On Tuesday the United States imposed sweeping tariffs on its largest trade partners, sending world markets tumbling and instigating retaliatory countermeasures that are likely to impact the cost and availability of electricity for millions of Americans while jeopardizing state renewable energy targets.
Effective March 4, 2025, the U.S. has imposed a 25% tariff on all imports from Mexico, a 10% tariff on Canadian energy and a 25% tariff on other imports, and an additional 10% tariff on all Chinese goods- tacked onto the 10% imposed precisely one month ago. More than one-third of all products brought into the United States are produced in Mexico, Canada, and China. Canada also generates roughly 90% of the electricity imported into the U.S., primarily clean hydropower flowing into states like New York, Maine, and Vermont.
The tariffs, paid by U.S. businesses to the U.S. government on purchases from affected countries, are the latest and largest levied in President Donald Trump’s ongoing trade war with neighbors he claims have been “ripping off” the United States. In an executive order, Trump professes Mexico and Canada have been allowing fentanyl and immigrants to pass freely into the U.S., and intends his tariffs to stay in place until both issues have been remedied to his satisfaction. Both countries dispute those assertions; Mexican President Ms. Claudia Sheinbaum’s government rejects Trump’s statements as “offensive, defamatory and without substance,” with Canadian Prime Minister Justin Trudeau echoing “there is no justification for these actions.”
The tariffs threaten the stability of the Canadian economy, which relies heavily on exports. The maneuvers have already prompted retaliation from the United States’ allies, further expounding impacts on people and businesses with bills to pay and grid operators and utilities trying to keep the lights on.
“Today the United States launched a trade war against Canada, their closest partner and ally, their closest friend,” Trudeau said Tuesday at a press conference in the capital of Ottawa. “At the same time, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense.”
“You’re a smart guy,” Trudeau continued, addressing President Trump by his first name, Donald. “But this is a very dumb thing to do.”
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Canada strikes back
Tuesday morning, Canada swiftly responded to Trump’s actions with a 25% tariff against $155 billion of American goods, roughly $30 billion implemented immediately and the rest within three weeks. The exact goods have yet to be specified.
“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Canada’s Prime Minister said. “While we urge the U.S. administration to reconsider their tariffs, Canada remains firm in standing up for our economy, our jobs, our workers, and for a fair deal.”
“Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas, and cars, and potentially lose thousands of jobs,” Trudeau continued, pointing out how tariffs will disrupt a successful trade agreement negotiated by President Trump during his last term.
Canada’s Prime Minister went on to proclaim President Trump is purposefully trying to crash his country’s economy.
“What he wants to see is a total collapse because that’ll make it easier to annex us,” Trudeau alleged. “That’s never going to happen. We will never be the 51st state.”
Meanwhile, Ontario Premier Doug Ford has doubled down on his previous promise to pull the plug on his province’s energy exports to the United States in retaliation, which would drive up prices for millions of ratepayers in the northeast, a region that has adopted particularly ambitious net-zero legislation.
“They rely on our energy, they need to feel the pain,” he told attendees of a mining convention in downtown Toronto on Monday. “They want to come at us hard? We’re going to come back twice as hard.”
“We keep the lights on in 1.5 million homes and manufacturers in New York, Michigan, and Minnesota,” Ford pointed out in a subsequent media appearance. “If he wants to destroy our economy and our families, I will shut down the electricity going down to the U.S. and I’m telling you, we will do it. It’s unfortunate. I would rather ship you more electricity, more energy.”
Ford revealed to the Wall Street Journal that Ontario intends to put a 25% export tax on the electricity it sends to Minnesota, Michigan and New York and will tell the province’s energy producers to shut down U.S. exports entirely if Trump moves ahead with more tariffs in April.
Canada’s contributions to the U.S. grid
The three states Ford rattled off are Ontario’s largest customers of exported electricity. Ontario has the third-most hydropower generation capacity of any province, totaling about 9 gigawatts (GW). Quebec (41 GW) has the most, followed by British Columbia (16 GW). Major players including British Columbia Hydro and Power Authority (BC Hydro), Hydro Quebec, and Ontario’s Hydro One have wholesale trading divisions and subsidiaries in charge of power exchanges with the United States.
