Can green business survive a trade war? Ella Blake, BSc Business Studies student at Trinity Business School, Trinity College Dublin, exposes the dirty truth: tariffs make solar panels pricier and supply chains dirtier. Yet hidden in the chaos lies hope – local production booms, circular economies rise. The real battle isn’t trade vs. sustainability – it’s rewriting the rules so both can win.

Trade Wars vs. Sustainability – Only One Can Win by Ella Blake.

‘Trade wars have cost the global economy an estimated $1.4 trillion in lost trade since 2018, but the environmental cost is even higher—supply chain disruptions and rising tariffs have slowed the adoption of green energy, with solar panel costs increasing by up to 30% in some regions.’ (World Bank & International Energy Agency). Trade wars involve economic conflict between countries where governments impose trade restrictions such as tariffs and quotas to compensate perceived unfair trade practices. The objective is often to protect domestic industries, reduce trade imbalances, or pressure another country into changing its policies.

It is important to note the speed at which trade wars can escalate, leading to higher costs, supply chain disruptions and slower economic growth. This hinders sustainable business efforts because it makes the trading environment unpredictable, discourages long-term investment and increases operational uncertainty, especially for global companies. A crucial question that must be addressed is whether sustainability can survive trade conflicts, or if it is an inevitable loser? This question can be addressed through analysis of the impact of trade wars on green business practices.

Increased Costs for Sustainable Materials

The cost of sustainable materials for businesses is raised by tariffs. Eco-friendly components such as recycled aluminium, organic cotton, and sustainable timber, all suffer the burden of tariffs. For example, the USA–China trade tariffs on renewable energy increased the price of solar panels significantly, with costs in the USA rising by up to 30% (Reuters, 2024). Tariffs also drive up the prices of finished products like electric vehicles and energy-efficient appliances that are manufactured sustainably.

Developing countries that produce eco-friendly goods often unjustly bear the burden of trade wars. Their market share is reduced by tariffs, discouraging ethical production practices. I propose that governments should exempt sustainable industries from trade restrictions, such as fair-trade agriculture and sustainable fisheries. This would ease the financial burden many companies face when sourcing eco-friendly materials. International agreements on protecting sustainable trade could encourage global alignment on sustainability.

Disruptions in Green Supply Chains

Companies are often forced to change to less sustainable suppliers due to trade wars. This is because they tend to be lower-cost alternatives, attractive to companies facing high trade restrictions. These suppliers use poor labour practices, and usually don’t meet the same environmental or ethical standards as higher-cost suppliers. These transitions may increase short-term gains and reduce operating costs, but in the long run, they increase companies’ carbon footprints and set them back on their mission of achieving corporate sustainability goals. For example, in the USA-China trade war (2018-2020) various American tech companies switched from Chinese suppliers to Vietnamese, Indian and Indonesian ones, undermining long-term ESG strategies (Wall Street Journal, 2023).

This attempt to avoid costly tariffs and other trade restrictions may have made these companies more competitive in the market, but it left more sustainable and ethical Chinese suppliers with fewer buyers. Businesses should diversify supply chains to gain the ability to choose partners based on ESG performance and not just cost. For example, fashion companies are sourcing cotton from multiple continents instead of just one, to avoid being overly dependent on a single supplier, increasing the resilience and sustainability of their supply chains.

Reduced Investment in Green Innovation

Businesses often have strict research and development budgets for sustainable technologies. With uncertainty in global markets and higher perceived risk of investment, they can be tempted to allocate less spending to such innovation, for example, businesses in the ICT sector during the USA–China trade war (Zhou et al., 2023).

This can be seen when automotive companies such as Ford and General Motors delayed electric vehicle research due to trade restrictions on key battery materials. Much of the supply of their materials is processed in China, and U.S. policies aimed at reducing reliance on Chinese suppliers, make it difficult for such companies to access materials quickly and sustainably.

Governments should provide incentives such as tax breaks or grants to encourage businesses to invest in green innovation despite trade uncertainty. A shift to more localised R&D and production for these investments could be beneficial.

Is There a Silver Lining?

Trade wars are not entirely destructive, pressure sometimes gives way to sustainability opportunities. Some companies shift to local, sustainable production to avoid tariffs and geopolitical risk. This can reduce emissions of transporting parts from overseas. Some European companies such as Iberdrola (Spain), are investing in local wind turbine and solar panel production instead of overseas imports.

Circular economy models are being increasingly adopted, reducing dependence on imported materials by investing more in recycling, refurbishing, and reusing existing resources. Electronic companies like Apple and Samsung, are investing in e-waste recycling to reduce resource extraction and waste, and to reclaim materials like lithium and cobalt.

In response to trade wars some governments are also pushing green policy and increasing support for domestic eco-friendly tech and industries. This stimulates innovation and job creation in the green sector. This can be seen in the EU Green Deal and Inflation Reduction Act (USA), which both encourage clean tech production at home, even during trade conflicts.

There are opportunities amid the challenges. Businesses and governments can take advantage of trade wars to bolster sustainability efforts. Governments should offer subsidies or tax incentives for businesses investing in sustainability initiatives, while businesses should collaborate on these efforts to offset disruptions caused by trade wars and reduce overall dependency on global supply chains.

Who Wins?

Despite trade wars being aimed at protecting domestic economies, they have major effects on global sustainability efforts. They lead to higher costs, disrupted supply chains and uncertainty, leading businesses to engage less in green innovation and ethical operations. Governments should consider exempting sustainable industries from these high costs.

Disrupted supply chains push businesses towards cheaper, less environmentally friendly suppliers, undermining ESG goals. Diversification measures should be taken to help companies remain resilient and competitive. Investment in green innovation should be supported by government incentives to help maintain momentum.

Trade wars are often damaging, but force businesses into strengthening their foundations by encouraging localised production and circular economy models as well as lowering emissions. Companies that do this  find themselves stronger and more resilient, like planting roots deeper to help with future shocks.

While some companies have adapted more sustainable business processes, these changes alone are not enough to combat the harm trade wars cause to the environment. They tend to be reactive and limited in scale.

To prevent sustainability from being the ultimate loser in trade wars, it is not just businesses and governments that must act. International collaboration among consumers should also be fostered. We can do more than we think. By supporting locally produced sustainable goods, supporting businesses with ethical sourcing, and seeking transparency, we can make a difference. Raising awareness, supporting fair trade, and activism on social platforms for sustainable business practices during trade wars, can help sustainability overcome them.

Click here for a list of references used in this article.

Useful links:

• Link up with Ella Blake on LinkedIn
• Read a related article: Building Walls or Bridges? How trade wars shape our sustainable future 
• Download this and other student articles in the special issue #32 Global Voice magazine.
• Discover Trinity Business School.
• Study at Trinity Business School, Trinity College Dublin.

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