The shipping industry, a backbone of global trade, is facing increasing pressure to decarbonize. Almost 50% of goods traded between the EU and non-EU countries are transported by sea. Data indicates that the share of goods transported by sea rose nine percentage points for imports and over four points for exports between 2002 and 2023. But can this industry, responsible for around 2-3% of global CO2 emissions (roughly equivalent to the aviation industry), truly become sustainable without crippling the world economy? The UN's International Maritime Organisation (IMO) is trying to introduce a levy on carbon emissions from shipping, but the path forward is murky, to say the least.
Tariffs: A Tax Cut for Manufacturers, a Bill for You?
The Siren Song of Tariffs
Enter tariffs, stage right. President Trump (in 2025) declared that he will impose tariffs of at least 10 percent on all foreign-made goods. The rate would be 34 percent for products made in China, 46 percent for those made in Vietnam, and 20 percent for the European Union. The rationale? To revitalize the US economy by increasing domestic manufacturing jobs, enhance national security, and even raise revenue.
But here's where the data gets interesting. While tariffs might seem like a straightforward solution to boost domestic production, the reality is far more complex. A 25 percent tariff on all cars made outside the United States, for example, isn't just going to make foreign cars more expensive. It's likely to increase the prices of *all* cars, including American-made ones. Why? Because US car manufacturers will need to pay tariffs on foreign-made auto parts, and perhaps more importantly, US auto companies will face weaker competition.
Economists estimated that Trump's tariffs will raise US car prices by between $4,000 and $15,000 per vehicle. Ouch. And it's not just cars. In 2018, Trump put a tariff on washing machines, which stayed in effect until 2023. During those four years, the cost of laundry equipment in the US rose by 34 percent, much higher than the overall inflation rate. So, while tariffs *can* protect domestic industries, they also have a direct, often painful, impact on consumers.
Tariff Logic: Revenue Mirage or Economic Reality?
The Numbers Don't Lie (But They Can Be Misleading)
Trump’s administration claimed that its auto tariffs would bring in $100 billion of revenue this year. But there's a fundamental problem with tariffs as a revenue source: The more a tariff encourages consumers to buy domestically produced goods, the less revenue it generates. For Trump's tariffs to provide a steady source of revenue, they would need to be so low that importers continue purchasing lots of foreign-made goods (and thus paying taxes on them). But Trump's tariffs in many sectors are very high, precisely because he wants Americans to purchase fewer foreign-made goods.
And this is the part of the report that I find genuinely puzzling. The economic logic seems… flawed, at best.
Moreover, tariffs on industrial inputs, such as metals, energy, and electronics, will raise costs for US manufacturers, forcing them to raise prices and rendering their products less appealing to foreign consumers. Further, tariffs on inputs will also give companies an incentive to locate factories in other countries, where they will not have to pay, for example, a 25 percent tax on parts and materials made in Canada or Mexico.
Foreign countries are retaliating against Trump’s trade policies by placing tariffs on American-made goods. And that will limit the global sales of American manufacturers. A 2019 Federal Reserve analysis showed that the tariffs Trump imposed during his first term reduced manufacturing employment in affected industries. Not exactly the outcome he was hoping for.
What about the argument that tariffs improve national security? Again, the data is questionable. America’s security likely depends more on strong international alliances than the amount of steel we produce domestically. In 2018, Trump himself reached a trade agreement with the governments of Canada and Mexico, yet he nevertheless applied 25 percent tariffs on both countries this year, in direct violation of his own trade deal. If the United States is unwilling to abide by the terms of the agreements it orchestrates, other countries have less incentive to cooperate with us.
Håkan Agnevall, CEO of Wärtsilä, noted that there are about 100,000 large vessels out there in the world and we cannot just scrap them. To reduce the emissions of the existing global fleet, Wärtsilä has developed a carbon capture technology which can extract around 70% of the CO2 from an engine’s exhaust. Around half of today’s fleet is propelled by diesel, and 48% is prepared for alternative fuels. But green fuels are currently two to four times more expensive than traditional fossil fuels. A carbon emission levy would level the playing field, narrowing the cost difference between more polluting and cleaner fuels. According to Euronews, decarbonizing the shipping industry is possible without damaging the global economy.
How can we decarbonise shipping without damaging the global economy?
A False Choice?
The narrative often pits economic growth against environmental responsibility. It's a false choice, a manufactured dichotomy. While tariffs might offer a temporary shield for domestic industries, they ultimately act as a drag on the global economy, hindering innovation and potentially increasing emissions through inefficient production. The shipping industry's carbon problem demands a more nuanced, collaborative approach – one that incentivizes green technology, fosters international cooperation, and prioritizes long-term sustainability over short-term protectionism.
The Data Demands a Better Answer
