2020 Will Be A Brutal Year For Coal

As if the economic fallout from the novel coronavirus pandemic weren’t enough, a series of trade battles have redoubled the United States’ economic woes in recent weeks. Like everywhere else around the globe, the U.S. has seen a severe downturn in nearly every economic sector and soaring rates of unemployment as the country shut down in the face of COVID-19. But just when the nation has been reopening and it looked like the country’s economy was slowly beginning its long road to recovery, new politically driven troubles have arisen. This week the New York Post reported that “The European Union wants to slap tariffs on American industries that are politically near and dear to President Trump and congressional Republicans this election year,” citing an earlier report by Bloomberg News released on Tuesday. “The EU has asked the World Trade Organization for permission to impose tariffs on $11.2 billion worth of US goods that would hammer farmers, coal producers and fisheries,” the Post report continued.

The impact on the energy industry could have particularly dire ramifications, as the U.S. energy sector has already been hammered so hard by the pandemic. Coal in particular has had a brutal year. A quick search engine search reveals nothing but doom and gloom for the industry, with headlines including “Renewables surpass coal in US energy generation for first time in 130 years” from the Guardian, “Coal’s Decline Continues with 13 Plant Closures Announced in 2020” from Scientific American’s E&E Energy News platform, and “The U.S. Coal Industry Is Declining Irreversibly” from Oil Price.

Coal is now poised to receive another blow--one that it may not recover from--from the European Union as part of the EU’s potential new tariffs. “The move could reportedly hit parts of the US that are politically crucial for Trump and top GOP lawmakers,” reported the New York Post. “For instance, the EU’s coal tariffs may target Missouri — which has two Republican senators.”

Related: China’s Oil Imports From Saudi Arabia Jump To Record High

So what spurred these proposed tariffs seemingly targeted at Trump? According to some reports, it’s just the latest battle in a lengthy trade war between the United State and the European Union that can all be traced back to a prolonged dispute over aerospace subsidies. “The WTO gave the US a $7.5 billion award last year over the EU’s illegal subsidies for European planemaker Airbus,” writes the Post. “Europe now wants to retaliate with the new tariffs after the WTO found the US illegally subsidized Airbus rival Boeing.”

The United States’ trade woes are not limited to the current spat with the EU. The nation is also embroiled in yet another trade war with China, this one more directly related to the pandemic. The novel coronavius has sent global supply chains into doubt, showing how risky these lengthy chains and trade routes can be when every step is another opportunity for contamination. As the Carnegie Endowment for International Peace reports, “with relations between Washington and Beijing in freefall, the future of global supply chains is uncertain. Even as inconsistent White House messages continue to raise questions about the direction of U.S. trade policy, trade war tariffs remain in effect.” While the two superpowers have been trying to leverage a deal, the relations have been rocky at best.

In the meantime, it remains to be seen how far the EU will go with its proposed tariffs on coal and other U.S. goods. “The two sides could reportedly work out a deal to avoid the back-and-forth tariff fight, but the EU’s chief trade negotiator recently indicated that’s unlikely,” says New York Post. According to many experts, coal is doomed regardless, but any chances of resilience will almost certainly be squashed by trade restrictions. 

By Haley Zaremba for Oilprice.com

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