European businesses brace for Trump return

The return of Donald Trump and his protectionist agenda to the White House will likely rock US trade relations with the world, including Europe.

Here is a look at how sectors of the European economy could be affected after Trump pledged 10 to 20 percent tariffs on imported goods from everywhere except China, which would face a 60 percent duty:

– Tough road for cars –

More than one million new vehicles cross the north Atlantic every year, according to the trade association uniting European auto manufacturers.

German carmakers are particularly exposed as the United States is its second export market after China, where they are already reeling from falling sales.

German auto manufacturer association VDA warned Wednesday that “any change in the framework conditions can affect the economic situation of the industry and thus also employment in Germany, but also in the USA.”

That is because automakers have factories in the United States that would help them avoid extra levies.

BMW head Oliver Zipse noted that his group has a large production facility in South Carolina, where its best-selling SUVs are assembled, proving “some natural cover” against possible tariffs.

Francois Roudier, secretary general of the International Organization of Motor Vehicle Manufacturers, echoed that sentiment.

“Trump will not crack down on foreign automakers established in the South,” he said. “The Germans already have factories there; they will be encouraged to manufacture vehicles there.”

– Bad for chemicals? –

The chemical industry, dominated by German giants such as Bayer and BASF, also faces an uncertain future in the United States.

The United States is the most important export market for German chemical and pharmaceutical products outside the EU.

France, for its part, exported more than 17 percent of its pharmaceutical products to the United States in 2022, its largest market outside Europe.

“We find that the pharma sector is particularly exposed, especially in Ireland, Switzerland, Belgium, Denmark and the UK, but we do not expect a trade shock on their products,” according to experts at Allianz.

– Bad taste for food –
Europe’s agri-food business has bad memories from the first Trump term, when he imposed 25 percent tariffs on wine, cheese and cognac.

The United States is the top export destination for French wine.

France’s export-dependent cognac makers, already hit by Chinese tariffs, now fret over the prospect of new US levies.

“We just took a big hit with China, and now it’s the United States,” said Sabine de Witasse, who took over one of the last family-run cognac operations using a wood-fired boiler in the southwest region of Charente 30 years ago.

“My main client conducts almost all their business internationally, in China and the United States, so there will inevitably be repercussions,” she said.

Spain’s olive oil makers, the world’s top exporters, were hit with additional tariffs during the first Trump presidency.

The World Trade Organization deemed the tariffs illegal in 2021 but the United States has yet to follow the WTO ruling.

Spanish olive oil exports have tumbled by 70 percent since 2019.

– Energy under fire –

Trump’s victory will be a boon for the oil and gas industry while possibly hurting growth of renewable energy.

“Anyone who’s into renewables, and Europe is a lot more than the US on that, will suffer,” said Antonio Fatas, economy professor at the French business school Insead.

“I think there’s going to be much less demand from the US from these type of services,” he said.

Trump is particularly opposed to offshore wind farms.

“One of the points that obviously we have in mind when we consider the new administration is really offshore wind,” said Catherine MacGregor, chief executive of French energy firm Engie.

Engie has three offshore wind projects under development in the United States.

“Potentially one could imagine that a moratorium could be put in place. And we’ll have to see,” she said.

But, she added, “we believe this is something that obviously Engie can live through.”

https://insiderpaper.com/

zerohedge
Economics , News , Politics , Science
November 22, 2024
2 views

Utility Companies Are Not On Our Side

Authored by Linnea Leuken & H. Sterlin Burnett via RealClearPolitics,

When electric power was a novel idea and just beginning to be adopted in urban centers, the industry had a Wild West feel to it as multiple companies strung wires, opened power plants, and sold electricity on an unregulated market. Competition was fierce, but state and local governments concluded that the inefficiencies and redundancies endangered the public and imposed higher costs.

So states set up service territories with monopolistic or oligopolistic service providers, who were entrusted with providing reliable power and sufficient reserve for peak periods in return for being guaranteed a profit on rates proposed by the utilities but approved or set by newly established state public utility commissions (PUCs). These commissions were charged with ensuring public utilities served the general public universally within their territory, providing reliable service at reasonable rates.

