Cold War on a Warming World

Introduction

The global transition to clean energy is caught in the middle of intensifying geopolitical conflict between the US and China. The world increasingly relies on China’s stunning advances in essential clean energy industries, but these advances — and China’s rise in economic power — have produced a dangerous reaction among US elites. In Washington, China’s rise has been interpreted as an intolerable challenge to US primacy and a fundamental threat to US national security, leading to a new era of great power rivalry. The current Trump administration’s approach to US-China rivalry has included efforts to form an economic bloc that excludes China, intensifying militarism, and an assault on clean energy at home and abroad. These tendencies within the Trump administration threaten the ability of other countries to work with China’s clean energy industries, and risk a turn towards militarism in the Chinese economy, with devastating consequences for both global stability and global decarbonisation.

China and the Global Green Economy

China’s rapid rise across a range of clean energy industries has helped transform its geopolitical position — and also transformed the fight against climate change. China now leads the world in wind, solar, batteries and electric vehicles (EVs), as well as in power transmission equipment, grid-level energy storage and ultra-high-voltage grid projects, which are essential to renewables-based electrification. ¹ Chinese firms also dominate the supply chains for so-called “critical minerals” (such as lithium, nickel, graphite and cobalt) that are essential to clean energy industries, as well as other manufacturing sectors. The rapid growth in clean energy production within China now outstrips growth in energy demand, putting China’s CO2 emissions on a downward trend since early last year.

China’s clean energy industries are also expanding globally and driving the energy transition in other countries. Rival companies in other countries have found it increasingly difficult to compete in global markets. High levels of investment and intense competition within China’s domestic clean energy industries have drastically lowered costs and increased exports. China’s solar industry has lowered costs to the point that in Europe imported solar panels are being used to build garden fences.

Chinese investment in green manufacturing overseas is also on the rise, allowing China’s clean energy firms to improve their access to profitable foreign markets. In some cases, this is in reaction to protectionist policies from other countries that feel overwhelmed by a glut of cheap Chinese imports. For example, Chinese solar firms have invested in manufacturing in “connector” countries in Southeast Asia to circumvent US tariffs on solar exports, while Chinese EV and battery firms have invested in Morocco and Turkey to more easily supply European markets.

China’s clean energy development has helped drive decarbonisation overseas: in 2024 clean energy exports from China amounted to 220 million tonnes of avoided CO2 emissions in countries outside of China, or a 1 per cent reduction in the rest of the world’s emissions. Investment in overseas manufacturing contributes another 90 million tonnes in avoided emissions, while a third factor, the financing and construction of overseas clean energy projects by Chinese firms, contributed a further 40 million tonnes.

Clean energy has grown to over 10 per cent of China’s economy and its growth has become central to China’s economic model. To secure a steady supply of natural resources for these industries, Chinese firms have met the demands of countries pursuing resource nationalism as a strategy for green industrial policy and economic development. For Global South countries with large reserves of clean energy critical minerals, resource nationalism means leveraging their resources to move “up the value chain” into refining and ideally clean energy manufacturing. These countries have imposed restrictions or outright bans on the export of unprocessed resources, requiring foreign companies to invest in processing facilities in exchange for access to mineral resources. Meeting their demands does not directly decrease CO2 emissions but is increasingly important for the global energy transition. Chinese mining and battery companies have been among the first to meet these demands.

This is of course not to say that all climate news from China is good. The growth of China’s clean energy industries has come at the expense of labour and human rights and forms of local environmental damage, both domestically and internationally. China remains the world’s top source of new carbon emissions and is off track on several climate targets. The growth of China’s clean energy industries both domestically and internationally is not sufficient to put us on a path to a climate safe future. Nonetheless, the greatest risk to the climate derives from the response of Washington’s foreign policy elites to China’s economic development.

Clean Energy and the Rise of US-China Conflict

In 2018, the first Trump administration announced that US foreign policy would be reoriented away from the “War on Terror” and towards “inter-state strategic competition,” particularly with China. Trump also launched his first trade war with China that same year. This turned into what Bernie Sanders labelled a new Washington consensus “that views the US-Chinese relationship as a zero-sum economic and military struggle.” This consensus transcended partisan divides, encompassing the vast majority of Democratic and Republican policymakers. The anti-China consensus, driven by structural transformation in the global economy and US elites’ commitment to global primacy, is generating escalating risks to the global energy transition.

