Trump’s tariffs may have ended his ambition to ‘Drill, baby, drill’

Import taxes were meant to light a fire under manufacturing – but, says Chris Wright, an unintended casualty may be America’s energy security

Donald Trump’s sweeping new tariffs have shaken global markets, wiping $6 trillion from stock exchanges worldwide and fuelling fears of a recession. But one sector has taken the sharpest blow: fossil fuels.

Oil and gas stocks have tumbled, with giants like ExxonMobil, Chevron, Shell, BP and Woodside all posting double-digit losses. Oil prices have plunged to a three-year low. Coal firms like Peabody and Glencore have seen their prices fall nearly 20 per cent.

This wasn’t just a knee-jerk reaction. Markets are signalling a slowdown in demand – and perhaps a new phase in the global energy transition.

Trump ran on a platform of “Drill, baby, drill”, promising to ramp up American fossil fuel production, while his tariffs were pitched as a boost to US industry. But investors now see the opposite: a squeeze on oil demand and tighter conditions for energy growth.

Not only do analysts sense that Americans might buy fewer cars and burn less oil, but China’s retaliatory tariffs could accelerate the country’s already remarkable drop in oil consumption, driven by its shift to Chinese-made electric vehicles.

Yet the real collateral damage could be the cost of clean energy for Americans and a reshaping of access to solar, electric vehicles (EVs) and batteries around the world.

Chinese exports – already subject to a 20 per cent tariff – now face an additional 34 per cent, bringing the total to over 54 per cent. But since Trump first imposed tariffs on Chinese solar panels and EVs in 2018, they have played a relatively small role in the US clean energy market.

Vietnam and Malaysia, now the two largest sources of solar panels for the US, are also hit with new tariffs – 46 per cent and 24 per cent, respectively. Tariffs on Taiwanese chips and Chinese shipping only compound the problem.

For American consumers, this could mean higher costs for rooftop solar panels and EV batteries. For global markets, it could mean a short-term oversupply – and an opportunity. Countries like Pakistan, Turkey and Australia could benefit from cheaper clean energy imports as US demand drops.

At a bigger scale, we could be looking at the beginning of a two-tiered energy transformation going forward, with Americans stuck in a bubble of gas-guzzling pick-up trucks and oil expansionism, while much of the rest of the world competes to collect up clean energy opportunities, investments and expertise.

However, Trump's tariffs are just the first wave of an economic tempest. The next wave will see reciprocal tariffs and new economic partnerships forced into existence.

China has already issued matching 34 per cent tariffs on US products, and President Xi is set to meet with Vietnamese and Malaysian leaders later this month.

While it’s too early to tell how this will all play out and the ultimate fallout on the world’s energy transition or economic stability – it’s clear that some of the biggest early losers were, ironically, some of Trump’s biggest campaign boosters.

But the early indicators suggest the US has already written itself off from accessing the world's cheapest clean energy opportunities for the near future, creating opportunities that other countries may be able to capitalise on.

The impact goes beyond solar and EVs.

Trump’s tariffs have also hit key components for nuclear power, another technology the US president has championed, especially small modular reactors (SMRs). SMRs already faced major cost increases, and many rely on imported parts and engineering expertise from Japan, France, and South Korea – all now hit with additional tariffs.

America’s new trade barriers now affect nearly all of its major economic partners – except Russia. Countries across Europe, Asia, Africa and the Pacific have been caught in the crossfire. Some of the highest tariffs were placed on nations like Cambodia, Laos, Fiji and Madagascar – some of the world’s most climate-vulnerable.

All in all, Trump has now imposed the highest trade barriers in more than a century, according to Rabobank’s Michael Every, with undeniable impacts on global trade, economic growth and greenhouse gas emissions.

These aren’t just economic decisions. They’re political statements – and they undermine years of global climate diplomacy and development support.

China was clearly the main target, and you wouldn’t be alone in wondering if these tariff increases will have an impact on the global rollout of renewable energy. China boasts close to an 80 per cent share of the world’s solar panel supply chain and, as of February, the country hosts more than 42 per cent of the world’s renewable energy capacity.

But Trump has been clamping down on those exports for years. His tariffs on Chinese solar components and electric vehicles in his first term effectively blocked companies like Chinese carmaker BYD from the US market, while Tesla has enjoyed an almost monopoly share of the US electric vehicle space.

That context is critical for understanding how global markets responded to Trump’s additional 25 per cent global tariff on all imported cars, light-duty trucks and spare parts. As the world’s second-biggest car market and biggest oil consumer, these auto-trade barriers could be among the biggest climate impacts.

In response, key car industry players such as Volkswagen, BYD, Tesla and Toyota have seen heavy stock price losses, but brands such as Volvo and Stellantis were among the worst performers, shaving close to 18 per cent off their stock price.

US car companies such as Ford and General Motors have avoided similarly stark losses, but as prime minister Keir Starmer noted, “Nobody wins in a trade war.”

The reality is that more than half of all vehicles sold in the US are built by foreign companies such as Toyota, BMW or Hyundai. And 44 per cent of them are assembled in the US from a mix of foreign and domestic parts, with a significant chunk of manufacturing in Canada and Mexico.

Analysts at Cox Automotive estimate that Trump’s 25 per cent tariffs on all imported cars could drive up foreign-manufactured car prices by more than $6,000 (£4,681) per vehicle. The result? Less car buying, slower industrial growth – and, potentially, a steep drop in oil demand.

For fossil fuel giants, the outlook suddenly looks a lot dimmer. But for the world’s most climate-vulnerable nations, already reeling from reductions in USAID and broken promises of climate support, the fallout could be even worse. The US is cutting itself off from the world’s cheapest clean energy supply chains, pricing out its own consumers and risking long-term competitiveness.

For other countries, this is a strategic moment. If they act quickly, they may be able to snap up surplus solar, strike new trade deals and invest where the US is retreating.

But for America – and the planet – Trump’s trade war may prove a costly and dangerous misstep.