Trump’s tariffs spell uncertainty for renewables markets

President Trump's recent tariff announcements, coupled with the potential for retaliatory tariffs, have resulted in a great deal of uncertainty around supply chains and the potential for rising costs.

To weigh some of the potential impacts these tariffs could have on energy markets, Wood Mackenzie hosted an online discussion highlighting some of the more apparent short- and long-term consequences.

Peter Martin, head of Economics at Wood Mackenzie, stated that the scale of the reciprocal tariffs has already taken its toll on global markets, and could see negative effects on the US economy.

He said: “If these tariffs stay in place, it’s difficult to see how the US can avoid a recession,” adding the trade barriers could knock off 1% GDP growth this year.

For the rest of the world, countries are looking at how exposed they are to US trade.

Have you read?
Trump’s new executive order plans to make coal great again
WEC’s Wilkinson warns Europe to not develop global ‘blind spot’ because of Trump

Martin stressed that in the short term, uncertainty around supply chains would abound and in the long term countries will be looking for alternative trading partners.

“Trump has turned the ship around on global trading…we have jumped back about 100 years,” said Martin, a turnaround that has left many questioning whether the US plans to go it alone thereby galvanising the rest of the world.

Impact on power and renewables

Benjamin Boucher, senior analyst, Market Intelligence Group at Wood Mackenzie, provided insights into potential cost increases that could result from the tariffs announcements.

Boucher highlighted three main areas where these cost implications could be felt, including:

• Increased rates of physical equipment imported,
• Increased costs of manufacturing using imported materials,
• Increased demand for domestically produced equipment.

These cost increases could impact for example solar modules, batteries and balance of plant equipment, having a knock-on effect for utilities and renewable energy companies alike.

Imports from China will hit the renewables industry hard, said Boucher. China is the largest battery manufacturer globally, with the US importing $16 billion worth in 2024.

Solar will also take a hit, as around 84% of modules came from Southeast Asia and in terms of utilities equipment, the US imports around 80% of required power transformers.

Boucher predicts that some relief could come from the exemptions for rare metals like copper and polysilicon.

Ultimately, however, cost increases for Li-Ion batteries could be as much as 25% and solar as much as 12%.

Chris Seiple, vice chairman, Energy Transition and P&R at Wood Mackenzie, commented that despite the Inflation Reduction Act, the cost of installing a solar project in the US is now 50% higher than the cost of installing a solar project in Europe. “Tariffs are making US a high-cost country for producing solar,” added Seiple.

According to Isabel Schwartz, vice president, Supply Chain Consulting at Wood Mackenzie, utilities are already starting to feel the impact of the tariff increases.

“Supply chain and project leaders are on the front lines with this dealing with the volatility in real time,” she said.

Utilities are having to take a three-pronged approach to navigate the complex situation, said Schwartz, by assessing the impact across the spend profile, responding to immediate impacts and creating long term strategies to boost supply chain resilience.

The situation is volatile and in a state of flux, with some countries entering talks with US officials to negotiate lower tariff rates and the most recent announcement of a pause on reciprocal tariffs for 90 days. Also, China is now facing 125% tariffs after announcing a new round of retaliation.