-term time horizons of venture capitalists. There is a cultural factor at play too. Because of the country’s caste-based social hierarchy that assigns a low status to manual work, Indians shy away from manufacturing and top talent rarely ends up making stuff. The few intrepid souls who enter manufacturing find it heavy going in a society that values status, not work.

Chinese Cars After Chinese Smartphones

One of the authors has repeatedly remarked on the continuity of cultural traditions in India and China. There is a reason India conceived of the number zero while China came up with paper. It might be a factor in making India the land of software and China the workshop of the world. In 2016, reported that India had the fastest-growing smartphone market in the world. In 2018, VentureBeat reported that Chinese smartphone makers were . Indians are notoriously price-sensitive and one of the authors preferred a no-nonsense Xiaomi to a fancy, expensive iPhone.

Just as the Chinese dominate the smartphone market, they could be the big winners in the electric vehicle market. So far, Suzuki has maintained its early mover advantage in India. Entering India in 1981, it has the brand recognition and the distribution network to remain top dog. Culturally, no foreign automaker knows India as well as Suzuki. Yet it is under pressure because of the new emission norms. In April, it decided to vehicles because the norms make them uneconomical.

Suzuki has also entered into an alliance with Toyota, a global giant but a minnow in the Indian market. The companies calculate that this partnership will enable them to compete better in India. Even as the Japanese are collaborating with each other, Indian companies are taking the foreign acquisition route to gain new technologies. Tata bought Jaguar and Land Rover, acquiring new technologies in the process. Yet this most reputed of Indian companies failed miserably when it launched .

China’s SAIC Motor Corporation already has a foothold in the Indian market through its British subsidiary, MG Motor. Reportedly, it is planning a investment in India. This involves producing an electric car by the end of this year. The Japanese, market leaders in the Indian market, are yet to do so. Even Nissan Leaf is not to be seen in India, though one can find it in landlocked Bhutan. The situation is when the Japanese lost their market domination to the Koreans because of underinvestment, low-risk appetite and slow rollout of the latest technology in the Indian market. This time, the Chinese threaten to upstage the Japanese.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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China’s booming electric vehicle industry is headed for some tough price competition followed by a shakeout, according to experts. The competitive landscape for China’s EV market is changing dramatically on several fronts. The phase-out of Chinese government subsidies on EVs is set to����before they are eliminated by 2020. Meanwhile, some 500 manufacturers have registered to make EVs in the country. Global automakers such as GM and Volkswagen are also expected to intensify their efforts in China, bringing superior technology and brand recognition.

Against the backdrop of those corrections came a recent trailblazing show by Shenzhen-based BYD Company, China’s dominant maker of EVs. BYD — which stands for “Build Your Dreams” — counts Warren Buffett among its investors and����a 632% jump in profit for this year’s first quarter to 749.73 million yuan ($111.4 million). It sold nearly 118,000 vehicles in the quarter, up 5.2% over last year’s first quarter. In comparison, BYD’s US counterpart and EV maker Tesla�� a loss of $668 million on revenues of $4.5 billion in the latest quarter. The 63,000 cars it sold last quarter represented a ��fall from the previous quarter.

According to Wharton Management Professor��, who is also director of the Program on Vehicle Mobility Innovation at Wharton’s��, BYD’s latest quarterly results reflect the volatility of the Chinese EV market, and its sensitivity to subsidies. He pointed out that the company’s profit growth in the last quarter is dramatic when compared to a����in its profits for 2017 following the first round of cuts in government subsidies.

The Chinese government had introduced subsidies in 2010 to promote EV sales, driven in large part by its desire to cut pollution levels. China’s EV industry has benefitted also from other government regulations aimed at shifting consumers away from internal combustion (fossil fuel-driven) vehicles. For example, securing a license plate for a new vehicle could take up to a year in many Chinese cities, but in the case of EVs, license plates are issued along with the vehicle. “That’s a huge incentive for somebody who wants to buy an entry-level vehicle,” said��, professor of management practice in business administration at Harvard Business School.