The United States and Canada share one of the world’s most integrated international electric grids, allowing the countries to pool resources in times of need. Every regional grid in the U.S. is connected to at least one Canadian province except for the Electric Reliability Council of Texas (ERCOT).
The New York Independent System Operator (NYISO) is interconnected with two Canadian system operators, Ontario’s Independent Electricity System Operator (IESO) and Hydro-Québec (HQ), where it can import as much as 2,500 megawatts (MW) from IESO and another 2,100 MW from HQ. Although Canadian imports accounted for less than 1% of annual US electricity consumption last year, NYISO and ISO – New England (ISO-NE) bank on a lot coming from Canada. In 2024, 9% of electricity demand in New England was met through imports from Canada through NYISO.
New York imported the most from Canada in 2024 at 7.7 TWh, according to data from the regulator. Via ISO-NE, Vermont imported 3.9 TWh and Maine imported 2.3 TWh in 2024.
The cost of doing business
Late last week, ISO-NE and NYISO requested authorization from the Federal Energy Regulatory Commission (FERC) to collect import tariffs, although admitting they’re still uncertain if they would (or should) apply to electricity imports from Canada. ISO-NE has estimated Trump’s decision could jack up the region’s power costs by up to $165 million per year, and NYISO claims tariffs on Canadian electricity “would likely amount to tens of millions of dollars per year” for New Yorkers.
“The NYISO and neighboring system operators have serious concerns that applying export tariffs to electricity may have serious adverse effects on reliability and wholesale electric markets,” NYISO stated on its website, emphasizing its FERC filing was made out of an “abundance of caution to ensure that if NYISO is determined to have an obligation under federal law to collect and remit tariffs on electricity imported from Canada it has the cost recovery and allocation mechanism in place to comply with that obligation.”
“The NYISO’s principal and preferred proposal would require any entity that causes Canadian electricity to be imported to New York to bear the cost of the tariffs,” it added.
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The United States spent about $3.2 billion importing 33.2 terawatt-hours (TWh) of electricity from Canada in 2023. The U.S. previously imported much more, topping out at 68 TWh in 2015, according to the Energy Information Administration (EIA). The decline can be attributed to drought conditions over the last few years, which have reduced hydropower generation and brought its cost closer to decreasing U.S. natural gas prices.
As Grid Status points out on the former blue bird app, President Trump’s 10% tariff might be enough to completely topple the scales, destroying any remaining advantages of importing electricity from up north.
Both NYISO and ISO-NE import millions of cheaper MWhs per year from Canada. With just 10% tariffs, this price advantage is nearly eliminated. Both NYISO and ISO-NE import millions of cheaper MWhs per year from Canada. With just 10% tariffs, this price advantage is nearly… pic.twitter.com/uraEkS8jPs
— Grid Status (@grid_status) March 4, 2025
Never-ending tariff Tuesday?
China also punched back at President Trump’s tariff actions Tuesday. The country’s finance ministry announced 15% tariffs on imports of chicken, wheat, corn, and cotton from the United States, plus 10% tariffs on imports of sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
Ms. Sheinbaum says the Mexican government will take its time to consider countermeasures that will likely include retaliatory tariffs, planning to make an announcement by Sunday.
President Trump has shown no signs of letting up on his trade war. A 25% worldwide tariff on imported aluminum and steel is set to go into effect March 12, and an as-of-yet-unspecified tariff on some agricultural products is expected in April.
Since you made it this far, you may be wondering, dear reader, how any of these actions benefit the United States. David Kelly, chief global strategist and head of the global market insights strategy team for J.P. Morgan Asset Management, took a stab at it.
“The trouble with tariffs, to be succinct, is that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity, and increase global tensions. Other than that, they’re fine.”
Reporting from the Associated Press was used in this article.
