Trump’s latest tariffs are on pause, but what would they mean for the U.S. energy supply?

President Donald Trump on Monday agreed to a 30-day pause on his tariff threats against Mexico and Canada as America’s two largest trading partners took steps to appease his concerns about border security and drug trafficking. But if the tariffs came into fruition, particularly Canada’s, there could be hefty implications for energy prices in multiple U.S. regions.

Trump on Saturday had directed 25% tariffs on imports from Mexico and Canada, with another 10% tariff on Canadian oil, natural gas, and electricity. The U.S. president had repeatedly previewed these moves, yet they still managed to shock many investors, lawmakers, businesses, and consumers.

Canadian Prime Minister Justin Trudeau posted Monday afternoon on X that the pause would occur “while we work together,” saying that his government would name a fentanyl czar, list Mexican cartels as terrorist groups, and launch a “Canada-U.S. Joint Strike Force to combat organized crime, fentanyl, and money laundering.”

The pause followed a similar move with Mexico that allowed for a period of negotiations over drug smuggling and illegal immigration. The 10% tariff that Trump ordered on China is still set to go into effect as scheduled on Tuesday, though Trump planned to talk with Chinese President Xi Jinping in the next few days.

How much electricity do we import from Canada?

Credit: EIA

Trade of energy between the U.S. and Canada is actually “relatively small” at less than 1% of total generation, according to the U.S. Energy Information Agency. However, these relatively small exchanges are a crucial part of grid balancing in the regions served by these international transmission lines.

Canada has exported “significantly” more electricity than it imported over the past two decades, but in 2023 the electrical trade between the two countries became more balanced, per the IEA. Monthly average exports from the United States to Canada in 2023 increased 70% on a year-over-year basis to 1,809 gigawatt hours (GWh), while monthly average imports from Canada to the United States decreased by 36% to 3,315 GWh. EIA attributes this shift to reduced hydropower generation in Canada caused by drought conditions, and lower natural gas prices in the U.S. providing an attractive alternative.

Connections between the U.S. and Canada stretch from New England to the Pacific Northwest, spanning three out of four of the country’s major interconnections. (Credit: EIA)

The value of power sales from Canada to the United States totaled $3.2 billion in 2023, nearly 30% less than in 2022, per the EIA. In contrast, electricity exports from the United States to Canada increased $454.5 million in 2023 to $1.2 billion. Average prices for the export of electricity from Canada to the United States were higher in 2023 despite an overall decline in total value due to the greater share of exports from Canada under contracts.

How is the industry responding?

Grid operators don’t seem to want to say too much, too soon.

The New York Independent System Operator (NYISO) said it is “actively pursuing guidance pertaining to the impact on electricity markets and which Canadian energy resources qualify,” and it will communicate with stakeholders once it receives more clarification.

“The U.S. and Canada have one of the most integrated electric grids in the world, allowing system operators in both countries to pool resources for improved reliability and economic efficiency,” NYISO said in a statement. “We are in close and regular contact with Hydro Quebec and Ontario’s Independent Electricity System Operator to ensure a reliable grid and stable flows of electricity across interregional transmission lines.”

ISO New England (ISO-NE) was similarly tight-lipped. The grid operator said it is also “seeking guidance” on the matter, but did not comment on any effects the proposed tariffs would have.

“We cannot speculate on what, if any, impact these actions will have on wholesale electricity prices or the level of imports into the region,” ISO-NE said in a statement. “ISO New England has a long history of working with its neighboring systems. In 2024, 9% of the electricity demand in New England was met through imports from our neighbors in Canada and New York. ISO New England will continue to focus on ensuring the reliability of New England’s grid.”

This article contains reporting from the Associated Press.

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