“China has been willing to pull all of the policy levers available to them to jumpstart the electric vehicle market,” MacDuffie said. “[It wanted to] stake out a claim to be not only the biggest market in the world, but the one that is accelerating the pace of the transition from internal combustion to electric.”

MacDuffie and Shih explored the outlook for China’s EV industry on the��.

Subsidies Going Away

Good times riding on subsidy props, however, don’t last forever in any market. Beginning 2016, the Chinese government has been steadily reducing its subsidies for EVs, in an attempt to progressively shift costs to its EV makers. The latest round, announced this March, will see the subsidy for pure battery electric cars with driving ranges of 400 km (250 miles) and above cut by half, to 25,000 yuan ($3,700) per vehicle from 50,000 yuan, according to a Bloomberg��. In order qualify for any subsidy, electric cars need to have a range of at least 250 km, it added. Last year, the Chinese government removed subsidies for vehicles that can travel less than 150 km in one charge.

The program to phase out the subsidies by 2020 means that the Chinese government considers EV technology “mature enough to not need the subsidy,” said MacDuffie. Specifically, the phase-out of subsidies for lower-range vehicles “helps the companies that are investing in better batteries,” he added, noting that BYD would be one of the beneficiaries.

Has China’s EV industry truly matured enough to be successful without the subsidies? “Yes and no; it’s complicated,” said Wharton Emeritus Management Professor��, who is also a China expert. “The Chinese government turns sales tax rebates on and off depending on desired support for an industry, including automobiles. Given Chinese driving habits — there is little long-distance automobile traffic because of high speed trains — the EV industry should do just fine on its own.”

Beijing, China on 5/3/2016 © Humphery / Shutterstock

Companies like BYD have made good use of government policies that encouraged the use of EVs. BYD cut its teeth making batteries for mobile phones and portable electronic devices over the past two decades, and then scaled that technology to make batteries for electric buses and other automobiles, Shih noted. “They have gotten a lot of practice over the last decade for sure.”

BYD’s top selling Yuan EV is����at between 89,900 yuan ($13,500) and 109,900 yuan ($16,200). At the other end of the price spectrum is the two-seater Bajoun E100, produced by a joint venture between China’s state-owned SAIC Motor Corp., General Motors and Liuzhou Wuling Motors,����at about 35,800 yuan ($5,300).

MacDuffie said that Tesla, unlike BYD, started as a luxury EV company and has over the years struggled to develop “a model that can sell at a mass market price.” Tesla’s Model 3 is priced upwards of $35,000, compared to the�� starting prices of $88,000 for the Model X and $79,000 for the Model S. By contrast, BYD’s cars are more affordable thanks to government subsidies, he added.

A Gathering Storm

China’s EV push has no doubt attracted global players as well. “You already see that response with companies like Volkswagen, BMW and others agreeing to source batteries in China, for example, or even starting to think about using China as their lead market for the development of EVs,” said Shih. According to Meyer, Hyundai and Kia will also be players in China’s EV market.

As global automakers seek to expand in China, “there is a coming storm of competition for Chinese electric vehicle manufacturers,” said MacDuffie. He noted that almost 500 manufacturers have registered to make EVs in China, and that they would together take the total manufacturing capacity up to 3.9 million vehicles annually, or about three times current sales levels.

For now, foreign brands have a small presence in China’s EV market, with a share of about 5%, while imports account for about 3%, according to a��CleanTechnica��. “I’m worried that the US will miss this market,” Meyer said. “GM has����the Volt, and the [Chevrolet]����(the Soul EV).”

However, “they’re not all going to survive,” MacDuffie said, noting that a shakeout in the industry is inevitable. “Before a shakeout comes some tough price competition, [along with] higher-end, technologically sophisticated competition from the multinationals. The big players – the ones with experience like BYD – are in a better position to survive a shakeout.” Added Shih: “There will be inevitably some kind of shakeout and consolidation, [similar to what occurred in the] American auto industry in the 1920s.”

