Cooperation or Coercion? The Costs of U.S. Trade Policy for the Energy Transition

Policymakers increasingly frame the energy transition through the lens of the energy trilemma: security, affordability, and sustainability. In theory, clean technologies—solar, wind, batteries, and electric vehicles—promise to advance all three goals. In practice, however, tradeoffs are unavoidable, and recent U.S. trade policy has doubled down on security at the expense of affordability and decarbonization.

The Trump administration has reframed clean energy as a national security threat due to American dependence on foreign supply chains concentrated in the Asia-Pacific. The concern is not unfounded. Lithium-ion batteries are primarily supplied by China, South Korea, and Japan, while most solar PV components are imported from Vietnam, Thailand, and Malaysia—countries where China has offshored production in part to circumvent tariffs. Upstream bottlenecks in critical materials such as nickel, polysilicon, and rare-earth elements further constrain domestic deployment.

China’s leadership is the result of aggressive state-backed industrial policy and free trade agreements. The nation invested $625B in clean energy in 2024 alone, representing nearly a third of global investment. It now controls 78-97% of global manufacturing capacity across the solar PV supply chain and over 70% of battery market share.

In response, the U.S. has turned to tariffs and friendshoring—relocating supply chains to allied nations. With a strong distaste against multilateral frameworks that have traditionally governed global trade, Trump 2.0 has relied on bilateral negotiations to advance security interests in the Asia-Pacific, creating two sharply contrasting models of friendshoring.

Signed in October 2025, the U.S.-Australia and U.S.-Japan Critical Minerals Framework Agreements include billion-dollar financing commitments for minerals production and supply chain cooperation. While shifting from low-cost Chinese components to friendshored materials will raise prices for downstream manufacturers, the frameworks create fair and favorable investment conditions to share costs and reduce risk. The major caveat is that they are non-binding, raising questions over their long-term effectiveness and practical benefits.

The concurrent agreements on reciprocal trade with Malaysia and Cambodia—negotiated in response to Trump’s “Liberation Day” tariffs—demonstrate a more coercive approach. Although the deals offer tariff exemptions and streamline investment pipelines for critical minerals and energy projects, their terms have been viewed as unstable and asymmetric. Malaysia and Cambodia are required to adopt trade restrictions aligned with America’s security interests, effectively delegating their trade sovereignty to Washington. More consequentially, the deals include “poison pill” termination clauses that allow the U.S. to withdraw if a partner enters into a trade agreement that “poses a material threat to economic or national security.” These provisions make American cooperation conditional on geopolitical realignment away from China.

Taken together, these security-first deals constitute a short-sighted, fragmented trade strategy that erodes progress along the affordability and sustainability axes of the energy trilemma. Washington is deepening relationships with select allies at a price premium while destabilizing emerging markets through conditional agreements and trade wars. It also translates into higher input costs and volatile investment conditions for the clean tech industry—undermining American competitiveness and even reinforcing China’s lead.

The U.S. could benefit from a more collaborative, stable, and incentive-driven trade policy to strengthen its supply chains. Washington can extend the cooperative financing model in Australia and Japan’s frameworks to its Southeast Asian partners, offering attractive alternatives to Chinese capital. Volatile blanket tariffs and ad hoc security restrictions can be replaced with predictable phase-in timelines and compliance thresholds to provide regulatory certainty for clean-tech investments. Finally, a return to multilateral cooperation with shared standards, transparency, and security commitments would reduce market fragmentation and help lower costs across value chains.

Above all, U.S. trade policy must recognize clean tech not as a liability, but as a strategic asset for geopolitical and economic leadership. Only then can the U.S. build resilient supply chains for the global energy transition.

Angela Ye

Undergraduate Seminar Fellow

Angela Ye is a senior studying earth and environmental science with minors in sustainability management and legal studies. Ye is also a 2025 Undergraduate Student Fellow.