Both the first and second Trump administrations have embraced protectionism, employing sweeping tariffs and more targeted restrictions that have impacted a wide range of technologies. So it wasn’t exactly surprising to Ben Boucher, principal supply chain analyst at Wood Mackenzie, when President Trump issued an executive order last week aimed at “securing America’s bulk power system.” But even so, both Boucher and the many companies whose supply chains will be impacted have some questions.
The order declares the presence of foreign-made equipment in the bulk power system a national emergency, a legal move enabling Trump to block foreign transactions under the International Emergency Economic Powers Act. It names two risks: first, that this equipment could have “digital backdoors” that expose the system to foreign threats, and also that reliance on these imports has created supply chain and national security vulnerabilities.
As a result, the Department of Energy has been ordered to block certain new purchases from around two dozen risky countries — though “99.9% of the import values are going to be tied back to China,” Boucher said — and even will have the power to force companies to remove equipment that has already been installed. There’s an open question of how this impacts Chinese OEMs with a presence in non-targeted countries, Boucher said; previous tariffs and efforts like the foreign entity of concern rules governing energy tax credit eligibility have tried to capture those companies as well.
The list of impacted equipment is long, ranging from inverters, transformers, and battery storage systems, to large and small generators, distributed control systems, and both software and firmware. Of course, even though hardware comprises the majority of the list, it’s the software layer of this equipment that would be exposed to the types of cybersecurity threats the administration is worried about.
The order mirrors a previous one that Trump signed in May 2020 (and which President Biden subsequently suspended). However, the new order covers a broader range of technologies — and crucially, it tacks on that power to remove existing equipment.
That 2020 order is one reason that this one doesn’t come as a shock to most in the industry. “We’ve been in kind of a period where utilities have been very hesitant to be using Chinese equipment for this exact reason,” Boucher said. “I think that one fact alone should offset some of the potential impacts as a result of this bill.”
As for why now? Trump is explicit about the fact that load growth has prompted the move.
“Since my first term, the threat to the United States regarding foreign supply of bulk power system electric equipment has become even more acute,” it reads. “The rapid growth of advanced manufacturing, data centers, artificial intelligence, and defense production has increased the Nation’s dependence on abundant, reliable electricity and magnified the consequences of a successful attack or supply disruption on the bulk-power system.”
Nothing is changing so far. The order is currently in DOE’s hands, which has four months to publish rules implementing it. Those rules will give the industry a lot more specifics over who and what the order applies to: which products, which vendors, which contexts. In the meantime, they’re left mulling three major questions — all of which have a huge bearing on the data center industry in particular.
Does it apply to data center power systems at all?
The power equipment serving data centers — both a major source of load growth, and a major priority of the Trump administration — doesn’t typically fall under the definition of “bulk power,” Boucher said. His initial read is that the order would be limited to power equipment ending at the level of substation transformer.
However, he added, “the way that the executive order is worded seems like it was targeting the dependence on China for AI-related infrastructure.” If that were the case, the order could really be a detriment to the hyperscalers and other data center developers who Trump has gone out of his way to support in the last year and a half.
And if the order is not interpreted as applying to data center-specific equipment, Boucher said, they’re not necessarily in the clear; there has been speculation that this order could have a data center-specific follow-up.
Regardless, data centers will still be feeling the effects. “You still need the power infrastructure to get the voltage down to the required level,” Boucher said. “All of that’s going to be impacted.”
How will it impact batteries?
Another potential problem for data centers, and countless other large loads, is the order’s potential impact on battery storage systems.
“Far and away the biggest concern is lithium batteries, just because China dominates supply chains and we don’t have the self-sufficient capacity to manufacture them domestically,” Boucher said. “So if we do see these restrictions put in place, where are we going to get batteries from?”
While the U.S. is slowly building up its battery manufacturing capacity — automakers are even starting to convert their electric vehicle battery facilities to meet the country’s growing need for storage — it’s not yet enough.
Stemming the flow of Chinese batteries would therefore be a problem for energy developers, and would slow the construction of data centers that rely on storage as on-site back-up power to keep servers running with the reliability required.
Boucher’s bigger question is how the order’s removal clause would work. If existing batteries are ostensibly vulnerable to cybersecurity threats, as the order suggests, would the federal government really remove them?
“I think it’s only going to happen for specific suppliers that are considered high-risk,” Boucher said. “It’s not just going to be a blanket removal of all Chinese batteries because that would be 95% of our storage systems.”
How will this order impact the transformer shortage?
Some of the same questions apply to transformers, which are currently in the midst of a years-long shortage that has slowed the pace of connecting both new power projects and new large loads to the grid.
Boucher pointed out that historically the U.S. hasn’t been too reliant on China for its large power transformers, but that has begun to change in recent years. He has seen a quadrupling of Chinese imports since 2023 alone, and the uptick is correlated with data center demand.
“Where the line ends” — meaning how strict DOE decides to be in implementing this order, and especially in implementing the removal piece of it — “is going to be the real deciding factor because if you do have to remove transformers that are already in place for data centers, that’s when you’re really going to start to see the issues emerge,” Boucher said.
Removing some of the already crunched supply, Boucher said, is going to cause that shortage to get worse. Along with the storage impacts, he said that’s “the biggest risk from a utility standpoint.”