Bullish Growth Outlook

Even in the face of those headwinds, China’s EV industry is��; sales grew 62% in 2018 to 1.3 million vehicles, while those of fossil fuel-driven cars����last year to about 28 million vehicles, as they did in the US and in Europe as well.

No major casualties are expected in the immediate aftermath of the withdrawal of China’s EV subsidies. “[China’s] EV makers — which for now prioritize volumes and market shares over profitability — will subsidize customers for the time being to mitigate the subsidy cuts, while passing on some of the losses to suppliers,”����ratings agency Fitch.

Over time, China’s EV industry has more than enough room to grow. Even as it is the world’s biggest market for EVs, sales of those vehicles account for just about 4% of total vehicle sales, MacDuffie noted. Some studies����EVs to command a market share of 50% by 2025.

Growth opportunities await Chinese EV battery makers as well. MacDuffie pointed out that Western makers of EVs have mostly been using either Japanese or Korean batteries. However, as they expand their EV manufacturing in China, they would have to source Chinese batteries as mandated by the government. That scenario would present expansion opportunities for Chinese battery makers, he said. “It will be interesting to see if China becomes a lead market for Volkswagen, GM or any other EV maker [not just] because of the mandates but also because of the size of the [Chinese] market,” he added.

China could also position itself as a compelling location for the manufacture of EV batteries. A cluster of major battery manufacturers is driving economies in the supply chain, Shih said.

Limited Room for Exports

According to MacDuffie, the Chinese government has had a desire for its domestic automakers to be exporting to the world by now. Its policy that required foreign automakers to form joint ventures with domestic Chinese companies was “a way for them to learn from the foreign multinationals,” he said.��

However, Chinese automakers did not extend those capabilities in manufacturing internal combustion vehicles for exports, especially to the US. “The market was growing so quickly in China that it was partly easier to sell into that rapidly growing domestic market than to reach for the high levels of quality and safety that are expected in the US market, for example,” MacDuffie noted.

China’s EV makers are not likely to make inroads into the US market any time soon. That is because safety regulations and other standards vary across countries, Shih pointed out. BYD already has a facility in Los Angeles County in California, where it manufactures electric buses, fork lifts and trucks, and has been periodically����its capacity there.

“The question is: Will their cars make it into the US market?” said Shih. He didn’t see any immediate openings for that, noting that EV imports from China into the US have been few thus far. “They haven’t been very successful in the US,” he said. Meanwhile, he saw opportunities for Chinese EV makers in many emerging markets, and added: “It’s only a question of time before they are in the US.”

“I don’t think the Chinese makers will try this market until there is equilibrium in trade relations [between the US and China],” said Meyer. “It’s a little while … before conditions are ripe for BYD and others to enter the US.”

China hopes that the transition from internal combustion engines to EVs will present an opportunity for its manufacturers to become global leaders in that space, said Shih. “They [won’t be] burdened with any of the infrastructure or the existing ways of working associated with making internal combustion engines,” he explained. “If you start with a clean sheet you don’t have anything to protect.”

Chinese automakers are, however, growing their exports of internal combustion vehicles in Latin America and Africa, replacing those from the US and Japan, said Shih. “Over time, they will develop that sales, service and support infrastructure and that will set them up well for electric vehicles.”

*[This article was originally published by , a partner institution of 51�Թ�.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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When it comes to the fight against climate change, the conversation has focused nearly exclusively on how to bring down levels of one element — carbon.��But what role will the metals and the mining industry play in the drive to realize a low-carbon future? As it turns out, one larger than we might think.

At the end of November, 10 leading auto and truck manufacturers including Toyota, Honda and Volkswagen, announced a in sourcing raw metals and minerals for electric vehicle (EV) production.