The conditions that made the reorientation of US foreign policy possible in 2018 had been developing for years at a structural level. The 2008 global financial crisis led to a rupture in the symbiotic relationship between the US and China that was founded in the era of neoliberal globalisation beginning in the 1990s. The 2008 crisis was followed by long-term stagnation, encouraging zero-sum competition between countries, each seeking a larger slice of a shrinking pie of global growth. During that period, China’s powerful economic stimulus, combined with ambitious forms of industrial policy, transformed its position in the international division of labour. Whereas manufacturing in China had occupied a subordinate role in supply chains controlled by multinational corporations based in the US and other Global North countries, Chinese firms started threatening the leadership positions of Western firms. Under these conditions, Trump’s actions in 2018 acted as a seed crystal in a supersaturated solution, and the new consensus formed.

US elites came to fear that China threatened dominance over future growth in two respects. First, the centre of gravity for global growth had moved from the North Atlantic to Asia, where China has the advantage of proximity. Second, China had become increasingly competitive in the most advanced sectors of the economy. At the top of this list are “high tech” sectors such as semiconductors, AI and quantum computing, but concern over the lead that China has established in clean energy technology also played a role.

The anti-China consensus combines this logic of economic competition with the logic of national security. US policymakers began to see economic ties with China and the presence of Chinese capital as threats to US national security, defined as primacy. China’s economic development could translate into future military superiority, leverage over industrial supply chains, IT-based espionage or sabotage and the “weaponisation” of ownership of strategic industries in the US.

Other political considerations were incorporated into the consensus. Both liberals and conservatives hoped that a reorganisation of US politics around the supposed threat of China would restore a sense of national unity and overcome the worrying increase in political polarisation. Leaders in both parties sought to invoke anti-China economic nationalism to compete for strategically important voting blocs in Rust Belt swing states.

The anti-China consensus yielded efforts to “decouple” or “derisk” the US economy from ties to China. Policy tools have included tariffs on imports from China and other restrictions on trade and investment. Solar panels were among the first targets of Trump’s initial tariffs against China, later augmented under Biden. Biden also imposed a daunting 100 per cent tariff on EV imports from China in 2024 on the grounds that the Chinese government could use such vehicles for espionage and sabotage.

There have also been efforts to extend these policies to other countries. In 2024, a group of twenty Democratic Party members of the US Congress wrote a letter to then Mexican President-elect Claudia Sheinbaum warning that the rapidly growing presence of Chinese EVs in Mexico posed a national security threat to both Mexico and the US. In Washington, it was rumoured that the US would require the exclusion of Chinese EVs in the renegotiation of the US-Mexico-Canada trade agreement in 2026. Under Trump 2.0, the US is applying coercive pressure on other countries to raise their own tariffs against China.

Democrats and Republicans alike have wielded anti-China protectionist and national security arguments as justifications for their energy policies. Democrats under Biden used anti-China politics to argue for the clean energy policies of the Inflation Reduction Act (IRA) and hoped to integrate other countries into the supply chains and markets of US clean energy industries. The current Trump administration, meanwhile, rejects the energy transition and in effect turns US-China rivalry into a competition between fossil fuels and clean energy. The Trump White House has invoked anti-China arguments to attack the clean energy agenda of the IRA on the grounds that it “threatens national security by making the United States dependent on supply chains controlled by foreign adversaries.” It is, however, unclear to what extent geopolitical rivalry is a motivating factor and to what extent it is a mere pretext. Other motivations, possibly more powerful, include the role that the fossil fuel industry plays within Trump’s political coalition, or even Trump’s personal hatred for the aesthetics of wind farms.

Trump 2.0 also seeks to force other countries to continue their reliance on fossil fuels. He has used tariffs as leverage to attack global climate regulations and to coerce other countries into committing to increased purchases of liquid natural gas (LNG) from the US and investment in LNG projects in the US. This risks worsening another trend within the Trump administration: a trend towards bloc formation.

