The last 48 hours have been a tariff whirlwind.
On Saturday evening, President Donald Trump announced 25% levies on goods from Canada and Mexico, and an additional 10% levy on goods from China. Energy resources from Canada specifically, including electricity flowing cross-border, are subject to a lower, 10% rate. The three countries are the United States’ most significant trade partners.
Those were set to take effect tonight at midnight — until this morning, when Mexican President Claudia Sheinbaum negotiated a one-month delay on those impacting Mexico in exchange for sending security to the border to prevent drug trafficking.
The news brought some relief to the stock markets, which had opened low this morning in anticipation of the pause. However, the economic impact is expected to be widespread. One analysis from the right-leaning Tax Foundation found that the tariffs would increase taxes by $1.1 trillion between 2025 and 2034, or roughly $800 per U.S. household.
Global trade has been a key reason for the steep drop in clean energy costs. China and other countries in East Asia are responsible for dramatic technological improvements in solar and battery technologies that hugely benefit the U.S. energy sector. And they are already subject to significant U.S. tariffs, including on solar specifically — though the 10% increase in tariffs on China is likely to further drive up costs
But as American Clean Power Association CEO Jason Grumet said in a statement, the U.S. has increasingly manufactured clean energy components domestically, relying on certain parts from Canada and Mexico. The benefits of the USMCA — the 2018 update to the North American Free Trade Agreement, which promotes trade between the three countries — have “been a positive factor in lowering American energy costs.”
Along with other energy associations, Grumet added, ACP “is concerned that increasing the costs of energy production inputs will put upward pressure on consumer energy costs and diminish our capacity to unleash energy abundance.”
The most clear-cut energy impacts are on fossil fuels and automobiles. Canada is by far the largest exporter of crude oil and natural gas to the U.S., and as a result of the tariffs, gasoline and home heating costs could jump. On Saturday, gasoline analyst Patrick De Haan said he expected a localized impact in the Rockies, Midwest, Great Lakes, and Northeast regions of the country of five to 20 cents per gallon.
And, while impacts on the Mexico tariffs will now be delayed, the auto sector is especially vulnerable to the planned duties. U.S. car components cross both borders multiple times in the course of assembly, and one analysis found that car prices could increase by as much as $3,000 as a result of the tariffs.
“The auto sector is going to shut down within a week,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, adding that no one in the sector will be profitable with 25% tariffs.
Meanwhile, electricity entering the U.S. from Canada will also be subject to the tariffs. That only amounts to a tiny sliver of U.S. electricity, but consumers in the Northeast who rely on cheap Canadian hydropower are likely to see their costs rise.
Daniel Finn-Foley, an energy transition analyst at Clean Energy Associates, wrote on LinkedIn that system-wide, “impacts will be immediate and heavy.”
Clean energy impacts of tariffs
For clean energy, though, it’s the commodity supply chain impacts of the Canada and Mexico tariffs that are especially likely to cause problems.
Both countries supply steel and aluminum to the U.S., which are key to building energy infrastructure like transformers (which are currently weathering a shortage), wind turbines, and transmission lines. Higher costs for these key commodities will inevitably impact manufacturers — and the energy companies that buy from them.
For example, analysts at the investment bank Citi are anticipating increases in steel prices of $100 to $150 per short ton, according to a November note to investors. And that’s before factoring in any potential retaliatory tariffs. Aluminum and copper are also likely to be impacted.
One analysis of the first Trump administration’s 2018 tariffs on steel and aluminum found that they put downstream U.S. manufacturing industries, like energy, at a disadvantage relative to foreign competition. The writers found that those tariffs lost the country roughly 75,000 manufacturing jobs.
That said, the tangle of factors impacting raw material prices is complicated, and the Trump administration levy announcement didn’t include details on eligibility for exclusions.
For now, though, it is clear that the planned roll-out could complicate the administration’s “energy dominance” agenda. Antoine Vagneur-Jones, head of trade and supply chains at BNEF, pointed out that the U.S. gets about half of its large-scale transformers from Canada and Mexico; the latter is also a big exporter of cables.
“This is a time when a lot of investment needs to be going into the grid in the U.S.,” Vagneur-Jones told Latitude Media. “And that’s where things are a bit worrying: when there are these issues in terms of tariffs being put on grid equipment specifically.”
Transmission is also particularly important, given the years-long queue to get energy from new projects to the places in the country that need them. Political factors and community pushback are already causing holdups for massive, much-needed projects like the Grain Belt Express — increasing steel and aluminum prices would only make things harder in a moment where demand for energy is mounting.
Meanwhile, Canada is also the largest exporter of uranium to the U.S., used for nuclear fission. The U.S. nuclear power sector had been in decline, but a recent swell of interest from hyperscalers has catalyzed a revival. Nuclear has strong bipartisan support, and work is underway to restart shuttered plants like at Three Mile Island and Duane Arnold.
However, there are questions about whether supply chains are robust enough to support the revival. While uranium is just one small part of that supply chain, higher equipment prices are an additional challenge that could hurt the industry.
