Trump More Likely Than Harris to Fight EU’s Carbon Border Tax, Ex-US Official Says

Trump could respond by launching a Section 301 investigation and using other tools on the grounds that the EU’s carbon border adjustment mechanism (CBAM) is an unfair way to treat trade with the U.S., said Daniel Bahar, managing director at Rock Creek Global Advisors and former assistant U.S. trade representative for services and investment.

“Greater skepticism on the climate issues in the context of a future Trump administration I think would contribute to a pretty free hand to kind of fight that on the trade side,” Bahar said during an American-German Institute event Oct. 17. Harris, in contrast, might be more sympathetic to the EU initiative because she has made addressing climate change a priority.

Penny Naas, lead for the German Marshall Fund’s Allied Competitiveness Initiative, said the EU still has time to revise CBAM to ease the concerns of its trading partners. The EU also still has an opportunity to pursue “joint work” with the U.S. on carbon border taxes “regardless of who wins in the White House, depending on how the Europeans approach it and approach the administration.”

Although the EU intends to start implementing CBAM in 2026, Jacob Kirkegaard, senior fellow at Bruegel and nonresident senior fellow with the Peterson Institute for International Economics, said the EU might be open to delaying implementation if the U.S. continues providing military equipment to Ukraine. But if the war ends or Trump tries to impose what the EU considers a “pro-Russian peace settlement, I think the political willingness to postpone or finesse CBAM in a transatlantic context will be zero.”

Turning to another key issue in U.S.-EU trade relations, Bahar said he would be surprised if Trump withdrew from the World Trade Organization despite the former president's criticism of the WTO. As president, Trump showed he was willing to work with other countries in limited ways at the WTO, such as on e-commerce. Trump wanted to show “we don’t oppose everything about this institution, we oppose certain specific things that we’re trying to change,” Bahar explained.

Naas said withdrawing from the WTO would be complicated and disruptive, creating a “global Brexit situation” that would require renegotiating trading relationships with Europe, China and others. Such a major move would divert significant attention from other economic efforts, she cautioned.

Even if a reelected Trump doesn't withdraw from the WTO, the organization could be damaged if the U.S. adopts congressional Republican proposals to end permanent normal trade relations (PNTR) for Chinese imports (see 2409260065 and 2403040041), said Laura von Daniels, head of the Americas Research Division at the German Institute for International and Security Affairs. Taking away China's PNTR status, which countries receive when they join the WTO, could have "very long-lasting negative consequences," she said.

CBAM and the WTO aren't the only matters that could affect U.S.-EU trade ties in the coming years. No matter the outcome of the Nov. 5 presidential and congressional elections, the U.S. is expected to continue running large trade deficits with the EU, which will remain a source of tension in the trans-Atlantic relationship, Kirkegaard said. "I'm actually afraid it's going to get worse" if the dollar strengthens due to interest rate cuts by the European Central Bank, he added.