Trump 2.0 and Bloc Formation

During the tumultuous week after Trump announced his “Liberation Day” tariffs, Oren Cass, founder of the right-wing think tank American Compass and a contributor to the influential policy platform Project 2025, outlined the new world order which he hoped Trump’s trade wars would create. In Cass’s vision, Trump would use high tariffs on China to cut off all US-China economic ties. Tariffs would also be used to coerce as many other countries as possible to adopt the same anti-China policies while US security commitments would be restructured along the same lines. The result: “a US-led bloc that excludes China.” Such a turn to bloc formation would constitute a major escalation in US-China rivalry and a significant new risk to global decarbonisation, cutting other countries off from accessing both exports and investment from China’s leading clean energy industries.

This vision of bloc formation is of course Cass’s, not Trump’s. Indeed, Trump apparently lacks any minimally coherent or consistent vision of what he hopes to achieve with his new trade wars. At the same time, Cass has several influential allies within the Trump administration. Treasury Secretary Scott Bessent attempted to get Trump to adopt this strategy in early April. Stephen Miran, chair of the Council of Economic Advisors and now member of the Federal Reserve Board of Governors, has likewise recommended a new trading system to “create a global tariff wall around China.” Vice President JD Vance and Secretary of State Marco Rubio (also serving as National Security Advisor) are established allies of Cass. As Chinese capital outcompetes US capital in global markets, the elite interest in bloc formation appears stronger. This is a trend that Trump’s trade wars have only accelerated.

Some aspects of Trump’s trade wars have been consistent with the bloc formation playbook. Regarding the US-China bilateral relationship, Trump has at times seemed willing to destroy it entirely. “Liberation Day” triggered a rapid escalatory spiral between the US and China that led the two countries to impose tariffs of over 100 per cent on one another, approximating a mutual trade embargo. This lasted throughout most of April 2025 until mid-May, when the two countries agreed to a partial truce that remains in place at the time of writing.

At other times, both before and after the April–May escalatory spiral, Trump has seemed interested in a “grand bargain” with China. This could include an offer of partial tariff relief while demanding that China commit to measures intended to reduce the trade deficit and boost US manufacturing. Trump has offered tariff relief on similar terms to Japan, South Korea and the EU. Ironically, Trump’s willingness to consider applying this approach to China demonstrates a sharp break from the trend towards “decoupling” or “derisking” that he helped create in his first term. The prospects of such a deal with China are uncertain at best, and Bessent has publicly rejected the idea of decreasing tariffs on China in exchange for increased Chinese investment in the US.

Pressure on other countries to adopt anti-China economic policies has been a recurring though uneven feature of Trump’s trade wars. In May, the UK agreed to “strict security requirements for Britain’s steel and pharmaceuticals industries” in exchange for tariff relief; China objected that this would be used to block the use of Chinese inputs in UK supply chains. More recently, Mexico has confirmed plans to impose tariffs of up to 50 per cent on imports from countries it has no free trade agreement with, the most important of which is China; this includes 50 per cent tariffs on imported cars, which will slow Mexico’s transition to EVs. As early as February, Bessent had suggested that Mexico could achieve tariff relief by matching the tariffs imposed by the US against China.

Additional pressure came from a new crackdown on so-called “transshipment.” In July, Vietnam agreed to a deal with Trump that included “a clause threatening a 40 per cent rate on goods ‘transshipped’ — or rerouted — through Vietnam.” US negotiators use the term “transshipment” broadly to apply to goods made in Vietnam using Chinese inputs at levels exceeding some as-yet undefined standard. This approach was then extended beyond Vietnam, as Trump issued an executive order that any imports from any country found to be “transshipped” would face a penalty of an additional 40 per cent tariff. China again was the main target, and “transshipment” remained poorly defined.

While some countries, such as Mexico and Italy, have yielded to Trump’s pressure, these measures are not enough to decouple their economies from China. Many other countries, meanwhile, are reacting to Trump’s trade wars by improving economic ties with China, most notably India. Trump 2.0 has made some efforts to pursue bloc formation, but the results remain uneven. In any case no coherent bloc formation strategy is possible while Trump continues his interest in a “grand bargain” with China.

It is difficult to predict how this might unfold over the remainder of the current Presidential term. As of the time of writing, both Trump and Xi seem hopeful that they can strike a deal with one another. But, however coherent the strategy, any country that Trump pulls into an anti-China bloc will lose access to Chinese clean energy industries, whether through clean energy imports, investment in clean energy manufacturing or clean energy projects. They would also be subject to pressure to integrate into US-led fossil fuel markets. The US pursuit of bloc formation, to the extent that it is successful, would create a bloc of countries in which the clean energy transition is impeded if not halted.

