A recent webinar I held, invited by financial services firm Jefferies, centered around the subject matter of tariffs and the burgeoning wave of trade protectionism. The audience, primarily composed of individuals invested in sustainability, expressed a notable interest in understanding how regulatory tools like tariffs influence our capacity to mitigate the effects of climate change. This is particularly relevant now, considering the international trade landscape has been undergoing unprecedented upheavals recently. Mandates for tariffs were introduced by the US on an array of countries only to be withdrawn or stalled within weeks.
The ripple effect of this tariff turbulence is notably felt in strategies devising ways to deal with a progressively warming planet. Our endeavors to ‘adapt’ to changing climate conditions, a terminology employed by climatologists to articulate the actions taken to lessen our vulnerability to climate risks by modifying existing systems, is being noticeably impacted. This is where the idea of ‘climate-resilient development’ enters the conversation, an approach that amalgamates adaptation protocols with empowering environments through solid governance, funding, knowledge enhancement, and strategic decision making.
This notion of climate-resilient development and adaptation forms the cornerstone of our defense mechanisms against an increasingly warming global environment. According to projections by the Intergovernmental Panel on Climate Change, there is a direct correlation between a surge in protectionist tendencies and emissions, the latter being thrice as much in the former scenario compared to circumstances that place sustainability at the helm. This significant increase in emissions is largely due to the deceleration in the required transformations, which a protectionist approach tends to bring about, to confront impending climate disasters.
The funds allocated for adaptation are already falling short, with a financial deficit projected to be between $215 and $387 billion by the year 2030. This estimate originates from The UN Adaptation Gap Report, established based on the information provided by countries about their national adaptation plans and the predicted costs of adaptation. Industries such as agriculture, water, and infrastructure carry the heaviest financial load. In terms of geographical distribution, low-income countries are particularly susceptible, although developing countries on the whole face a larger gap in adaptation financing.
The rise in tariffs could exacerbate the situation, potentially reducing the funding available for adaptation in critical sectors and regions. Despite the harsh realities of climate change becoming more palpable, only a third of corporations have made their strategies public to mitigate and manage the physical effects of climate change. The costs involved in these strategies are often contingent on physical climate perils such as intense heatwaves, water scarcity, and drought. To handle the escalating costs of such climate hazards, investments in climate adaptation need to be boosted.
However, rising trade tensions and retaliatory tariffs mean companies frequently prioritize maintaining consistent margins over long term environmental strategies. These measures can distract from the inherent fragilities within our systems. This situation is particularly stark within the soy markets. With the trade instability involving the US, Brazil’s share of soybeans provided to China has expanded over time.
Global soybean imports are primarily driven by China, accounting for around 62%. The US has traditionally been a major supplier to the Chinese soy market, but with the ongoing uncertainties around retaliatory tariffs, that status is shifting. Back in 2000, China’s soybean market was divided between Brazil with a 20% share and the US with about 50%. The recent figures paint a different story with Brazil accounting for an overwhelming 71% of China’s soy imports while US contributions have diminished to 21%.
This trading realignment due to tariff regulations strongly influences the paths taken by soft commodity supply chains. Further to this, the newly charted paths are causing environmental harm. The FAIRR Initiative’s Coller FAIRR Protein Producer Index reveals that Chinese corporates are far from transparent when it comes to deforestation; 75% of the Chinese firms on the Index do not have a dedicated target to prevent deforestation from soy production.
Deforestation not only intensifies the carbon emissions by releasing the carbon locked within trees into the atmosphere, it also creates hurdles for the local communities to cope with escalating temperatures by promoting drought conditions. For instance, severe drought conditions are becoming increasingly common in the Amazon, with an eye-watering 69% of municipalities reporting drought rates surpassing those of 2023.
Tariffs detract from the transformative actions needed to mitigate the impacts of climate change. It’s imperative for those in positions of power, in both the private and public sectors, to keep their focus unwavered on the long term alterations required to adapt to our warming planet and not to be distracted by the incidental commotion caused by tariffs.