Donald Trump’s latest tariffs are likely to significantly impact the renewable energy sector, risking higher costs, strained supply chains, and undermining the U.S.’s goal to take the lead in artificial intelligence, according to industry leaders.
The new tariffs, which range from 10% to 49% on electrical parts, battery storage systems, and other equipment from China, Southeast Asia, and Europe, come as an added blow to an industry that is already facing challenges from Trump’s favoring of fossil fuels and his reluctance towards clean energy initiatives.
Industry executives have cautioned that these tariffs will ultimately lead to increased consumer electricity bills. Data from Bank of America shows that electricity prices increased at double the rate of inflation last year, with many utility companies seeking substantial price hikes from regulators to offset rising labor and material costs, along with necessary grid upgrades.
“This situation could severely delay our progress toward achieving energy independence and making the U.S. a hub for data centers and AI technology,” said Sandhya Ganapathy, CEO of EDP Renewables North America, a leading developer in wind, solar, and battery storage.
She noted that the added costs create significant disruptions for businesses.
Analyst Julien Dumoulin-Smith from Jefferies described the tariffs as causing “a lot of turmoil” during a time when there is uncertainty surrounding whether Trump might eliminate the green energy incentives established by the previous administration.
Dumoulin-Smith stated, “These tariffs will likely make companies hesitant to invest. The problem is that many renewable sectors, like solar and wind, still don’t have a robust domestic supply chain. This means buying from international suppliers is often the only option.”
In response to the domestic manufacturing gap, President Biden initiated a reshoring initiative by introducing extensive tax incentives under the Inflation Reduction Act and Chips and Science Act. Since the enactment of these laws over two years ago, more than 200 large-scale manufacturing projects have been initiated, although many are yet to begin production.
Experts emphasize that the green energy industry is especially vulnerable to tariffs due to its heavy reliance on foreign imports and decreasing government support. Trump has frequently criticized the Inflation Reduction Act, referring to it as a “green new scam,” while placing a strong focus on fossil fuel development, which has dampened investments in renewable energy.
The battery storage sector is among those most affected, as it is crucial for harnessing renewable energy. Research from Rho Motion reveals that over 90% of lithium-ion energy storage cells used in the U.S. came from China last year. Despite efforts to boost domestic production, the U.S. still lacks the capacity to fulfill its demand.
Currently, imports of Chinese storage cells face an added 34% tariff on top of a previous 20% rate, bringing the total potential duties on these products to an alarming 82.4% by 2026.
“The U.S. storage industry will bear significantly higher costs for these cells compared to other nations,” said Iola Hughes, an analyst at Rho Motion.
While there is some growth in U.S. production of storage cells, many of the new facilities will still depend on imports of components from China, which will incur tariffs.
In the solar panel market, the U.S. imported about 95 million photovoltaic panels last year, primarily due to stockpiling in anticipation of tariff changes. Most of these imports came from countries now facing high duties, such as Vietnam and Malaysia. Experts, including Marius Mordal Bakke from Rystad, predict an uptick in imports from regions like the Middle East and Africa.
“The expectation is for a quicker increase in domestic manufacturing of cells and modules, but costs for developers will inevitably rise,” Bakke added, noting the U.S. remains dependent on imports of polysilicon and wafers.
The wind energy sector also faces challenges, relying heavily on EU imports for components like blades and electric systems. A report suggested that universal tariffs of 25% on imported wind products could spike project costs by 7%, jeopardizing many projects.
Additionally, the U.S. needs to upgrade its electric grids to cater to increasing power demands, but the tariffs will inflate the costs, resulting in higher electricity prices for consumers.
Ganapathy concluded, “Many critical components, including transformers and circuit breakers, are sourced from abroad. These tariffs impact not only new projects but also the stability of our existing grid, which needs to keep up with soaring energy demand.”