US risks igniting inflation if carbon tariffs hit China

Chinese steel and aluminium exports are again under attack as the U.S. and European Union consider imposing new restrictive tariffs on carbon dioxide emissions.

The decision put forward by President Joe Biden's administration is likely to have the biggest impact on the aluminium market. It will particularly affect the EU, which has relied on Chinese steel mills to fill production gaps due to anti-Russian sanctions. This reliance underscores the importance of inflation risks, as all of these factors could lead to a reduction in supply or an increase in costs, depending on climate targets.

In an interview for Bloomberg TV, Paul Gambles, co-founder and managing partner of the MBMG Group, stated that Biden could deliberately fuel inflation, thereby damaging all global trade later and, among other things, only aggravating Sino-US diplomatic and economic relations.

The EU is already considering imposing a carbon tax on imports. Steel and aluminium could be added to the list of materials to be taxed. For these exported metals, China is the largest producer. Thus, the country exports its surplus production. The steel industry is the second-largest source of emissions in China after electricity production. Combined with aluminium, it accounts for about one-fifth of national carbon emissions.