In the coming years, the electric car market is expected to surge as regulators enact strict emissions limits and incentivize EV production. Already, risen 63% in the third quarter from last year, with China accounting for half of the purchases. This has helped propel skyrocketing for the raw materials that manufacturers use, such as copper, aluminium and cobalt.��

Not just any kind of raw materials, however. At a time when many metal and mineral suppliers, especially in ,��have been exposed for their poor environmental and human rights records in recent months, automakers and other firms are paying increasing attention to their supply chains and driving surging demand for low-carbon, sustainably sourced metals and minerals. Already, the market is paying higher prices for these materials, signalling the creation of a two-tiered market with higher prices for “green” metals and traceable minerals. For those in China, and many other developing countries choking under the smog-filled skies caused by irresponsible producers, this shift can only be a good thing.

In a sign of what’s to come, major suppliers have already begun to respond to the shift in demand by modifying their offerings and pricing systems. At the Asia Copper Conference in Shanghai in late November, announced a new scheme under which customers would pay varying prices for copper depending on the environmental or community impact of the production process. The initiative, which has the tentative name “feng shui copper” in Chinese, parallels similar moves taken by palm oil producers to improve the transparency and sustainability of their supply chains.

In the aluminium industry, too, major producers have also announced new offerings, often sold at a premium. Last month, launched a low-carbon certification program and a new brand known as .��Thanks in part to the fact that Rusal powers 90% of its smelters on hydropower, ALLOW’s carbon footprint, at less than 4t CO2/t Al, is roughly one-third the world average at approximately 12t CO2/t Al. According to a Rusal spokesperson, although ALLOW does not have a set premium, some customers are open to paying up to $50/ton more for these types of certified “green” metals.

More recently, also announced two low-carbon metals which will be sold at higher prices, one with a maximum of 4kg of CO2/kg and the other with 75% minimum recycled content, anticipating that customers will be open to paying a price to help combat climate change.

These industry-driven moves mirror government-led initiatives in China to crack down on domestic aluminium production, which runs on coal-fired electricity, in a bid to reduce smog levels. This year, Beijing demanded that smelters in 28 northern cities reduce output by at least 30% during the winter heating season, when smog is usually at its worst. The anti-pollution drive, by a state that accounts for half of all aluminium output, helped aluminium prices to a five-year high this autumn, offering a boost to foreign producers who already rely on renewables to power the energy-intensive smelting process.

Similarly with rising demand for low-carbon metals — even at a higher price point — there are growing calls for ethically sourced rare minerals, as human rights organizations, regulators and consumers become more aware of the human cost of mining for lithium, nickel and other raw materials used in rechargeable batteries. According to market analysts, miners that respond to these demands can benefit from a higher price point in exchange.

Most well known are the numerous human rights abuses that riddle the supply chains for cobalt, a key ingredient in EV batteries, more than half of which is sourced from the Democratic Republic of Congo. But there are also major concerns about the used to mine other raw materials, such as lithium, graphite and nickel. For instance, although it might not be as notorious as cobalt, the extraction methods used for nickel — the most important metal by mass in lithium-ion battery cathodes that electric car manufacturers use — is fraught with environmental and other abuses. In the , which accounted for 20% of global production in 2015, the government recently shut down 17 mines over concerns such as the spread of cancerous dust and rivers stained red with hazardous chemicals.

As a result of these issues, ambitious EV manufacturers like Volkswagen have launched initiatives seeking . Already, prices of a high-purity form of nickel used in batteries have been surging, with demand expected to grow tenfold by 2025, to 570,000 tons. Meanwhile, the industry has been seeing new, set up shop as demand for traceable materials grows.

For too long unscrupulous producers in China, the Philippines and other emerging markets have been able to get away with using environmentally harmful, abusive practices to meet ferocious global demand for metals and minerals. As governments crack down on polluting industries, and carmakers step up their commitment to sustainable sourcing and production, global commodities markets are set for a sea change.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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As Barack Obama’s presidency comes to an end, the concern that climate change will take a backseat in the next four years has now become a reality. Throughout his campaign, Donald Trump’s vocal statements��about wanting the United States to pull out of the 2015 Paris Agreement created fear among the global community. Such pronouncements��have also signaled a over the direction that the new administration might take on the issue of climate change.

