The Economist 07Dec2019

72 Finance & economics The EconomistDecember 7th 2019

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which could help. On November 21st s&p

Global, a credit-rating agency, bought the

esg arm of Robecosam, an asset manager.

Moody’s, a competitor, purchased Vigeo Ei-

ris, an esg data outfit, in April. In 2017 Mor-

ningstar, a research firm, acquired a 40%

stake in Sustainalytics, another esg rater.

msci, an index provider, has been building

up its esg-scoring expertise. Simon Mac-

Mahon of Sustainalytics expects scoring

systems to converge over time. The defini-

tion of esg is so broad, he says, that raters

may be trying to capture different things.

For now investors who use esg indices

often look past the headline scores—and

even, in some cases, create their own esg

ratings. Issues that they find particularly

relevant, such as the flood risks faced by an

insurer’s corporate clients, may be buried

because esg ratings average many dispa-

rate data points, says Jessica Alsford of

Morgan Stanley, a bank.

If esg data do eventually become more

accurate and consistent it will become

harder for bosses and fund managers to en-

gage in “greenwashing”—massaging indi-

cators without truly changing hue. And in-

vestors will be able to pursue more varied

and sophisticated esg targets, says Maria

Elena Drew of T. Rowe Price, an asset man-

ager. Big insurers, for example, which are

heavily exposed to extreme weather

events, will be able to invest their capital in

a way that hedges against climate risks. But

for now the esg rating industry is still in its

infancy and Ms Peirce’s criticisms, though

blunt, ring true. 7

Scrambled ESGs

S&P 1200 index of global companies

100=best ESG* scores, December 2019

Sources: Bloomberg;

IMF; The Economist

*Environmental, social

and governance

100

80

60

40

20

0

100806040200

Ratings by RobecoSAM

ESG scores by provider Ratings by

Sustainalytics

Less than $10bn

$10bn-50bn

$50bn-100bn

$100bn-200bn

$200bn and over

806040200

Average ESG scores by market value

RobecoSAM Sustainalytics

P

resident donald trump’sattempts to

orchestrate America’s trade relations

are causing a cacophony. On December 2nd

he trumpeted new tariffs on Brazilian and

Argentine steel and aluminium. Hours lat-

er the United States Trade Representative

(ustr) chimed in with two sets of tariffs on

European products. Over the following

days noise grew louder in Congress about a

bargain that would secure the Democrats’

approval for the usmca, a trade deal with

Mexico and Canada. And all this against the

drumbeat of trade war with China.

The theme, American unilateralism, is

consistent. But the various voices are not,

with Trumpian trumpetings vying for air-

time with the ustr’s measured pace. Start

with the week’s first announcement, when

Mr Trump tweeted that Argentine and Bra-

zilian steel would face American tariffs,

“effective immediately”. American farm-

ers, he said, were suffering from the two

countries’ “massive” devaluations. But his

response made no sense. Argentina and

Brazil have not been trying to take advan-

tage of American farmers by manipulating

the peso and real downwards. Rather, as

their economies have flailed, they have

struggled to prop their currencies up.

Moreover, though Mr Trump surely in-

tended to restrict imports, for some pro-

ducts tariffs could mean they rise. An an-

nual quota for Brazilian slab, billets and

blooms (semi-processed steel products) is

already full, for example, so switching

from quotas to tariffs now would grant

American importers greater flexibility. And

the new tariffs are unlikely to survive any

legal challenge, since relevant deadlines

passed months ago. The law Mr Trump has

invoked allows tariffs in the service of

America’s national security. Claiming that

it covers propping up farm incomes would

be a stretch.

The president’s tariffs-by-tweet stood

in contrast to the day’s other big announce-

ments, which followed much deliberation.

One related to a long-running dispute at

the World Trade Organisation (wto) over

European subsidies for Airbus, which

America won. In October the wto had said

that the Trump administration could pe-

nalise the eu by placing tariffs on $7.5bn of

its exports. The eu argued that the offend-

ing subsidies had been withdrawn. On De-

cember 2nd the wto dismissed that claim,

and the ustr started the process for raising

new tariffs on European exports.

The other was accompanied by a 93-

page report, stuffed with footnotes and le-

galese. The ustr had spent months investi-

gating a French tax on digital services,

which will fall heavily on American tech

giants (see box on next page). “If they’re go-

ing to be taxed, it’s going to be the United

States [that] will tax them. Okay?” said Mr

Trump on December 3rd. The ustrcon-

cluded that the tax was “unusually burden-

some” for affected American companies,

and is preparing to hit $2.4bn of French

products with tariffs in response, includ-

ing $800m of cosmetics, $800m of cham-

pagne and $400m of handbags.

Inconsistent trade policy is nothing

new from the Trump administration. The

tariffs on steel and aluminium imposed in

spring 2018 were justified on dubious na-

tional-security grounds; by contrast the

first round of tariffs on China, in mid-2018,

were imposed after a detailed report by the

ustr on America’s many, and in some

cases legitimate, grievances.

Overall, though, some aspects of Ameri-

ca’s trade policy are making others harder

to achieve. Its trade partners can point to

Mr Trump picking on Argentina and Brazil,

and paint their resistance to American at-

tempts to recast its trade relations with

them as standing up to a bully. Implausible

claims of harm to national security also go

down badly elsewhere.

All this may be part of the reason Mr

Trump has so far failed to secure the “sub-

WASHINGTON, DC

The Trump administration’s trade policies clash with each other  

Multiplying tariffs

Sound and fury

Once more, with feeling