Much has changed since then. Politicians began to supplant engineers to decide, based on self-interested calculations, what types of power should be favored and disfavored, and what types of appliances and modes of transportation Americans could use. As the 21st century dawned, a new consideration entered the picture: Climate change.

Under the banner of combatting global warming, utilities were at first encouraged and then coerced into adopting plans and policies aimed at achieving net zero emissions of carbon dioxide. The aim of providing reliable, affordable power – the rationale for the electric utilities’ monopolies in the first place – was supplanted by a controversial and partisan political goal. Initially, as states began to push renewable energy mandates, utilities fought back, arguing that prematurely closing reliable power plants, primarily coal-fueled, would increase energy costs, compromise grid reliability, and leave them with millions of dollars in stranded assets.

Politicians addressed those concerns with subsidies and tax credits for renewable power. In addition, they passed on the costs of the expanded grid to ratepayers and taxpayers. Effectively, elected officials and the PUCs, with a wink and a nod, indemnified utilities for power supply failures, allowing utilities to claim that aging grid infrastructure and climate change were to blame for failures rather than the increased percentage of intermittent power added to the grid at their direction.

Today, utilities have enthusiastically embraced the push for renewable (but less reliable) resources, primarily wind and solar. PUCs guarantee a high rate of return for all new power source (wind, solar, and battery) installations, which has resulted in the construction of ever more and bigger wind, solar, and battery facilities. The costlier, the more profitable – regardless of their compromised ability to provide reliable power or the cost impact on residential, commercial, and industrial ratepayers.

A new report from The Heartland Institute demonstrates the significant financial incentives from government and financiers for utilities to turn away from affordable energy sources like natural gas and coal, and even nuclear, and instead aggressively pursue wind and solar in particular. All of this is done in the name of pursuing net zero emissions, which every single major utility company in the country boasts about on their corporate reports and websites. Reliability and affordability come secondary to the decarbonization agenda.

Dominion Energy is a good example, as they are one of the most aggressive movers on climate-focused policy. Dominion CEO Robert Blue speaks excitedly about government-forced transitions to a wind- and solar-dominated grid in interviews. During one interview with a renewable energy podcast, he said:

“[S]ometimes the government needs to focus on outcomes. We’re trying to address a climate crisis, and we are going to need to move quickly to do that.” In the same interview, he expressed enthusiasm about federal policy that would achieve a government-directed transition.

And why wouldn’t he? Dominion, like most utilities, is granted government tax credits and guarantees on returns for investing in large, expensive projects like offshore wind, the most expensive source of electric power. The bigger the project, the bigger the profit with guaranteed returns.

Also, onshore wind companies have received special “take limits” from the Fish and Wildlife Service to kill protected bald eagles and golden eagles, while prosecuting oil companies if birds are injured or killed on their sites.

Net zero policies are not the environmental panacea that climate change activists proclaim. Industrial-scale wind and solar use substantially more land than conventional energy resources, disrupting ecosystems and destroying wildlife habitats in the process.

And despite recent technological advances, wind and solar are still not dispatchable resources, meaning they cannot provide consistent power at all times needed. Refuting claims made by environmentalists and utilities that wind and solar are the cheapest sources of electric power, costs have risen steeply as the use of wind and solar has increased. Customers of Duke Energy in Kentucky, for example, are paying 78% higher rates in the wake of coal-fired plant closings.

Politicians and utilities are pushing for even more electrification for appliances and vehicles despite the fact that Federal Energy Regulatory Commission officials have repeatedly warned in recent years that adding more demand for electric power while replacing reliable power sources with intermittent renewables is destabilizing the power system.

It appears that the utilities prioritize short-term profits over grid reliability or keeping costs reasonable – and the government officials who are supposed to keep them in check are only encouraging them. It doesn’t need to be this way. The U.S. grid was not always this way. Only in recent years, with the obsessive pursuit of net zero, have rolling black and brownouts become so common.

Today, utility companies are sending lobbyists to conservative policymakers in order to convince them that the utilities have our best interests in mind. Their track record tells another story. Meanwhile, Americans have less reliable electricity at higher costs.

Linnea Lueken (llueken@heartland.org, X: @LinneaLueken) is a research fellow with the Arthur B. Robinson Center on Climate and Environmental Policy at The Heartland Institute.

Tyler Durden
Fri, 11/22/2024 – 06:30