Donald Trump’s “energy dominance” agenda, already looking increasingly difficult to achieve, is now taking a massive blow from the president’s trade agenda.
Despite Trump’s choice to exempt at least part of the energy industry from the sweeping tariffs that partially go into effect at midnight Friday, virtually no part of the U.S. energy and electricity industries will be able to avoid cost increases and significantly longer timelines induced by the new tariffs.
“There’s so much that’s deeply incoherent about this policy,” said Joe Webster, an energy expert at the Atlantic Council think tank and a former energy consulting analyst, about Trump’s new tariffs.
The tariff policies technically exempt oil and gas products, reflecting the way that the Trump administration has favored oil and gas over renewables like wind and solar.
But the tariffs — and the retaliation already underway from China — are expected to raise prices for the petroleum industry, renewable energy companies, utilities, data centers, and eventually everyday electricity bills, analysts told NOTUS. They are also expected to exacerbate existing shortages of critical infrastructure like transformers, which could further impair the slog to get new sources of energy online across the country.
“There are tremendous stakes for oil and gas in the steel tariffs,” said Clayton Seigle, a leading oil industry analyst and chair of the energy sector at the Center for Strategic and International Studies. “Even though the oil companies probably got the best-case scenario in terms of energy commodities, steel is probably one of the biggest input costs for oil and gas production.”
The country is already facing a historic increase in electricity demand, long delays in projects to build new sources of power, and rising electricity prices — all of which Trump has packaged as an “energy emergency” and pledged to address through a new era of “energy dominance.”
His administration is seeking to increase oil and gas drilling, make electricity more affordable, and embrace the race to build out massive, power-hungry data centers necessary for advancements in artificial intelligence.
Industry watchers say the tariffs will immediately make it more expensive to produce more oil and gas, build out new sources of power generation, and expand data centers and artificial intelligence.
“It’s one, extremely logical. Two, incredibly obvious. And three, apparently rejected by the White House,” Webster said of problems tariffs will pose for cheap new electricity. “Electricity is often the key constraint for new data center projects and so, impairing the U.S. ability to construct additional electricity generation and transmission is going to severely degrade our ability to compete with China on artificial intelligence.”
The White House did not immediately respond to requests for comment.
The petroleum industry has already been especially hard-hit by the 25% steel and aluminum tariffs that went into effect March 12, leading to significant increase in costs. The tariff costs led to stunning reports of industry pessimism in the latest quarterly survey from the Dallas Fed, a survey that reflects what industry leaders are telling the White House, multiple lobbyists told NOTUS.
“So many components go into building and maintaining energy infrastructure. Some sectors will be disproportionately hit harder than others, but the pain will be felt across the board,” said Nick Loris, the vice president of policy at C3 Solutions, a pro-innovation, deregulation environmental advocacy group that has advised the Trump administration’s Department of Energy.
On Friday, the fossil fuels industry found itself with another unexpected problem. In retaliation for the new tariffs, China added the rare earths mineral lutetium — which is used in oil and gas refining — to its list of products with export controls, inducing a major disruption to the supply chain.
It’s not clear whether it will be possible for the industry to build a sufficient stockpile of lutetium to avoid shortage issues, Reed Blakemore, an energy expert at the Atlantic Council, said.
“I would expect that the Trump administration makes a concerted effort to ensure that commodity and materials material supply chains don’t undercut wider energy production targets, but it is a tension that I think is emerging as a result,” he said.
Even if the oil and gas industry gets further protections from Trump, fossil fuels alone cannot address the increasing power demands on the grid. Timelines for new natural gas plants to be built and connected are longer than they are for wind and solar in some places, and battery storage buildout plans are critical for the plans of grids in Texas and California. Unlike oil and gas, batteries, wind, and solar have no exemptions from the tariffs. And getting them online requires more investments in electricity infrastructure, which will now be more expensive.
“A lot of transformers and electrical equipment are imported, so the costs would rise at the same time that electricity costs are already on the rise,” said Rob Gramlich, the president of Grid Strategies, a transmission-focused consulting firm.
Companies, from oil and gas producers to solar and wind, will for now avoid making any big changes to their long-term strategies because they cannot trust that the administration’s policies will be consistent in the long term, industry insiders told NOTUS.
(Industry groups have for the most part issued neutral public statements on the tariffs, neither challenging them explicitly nor embracing them. Almost entirely, energy industry leaders insisted on speaking with NOTUS on background for this story, unwilling to draw attention from the Trump administration).
“Sudden changes in policy can be incredibly disruptive, chilling investments and slowing job creation — especially for manufacturers. In the global competition for capital, manufacturers need long-term policy certainty to be confident about making multi-billion-dollar investments,” said Abigail Ross Hopper, the president of the Solar Energy Industries Association.
But many leaders — including those advising the renewable power industry — remain confident that the Trump administration will eventually negotiate deals with some of the most critical trading partners.
“You need to ensure that your trade agenda doesn’t undercut your energy dominance agenda,” Blakemore said. “As we see this administration, particularly the wider politics fall into place, I think you will see some further efforts to align those two spaces. Right now, we’re operating in a period of opacity, which makes it a little difficult to see with precision how those two sides of the wider Trump strategy will unfold in a durable fashion.”
But certain choke points will get worse in the meantime, Webster cautioned. Transformers, for example, are necessary to move electricity from the point where it is produced to the consumer. And now, U.S. buyers will find themselves shunted to the back of the line.
“It’s going to substantially impair our ability to build new things in the United States,” he said.
—
Anna Kramer is a reporter at NOTUS.