CLIMATEWIRE | Over recent years, the cost of clean energy has consistently decreased, supported by a network of global research hubs and production facilities.
However, that trend has come to a halt.
This past Saturday, President Donald Trump announced the implementation of significant tariffs on imports from Canada, Mexico, and China, heralding the start of a new international trade framework centered on nationalistic protections. This shift could lead to costly consequences for Americans. Though clean energy sectors are not the primary target of the president’s trade policies, the imposed tariffs are likely to severely affect industries like solar, battery, wind, and electric vehicles.
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President Trump’s recent executive action, set to take effect this Tuesday, imposes a 25 percent tariff on goods from Canada and Mexico and a 10 percent tariff on imports from China. Additionally, a lower tariff of 10 percent will be applied to Canadian oil imports.
A White House briefing document released Saturday evening describes tariffs as a potent and historically effective tool for controlling illegal immigration and drug trafficking, such as fentanyl. The order is expected to lead to a noticeable increase in the prices of goods, with entities like the U.S. Chamber of Commerce and the American Petroleum Institute expressing concern over its potential impact on the U.S. economy.
“Energy markets are intricately interconnected, and maintaining free, equitable trade across our borders is vital for providing affordable, reliable energy to American consumers,” stated API President and CEO Mike Sommers.
The tariffs arrive at a time when clean energy sectors are striving to reduce costs to replace fossil fuels, the primary contributors to climate change.
Trade has played a significant role in the global reduction of clean energy costs over recent decades. According to investment bank Lazard, the average lifetime cost of utility-scale storage plummeted by 83 percent from 2009 to 2024, despite a post-Covid increase in solar costs. Similarly, onshore wind costs decreased by 65 percent during the same period.
These tariffs threaten to reverse those advancements. The American Clean Power Association, a trade organization, expressed concern that “increasing the costs of energy production inputs will drive up consumer energy costs and reduce our ability to harness energy abundance.”
“While the resources utilized by wind and solar energy, augmented by battery storage, are free, some of the components for these technologies are produced in Canada and Mexico,” the association added.
China produces approximately three-quarters of the world’s lithium-ion batteries, according to the International Energy Agency.
For onshore wind turbines, while many components are manufactured domestically, a significant portion of the steel used in the United States is supplied by Canada and Mexico. Steel constitutes nearly 75 percent of the mass of a wind turbine.
Mexico is becoming a prominent center for electric vehicle production, with General Motors manufacturing its all-electric Chevrolet Blazer and Equinox models in the country. Meanwhile, Canada supplies about half of the refined nickel consumed in the U.S., a crucial ingredient in battery production.
Canada, China, and Mexico are also key producers of essential electrical grid components like transformers, circuit breakers, and switchgears, which are necessary for upgrading the grid and advancing clean energy development.
“The global supply chain, including that of clean energy, faces major disruptions,” noted Gernot Wagner, a climate economist at Columbia Business School.
Trump’s broad application of tariffs contrasts with the targeted tariffs previously implemented by the Biden administration against Chinese electric vehicles and solar products manufactured by Chinese companies in Southeast Asia. These actions underscore the ongoing tension in international trade relations, where nations and corporations balance the lower costs facilitated by trade against the benefits of protecting domestic industries, Wagner explained.
However, unlike Biden, who coupled targeted tariffs with substantial subsidies for domestic clean energy manufacturers, Trump has proposed cuts to clean energy funding, specifically targeting investments made in renewable sources, electric vehicles, and other low-carbon technologies by the previous administration.
Wagner cautioned that such sweeping measures as Trump’s tariffs could prove costly and might ultimately backfire, particularly affecting the oil industry by increasing the costs of gasoline and diesel. Although the fossil fuel industry is generally less adaptable than the emerging clean energy sector, which can more easily relocate solar panel production than overhauling a refinery processing heavy Canadian crude, this offers little consolation to clean energy firms.
The most significant impact of Trump’s policies may be the uncertainty they introduce, complicating investment decisions for companies.
“We might see a range of retaliatory tariffs and a continued weakening of the rules that have historically restrained countries from imposing tariffs,” said UC San Diego’s Victor. “This could have dire consequences for the global trading system and, frankly, for the American economy.”
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2025. E&E News provides essential news for energy and environment professionals.
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