A New Arms Race

To the extent that US leaders commit to the formation of an anti-China bloc, they will also be tempted to militarise the competition between blocs, greatly increasing the risk of escalation to global war. To make this devastating outcome even worse, increased militarisation of the Chinese economy would create additional threats to China’s clean energy industries and thus global decarbonisation.

Using US tariffs or other forms of economic pressure to coerce other countries into decoupling from China is unlikely to ever yield the desired results. China has formed strong economic ties with countries around the world through supply chains, foreign investment and infrastructure development. In most cases, countries have exceptionally strong economic incentives to attempt to avoid picking sides or are more likely to side with China over the US if faced with a true ultimatum. Only in a small number of cases, in which countries are much more economically reliant on the US than on China, is economic coercion likely to successfully force countries into a closed US-led bloc.

Escalation to military coercion, where the US maintains a commanding competitive advantage over China in most of the world, is a possible solution to this problem. This has already been explored under Trump 2.0. Soon after his re-election in 2024, Trump embraced a renewed vision of the Monroe Doctrine, claiming the Western Hemisphere as a core sphere of influence for the US. This included demands for the annexation of Greenland, Canada and the Panama Canal as US territory; in the cases of Greenland and the Panama Canal this was in part a response to potential or actual investment from China in sectors seen as strategically sensitive and included threats of military force.

In August 2025, the US deployed warships carrying 4000 sailors and marines to the Caribbean to threaten Venezuela and conducted an airstrike on boats, which the White House claimed (apparently without evidence) had been smuggling drugs. These airstrikes have since been repeated in the Caribbean and Pacific. Secretary of State Rubio is reportedly responsible for leading this effort, and has a broader agenda of renewed military intervention in Latin America including regime change in Venezuela and Nicaragua. According to a State Department spokesperson, Rubio’s vision for Latin America includes “pushing out China’s exploitative practices.” This is consistent with Cass’s vision of bloc formation, albeit augmented with more openly violent tools. China has stronger trade relationships than the US with much of Latin America, including most South American countries and (notably) Panama, but cannot compete with US military power or its ability to foment coups in the region.

If the US turns to military force to form a closed anti-China bloc, China’s leaders will find it increasingly necessary to mobilise China’s own military power to protect China’s access to foreign markets and its investments. Bloc formation transforms international competition over growth, a persistent feature of every form of global capitalism, into competition over territory and the labour, natural resources and markets contained within countries. This is ultimately resolved through military power and brinksmanship. If the US begins to play this game, China must eventually play it as well. This would necessitate an arms race.

If the projection of military force becomes necessary to secure access to foreign markets and protect overseas investments, then that would require China’s leaders to militarise the Chinese economy. As US military strategists have noted, there is a great deal of room to mobilise China’s immense manufacturing capacity for military purposes, which would create an arsenal that would grow at a terrifying rate. EVs and batteries can be repurposed for military applications in obvious ways and overlap with other readily militarised sectors like drones and robotics in terms of supply chains, technology and manufacturing know-how. At a certain point in escalation, militarisation would mean cannibalising productive capacities and inputs now devoted to clean tech manufacturing. Even if new Chinese armaments used more clean energy than their US counterparts, their development would come at a cost to global decarbonisation.

As in other cases, China’s leaders may be tempted to make an economic virtue out of supposed military necessity. Around the world, interest is growing in military Keynesianism despite the severe limitations of military contracts compared to other modes of public investment. Increased military spending can appear superficially as a welcome source of economic stimulus, and one that would be consistent with China’s existing pattern of investment-led growth. In Germany, an emerging turn toward increased military production is already being touted as a solution to overcapacity in the auto industry. Industrial overcapacity is also a notorious issue in Chinese manufacturing, which China’s leaders are struggling to deal with. If they were to attempt a similar solution to the one suggested in the German case, the consequences for the world would be catastrophic.

Global imbalances triggering bloc formation, leading to an arms race, culminating in war — this is a path that previously led us to world war. ² We unfortunately risk traveling a similar path today. In the current conjuncture, even if bloc formation does not escalate to the point of war, it could still ruin our best remaining chance of defeating the climate crisis. We must grasp the structural contradictions that underlie these dangerous trends and seek to overcome them.