In the aftermath of the pandemic, war, and the economic convulsions that attended them, many column inches have been devoted to talk about de-globalization and an associated increase in supply-chain resilience. In Western policy circles, this has largely been construed as “decoupling” from China. Almost five years later, however, it has become increasingly clear that the world’s dependence on the system of supply chains mastered by China has, if anything, increased. The integrity of this very system is central to the successful and timely decarbonization of the global economy required to prevent irreversible climate disruption.

Last Monday, the outgoing Biden administration threw a further wrench into this system. It announced it would further tighten the restrictions on exports of US-made technologies that the administration had first implemented two years ago. The latest series of steps aimed at cutting off the Chinese from the world’s most important industrial technology. The measures included adding to a restricted trade list (the “entity list”) 140 Chinese firms primarily involved in the manufacture of machinery and tools required for the production of high-end chips.

This set of confrontational trade policies is a product of what Jake Sullivan, Joe Biden’s hawkish national security secretary, has dubbed America’s “small yard high fence” approach to dealing with China. To compliment these measures, Sullivan has also urged the United States to offer military support to its regional allies. The US Department of Commerce had previously extended exports controls to the manufacturers of the most advanced semiconductor producers in the world, namely the Netherlands-based ASML, who, with its German suppliers Zeiss and Trumpf, are currently the sole source of the EUV (extreme ultraviolet) lithography machines used by the Taiwan Semiconductor Manufacturing Company (TSMC) for the newest generation of chips.

The implications for the global decarbonization efforts are wide-reaching and readily apparent. China’s dominance in global manufacturing, including and in particular in green energy technologies, such as mass-produced photovoltaic cells and highly efficient electronic vehicles (EVs), make it the undisputed leader in the climate race.

This status is heightened by the political valence that discussions of climate policy have taken on in the United States. National security interests are more and more frequently getting in the way of stated commitments to net zero. During Biden’s time in office, the United States saw record levels of oil and liquid natural gas production, becoming the largest producer of fossil fuels in history. This is partly a response to increased European demand following Russia’s invasion of Ukraine.

Within Europe, a rudderless approach to industrial policy has cemented the Chinese claim to leadership in the global climate race. EU member states, currently reeling from political uncertainty in France and Germany, appear unable to overcome their fiscal deadlock. Their key industries were and remain to a large extent overexposed to energy and commodity shocks. In the case of the German auto industry, the jewel of European manufacturing and the leader in research and development spending, squandered its considerable expertise by doubling down on attempts to fine-tune obsolete internal combustion technology while devising software to cheat on emissions tests.

While countries like the United States and Germany claim to have laid the scientific and institutional basis for the climate transition, their political and corporate elites have failed to internalize these insights. China stands alone.

The national protectionist policies come hand in hand with wide-ranging subsidies. The architects of Europe’s industrial policy have, however, failed to see that China’s subsidies are not the reason for its market dominance. EVs are a particularly stark example: the price advantage of Chinese EVs remains at 44 percent over their European counterparts even after adjusting for limited state subsidies for producers.

China has, nevertheless, responded in kind to European and American tariffs. On Tuesday, the Chinese government announced a ban on the export of several rare earth minerals, including germanium, antimony, and gallium. China controls up to 99 percent of the world’s known supply of these minerals, which are key to the production of semiconductors and electronics. The move could have broad implications for both civil and military industrial production in the United States and beyond.

Above all, a consistent supply of these and other rare earth minerals is seen as crucial to the green energy transition. Even more consequential is graphite, key to the production of large batteries, and therefore to electrification, particularly of the global transport industry. Ninety percent of graphite production and refining is controlled by China and further exports restrictions might follow as the trade war escalates further.

How this tit-for-tat protectionism will play out is unclear. It is plausible that current restrictions on both sides could be used as bargaining chips in the coming negotiations between members of the Trump administration and their Chinese counterparts. It is entirely possible that tariffs will be successfully circumvented by Chinese firms and will simply create new costs for US households, as was the case with the tariffs in Donald Trump’s first term. Both the United States and China have chokeholds they have to fully leverage. All of these factors and the policy uncertainty make it hard to predict how trade disruption will hinder green industrial policy. What is clear, however, is that it will delay the transition to net zero; this is a delay we cannot afford.

Prior to the US election, some commentators argued that the global subsidy race between the world’s major economic blocks might prove the best way to coordinate green investment in a timely manner — even if the price of green industrial policy is a heightened risk of military confrontation between China and the United States. In an age of overlapping emergencies, haunted by the specter of irreversible climate breakdown, this is a trade-off we might be inclined to accept.

But there is reason to view even this gloomy scenario as overly optimistic. The prospect of turning our “billions to trillions,” that a successful energy transition requires, might still elude us, even while we accept a more fractious geopolitical future dominated by great power competition and a heightened risk of nuclear war. This is what might be termed the Annie Hall world: the food is so terrible and the portions so small. We don’t get very much buck for our bang. The obvious corollary is that geopolitical competition and trade rivalry simultaneously slows the development of clean energy technologies and green economic development.

Perhaps the best-case scenario would involve making use of the world economy as it exists in its current from: twin-deficits (trade and fiscal policy) and finance in the United States, large surpluses and most of global production in China. A grand bargain, or a “New Green Chimerica,” would harness the power of US finance by financing the import of Chinese (and to a much lesser extent European) green tech to ensure the transition in the United States.

As the bellicosity and recklessness of the US political class toward China mounts, however, these plausible scenarios for a timely global decarbonization become ever less likely. As economic historian Adam Tooze recently noted: if the first “China shock” consisted of advanced economies integrating China into their supply chains, then the second shock consists of them begging to be integrated into China’s. All evidence points to this shock already unfolding. If the United States and its allies are serious about the green transition, their trade policies need to reflect the reality.