Climate-friendly tariffs would penalize countries that undercut American companies with dirtier production.
Op-ed by Ely Sandler and Daniel Schrag, The Washington Post, June 23, 2025
President Donald Trump’s tariffs are in limbo, struck down by one federal court and temporarily reinstated by another. Congress, with its slim Republican majority, seems unlikely to enact them into law. Beyond the legal or political fights, however, the motivating question behind the tariffs remains: How should America respond when trading partners tilt the scales, whether through unfair subsidies, trade barriers or lax environmental regulation?
Fortunately, there’s an alternative approach in Congress that can build on Trump’s trade agenda more effectively, more durably and, potentially, with a much broader coalition of support: holding trading partners responsible for the pollution that gives them a leg up in manufacturing.
At its core, this is a question about China and a handful of other countries whose advantages are powered, quite literally, by cheap and dirty energy. China is the world’s largest emitter of carbon dioxide and the world’s largest exporter. Those facts are not unrelated. Despite an impressive rollout of clean energy, China’s factories still run overwhelmingly on coal. This makes China’s exports far dirtier than goods produced in America.
The answer might therefore lie in a smarter kind of tariff — one that scales based on the carbon dioxide emissions produced during manufacturing. A bill to do just that was recently introduced by two Republican senators; similar proposals have drawn bipartisan support in the past.
Though the United States is often portrayed as lagging on climate, American manufacturers in sectors such as aluminum, cement, steel and fertilizer are significantly cleaner than what we import from abroad. That’s largely due to America’s abundant natural gas, which pollutes far less than coal. This means that in a world where companies have to pay for the carbon dioxide they emit, goods made in America become more competitive.
The Foreign Pollution Fee Act, which is currently going through budget reconciliation, was introduced by Republican Sens. Bill Cassidy (Louisiana) and Lindsey Graham (South Carolina). It would impose a tariff based on how much carbon dioxide the exporter has emitted. Markets such as Britain and the European Union, which are similar in carbon intensity to the U.S., would be exempt, while heavy polluters such as China and Russia would pay more. Although structured differently, the bill would function like the E.U.’s Carbon Border Adjustment Mechanism, a climate-focused trade measure that aims to raise revenue and support domestic industry.
In our analysis of the proposed legislation, we highlight three key opportunities that make this bill especially timely in light of the recent tariff rulings.
First, carbon tariffs generate revenue. We estimate that the proposal could raise up to $198 billion over five years, nearly triple what the U.S. collected in tariffs over all of last year. Though this is probably an upper bound, as trade reshuffling could lower the revenue potential, others’ more conservative models still put the figure in the tens of billions or hundreds of billions.
Second, the tariffs would give American industry a competitive edge against exporters to the U.S., especially China. American products are less carbon-intensive than most imports covered by the bill — in some instances, over 90 percent cleaner. According to one analysis, this could lead to a nearly 10 percent increase in U.S. manufacturing for a sector such as cement and more than a 7 percent increase for iron and steel.
Third, the proposed legislation from Graham and Cassidy is not paired with a domestic carbon price — a deliberate choice to make the bill more acceptable to Republican lawmakers and to voters, who have rebelled against carbon taxes in other countries. This might be a politically necessary concession, but it comes with a cost.
Pairing carbon tariffs with a carbon price at home would increase revenue and strengthen the policy’s legal footing under international trade rules, which typically require alignment between domestic and border measures. More important, without a carbon price, America’s emissions advantage might erode as other countries decarbonize and U.S. firms face no comparable incentive. With superior access to capital and technology, American industry is well positioned to outperform dirtier global competitors, but only if policy rewards investment. The carbon price could be phased in gradually, giving U.S. manufacturers time to adapt and invest without undermining energy output today.
There are still trade-offs to consider. Like all tariffs, the proposal would raise the cost of imported goods, risking inflation. Unlike most carbon-related border measures, it is based on the value of imports rather than an explicit carbon price, a design that could provoke pushback from U.S. trading partners. These are valid concerns. But so is the need to protect American industry and lay the groundwork for carbon pricing that rewards cleaner production and lowers emissions. Neither the president nor congressional leaders in either party should pass up such an opportunity.
Ely Sandler is a research fellow at the Harvard Kennedy School. Daniel Schrag is the Sturgis Hooper professor of geology and a professor of public policy at the Kennedy School.
https://www.washingtonpost.com/opinions/2025/06/23/tariffs-china-trade-carbon-emissions/