US President Donald Trump’s decision to impose tariffs on Canada, Mexico and China has led to significant shifts in the global trade order, posing serious risks for the renewable energy, electric vehicle (EV) and climate technology sectors in particular. The new trade policy brings protectionist approaches to the forefront while threatening long-standing cost reductions and supply chains in the clean energy sector.[1] The Trump administration’s withdrawal from international protocols on climate change complicates the implementation of major energy transition and climate change-related decisions.
The tariffs announced by Trump include a 25% tariff on imports from Canada and Mexico and a 10% tariff on products from China. However, the tariffs on Canada and Mexico were temporarily suspended after last-minute negotiations with the heads of both countries.[2] Under this agreement, Canada and Mexico agreed to take more responsibility in the combat against illegal immigration and drug trafficking. On the other hand, the tariffs imposed on China were quickly met with retaliation. Beijing imposed restrictions on US imports of oil, liquefied natural gas (LNG), vehicles, agricultural equipment and filed a formal complaint within the World Trade Organization (WTO).
While the Chinese Ministry of Commerce described the Trump administration’s decision as “malicious”, Trump stated that this was only the beginning and that he would take harsher measures if necessary. Europe is closely following the process. Although Trump has not yet imposed direct tariffs on European goods, during the election campaign he had frequently stated that he might impose additional tariffs on European products. Therefore, European countries and business leaders are preparing for possible restrictions from the US. However, the government changes in the member states and the lack of a unified political discourse within the European Union raise questions about what kind of decisions the EU will take on this issue.
Although Trump’s trade policies do not directly target the clean energy sector, the uncertainties it will create in global supply chains could have significant negative impacts on the climate technology and renewable energy sectors. Increased dependence on imports, particularly for raw materials, and the production facilities being overseas could restrict US citizens’ access to products or increase their costs.
International trade or globalization is known to play a critical role in reducing clean energy costs. According to recent studies, energy storage costs fell by 89% and the costs of offshore wind projects by 65% between 2009 and 2024. These reductions have been driven by lower production costs and the streamlining of global supply chains. However, new tariffs threaten these gains.
In particular, additional tariffs on China could lead to significant cost increases in the production of solar panels, batteries and electric vehicles. According to the International Energy Agency (IEA), 75% of the world’s lithium-ion batteries are produced in China. In addition, a significant portion of the steel and wind turbine components used in the US are procured from Canada and Mexico. For example, about 75% of a wind turbine is made of steel, much of which comes from Canada.
The American Clean Energy Power Association warns that the new tariffs could negatively impact investments in the clean energy sector. “Increasing the costs of power generation inputs will drive up consumer energy costs and reduce our capacity to ensure energy abundance,” the association said.
EV production around the world is expected to be severely affected by this trade war. General Motors’ all-electric Chevrolet Blazer and Equinox models are produced in Mexico. Canada provides about half of the refined nickel used by the US. Nickel is a critical raw material for battery production.[3]
Economic and energy experts believe that Trump’s new trade regime could slow the global energy transition and increase energy costs. David Victor, Professor of Innovation and Public Policy at the University of California, San Diego, stated that these developments could harm the clean energy sector in the long run: “This is likely to slow down the energy transition because it increases costs, especially tariffs on China, causing chaos in supply chains.”[4]
On the other hand, these developments may also have a negative impact on the fossil fuel sector. The US oil industry is concerned that trade barriers could increase the prices of crude oil and refined products. “Energy markets are highly integrated, and free and fair trade across our borders is critical to providing affordable and reliable energy to US consumers,” said Mike Sommers, Chief Executive of the American Petroleum Institute (API).[5]
This uncertainty may lead companies to reconsider their investment plans. In the renewable energy sector, it could result in reduced investment, postponement of new projects or shifting production to other countries. “Such sweeping interventions are very costly. These moves by the US against the global trading system could be bad for both the American economy and the world economy.” said Gernot Wagner, a climate economist at Columbia Business School.[6]The S&P Global Clean Energy Index has fallen 16% since November. Renewable energy companies in the US lost 9% on average, while those in Europe fell 15%.[7]
Ultimately, these moves, which could lead to higher energy costs in the US, could also put a strain on the fossil fuel sector. A slowdown in the global energy transition has the potential for long-term negative consequences, both economically and environmentally.
[1] “What are tariffs and why is Trump using them?”, BBC, https://www.bbc.com/news/articles/cn93e12rypgo, (Accessed: 14.02.2025).
[2] “Could Trump’s Tariffs Trump’s Spark an Energy Trade War?”, Energy Digital, https://energydigital.com/sustainability/could-trumps-tariffs-spark-a-global-climate-tech-trade-war, (Accessed: 14.02.2025).
[3] “Trump Tariffs Spark Fears of Clean Energy Supply Chain Chaos”, SCIAM, https://www.scientificamerican.com/article/trump-tariffs-potential-clean-energy-effects-explained/, (Accessed: 14.02.2025).
[4] “Q&A: The Energy, Trade and Geopolitical Implications of the Trump Tariffs”, Columbia SIPA, https://www.energypolicy.columbia.edu/the-energy-trade-and-geopolitical-implications-of-the-trump-tariffs/, (Accessed: 14.02.2025).
[5] Ibid.
[6] Ibid.
[7] “Las medidas de Trump se cobran el peaje en las renovables de todo el mundo con caídas del 16%”, CincoDias, https://cincodias.elpais.com/mercados-financieros/2025-02-12/las-medidas-de-trump-se-cobran-el-peaje-en-las-renovables-de-todo-el-mundo-con-caidas-del-16.html, (Accessed: 14.02.2025).