One such fear is whether��the United States pulls out of its commitments to the Green Climate Fund (GCF) and international development aid. The GCF is one commitment that calls on rich nations to provide money and technology to help developing countries mitigate and adapt to climate change, and is a key component of the Paris Agreement. Although this move might strike a blow to over a period of four years, there are ways to overcome the funding gap.

Some of these include , which allow for the flow of investment-grade climate-related finance across various countries. And even if the Trump administration does not support such instruments, it is the private sector push that has sustained the green bond market so far and will enable it to be a . However,�� to stay partially engaged in these international discussions will mount as climate change impacts begin to affect��countries that are trading partners or close allies.

These concerns may be real, but such a reversal in policy is almost always easier said than done. On the international front, if the US chooses to back out of the Paris Agreement, the international community would most likely retaliate with a carbon tariff on imports of American-made goods. By doing so, it would only prove expensive to the heaviest industrial polluters, like those producing��good containing steel and cement.

Even though the climate agreement��does not explicitly state any enforcement measures (such as economic sanctions), the global mindset for reducing greenhouse gas (GHG) emissions is so strong that America’s biggest trading partners like Mexico and Canada could introduce��carbon tariffs. As one puts it, forcing US industries to turn to cleaner energy sources under a��threat of an import tariff is not a far-fetched idea.

Private Sector Switch

But it��isn’t just international pressure that makes it hard to slash climate agreements and end progress on environmental protection. The shift to renewables in America is making fast progress on its own. Recently, Google announced that by 2017 all of its operations and offices would be . This landmark moment for the internet giant is signaling a rising trend within��the private sector of switching to low-carbon sustainably produced energy.

Other tech giants such as Apple and Amazon have also started investing heavily��in renewable energy, creating a market push for clean technology. This is great news as tech companies have increasingly been under scrutiny due to their fast growing operations and, in turn, generating a bigger carbon footprint. It is now said that the , even rivaling transport-heavy industries like aviation.

Such advancing changes are not purely because big corporations have suddenly become empathetic to the impacts of climate change. Sustainability itself has become a business case that advocates for better financial opportunity in renewables (), more resiliency from extreme climate events (like and polar vortexes), and��opportunities to grow their own profit margins (such as efforts made by ).

It is not only tech companies that are taking off, but auto giants like General Motors (GM), Toyota and Volkswagen are slowly getting in on the sustainability trend. This race to reduce carbon emissions really took off when companies like Tesla came out with a plan to . By using sleek electric vehicle (EV) models that capture a driver’s imagination using technology such as autopilot driving, Tesla and others are paving the way into the future. Their rising popularity is seen with in 2016 alone.

The market is also getting competitive as companies like GM are coming out with alternative options for the car owner. One such option being the newly released Chevrolet Bolt EV, an electric car that is not only efficient, but can easily enter the mass production market. Such competitive, technologically advanced and fuel-efficient vehicles not only signal a shift from traditional car manufacturing, but also make it harder for any government to curb technology growth that is dependent on clean power.

Ideological Challenge

The biggest challenge that the Trump administration poses, however, is an ideological one. As Catherine Abreu of the Climate Action Network Canada told me in an interview: “There will always be sub-national action to keep momentum alive for the climate agenda, but it is the moral impact of decisions taken by the new administration that will deal the biggest blow to the climate community.”

However, in such uncertain times, it is optimistic to know that strong market forces are fueling the , and in turn making companies abandon��coal. It is against��Trump’s anti-globalization rhetoric that different communities will continue to work together and rally around the mission of tackling climate change.

Environmentalists have always felt the urgent need to address climate change, but with changing political systems, this momentum and morale��will need greater protection than ever before. Whether or not Donald Trump believes that climate change exists, the rest of the world knows it does and is willing to work toward combating��it—with or without the United States’ support.

In the gloomy times ahead, we must remember that happiness can be found even in the darkest of times, if only one remembers to turn on the light—powered by renewable energy, of course.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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