When rivers overflow their banks in China, the damage spills to the U.S. This is globalization: Economic consequences of weather extremes that damage regional economies spread through global trade relations.
Of all countries, the U.S. is impacted strongest by these indirect damages, as new analysis shows. What is more: President Trump’s campaign for a trade war and economic isolationism is likely to make the consequences of the warming of our planet worse for his country.
{mosads}While the president is right to worry about the trade balance, he is terribly wrong to seek reducing trade with other countries. On the contrary, increasing international trade would help climate-proof the U.S. economy.
Trump does not believe in climate change, but that won’t make it go away, and it does not only have consequences for the much-ridiculed polar bears and coral reefs. It spells trouble for national economies across the globe and all of our wallets as well.
Greenhouse gases from burning fossil fuels increase the temperature of our planet; that’s fundamental physics. Also, a warmer atmosphere leads to more evaporation, more moisture in the atmosphere and thus more rain. That extra rain falls more often in extreme events, triggering devastating floods.
The scientific basis for this is the Clausius-Clapeyron law of 1843 — named after its discoverers. The physics was true then, and it will still be valid long after Trump is gone. Congress can change many laws, but not the laws of nature.
Extreme weather spreads unevenly. In the next 20 years, the global warming path is determined by the carbon that we have already blown into the heavens above us. The future after that is clinched by our current inaction.
Without further adaption measures, climate change will likely increase economic losses from fluvial floods worldwide by more than 15 percent. In China, the flood risk will increase sharply and so will the economic damages. Companies simply cannot produce when their machines are flooded.
However, in a globalized world, this is no reason for gloating, because the economic damage does not stay in China. After all, China is the largest exporter of goods to the U.S. and Europe. These products are not just baseball caps and cell phones for us consumers but also intermediary products for our industries.
In 2011, heavy rains led to devastating floods in Thailand. As a direct consequence, there were no more hard drives for sale in both the U.S. and Europe in the beginning of 2012. Failure in China’s economic output would have a much greater impact.
For decades, companies have a global “just-in-time” supply strategy implemented. Storage means dead capital and is thus banned by supply-chain managers. That might have to change in the future when industries will increasingly be surprised by weather extremes.
Of course you can insure against such supply failure, but insurance companies are more aware of climate change than many other companies.They already have adjusted their policies.
Bad weather has already happened in the past, but climate change increases the risk dramatically. The economic flood risk in China will increase by more than 80 percent over the next two decades. So, an intensification in weather extremes has to be included in future supply strategies.
This will cost us — whether in the form of direct flood damage, as a supply loss, as rising insurance costs or due to scarcity-induced price increases on the world market.
The specific problem for the U.S. is its strongly unbalanced trade relation with China. Without major changes in economic relations, the United States will, in addition to those damages occurring inland, import expensive climate damage from abroad.
In contrast, the EU has largely compensated its strong imports with almost equally strong exports to China. For any single company in Europe, the increase in floods in China may still be a problem when extreme weather hits its suppliers.
But in the economic aggregate, Europe can offset the damage passed on through failures in retail chains by exporting more goods to Asia. Climate damage in China is in fact an economic opportunity for those who are already engaged in intensive, but bilateral trade with the country.
So, the unbalanced trade with China is an issue to address in the U.S. But tragically, President Trump’s strategy seems to be isolationism — and that is leading the U.S. astray. Instead of enhancing tariffs to punish imports from China, he would have to increase exports there.
More trade instead of less can help deal with climate risks by dispersing them. On their own, the U.S. will quickly realize that although the river floods will not increase as much inside its own borders, weather extremes will intensify strongly in the United States as well.
As an example, see last year’s record hurricane season with devastating effects for both Houston and Puerto Rico, and combine this with warming-induced rising seas. This too will affect the U.S. economy. Trade can help to compensate for the resulting production losses.
What can be done? China has to adapt by improving flood protection. Businesses around the world need to diversify their supply chains or introduce stocks and storages. And it is crucial to achieve balanced and flexible trade relations.
But above all, the destabilization of the climate that we are causing by our carbon emissions needs to be stopped: The burning of coal, oil and gas has to be phased out. We need climate realism instead of national chauvinism.
Anders Levermann is a physics professor and climate scientist at the Potsdam Institute for Climate Impact Research in Germany and at Columbia University in New York. Follow him on Twitter: @ALevermann.