Tariff Impacts on Energy, Utility Costs, and Environmental Sustainability - BORDERLINE ECONOMICS 1/2/2025

TARIFFS HAVE INCREASED CONSUMER UTILITY COSTS

Recent data shows that household electricity bills have risen in cost by 9.6% since 2024. With the current cost of living at record highs, the drastic increase in household utility costs raises important affordability concerns for average Americans. One of the major driving forces behind the increase is tariffs implemented by the second-term Trump administration throughout 2025, which have raised the costs of oil and gas imports from Canada. 

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With Canada serving as America’s largest supplier of natural gas, supplying around 98% of all U.S. natural gas imports that make up 43% of America’s fuel for powering the electrical grid, sweeping 25% tariffs on Canadian imports and 10% tariffs on energy imports enacted in March have driven higher costs of natural gas in America, which has in turn increased utility expenses for consumers. The 50% tariffs on steel enacted in June significantly increased costs of natural gas production, with steel being a key component of natural gas production, used for well casing, transmission lines, and pipelines.

Additionally, steel tariffs raise the cost of maintaining the US electrical grid, as steel plays a prominent role in transmission towers and transformer housings. Other tariffs on raw materials, such as 50% tariffs on imported aluminum, have raised costs of construction and repairs for transmission conductors and distribution lines. Such drastic increases to raw materials crucial to keeping the US power grid up are most certainly being passed to consumers through higher power bills.

TARIFF IMPACTS ON CLEAN ENERGY INVESTMENT AND SUSTAINABILITY

One of the Trump Administration’s key focuses this year was driving natural gas usage and oil exports in the US, with the president pushing the “Drill, baby, drill” slogan. During the same time, the administration raised tariffs on components crucial to alternative clean energy production—particularly solar components such as solar modules, wind turbine parts, and batteries. The tariffs have resulted in high costs of clean-energy expansion and integration in America, as well as increased costs of maintaining existing wind and solar infrastructure. 

The use of tariff policy, which has made environmentally sustainable energy expensive in comparison to natural gas and oil, highlights a clear reversal of ESG goals in American utilities. The increased usage of fossil fuels and heightened costs of clean energy investments will most certainly have environmental consequences and have the secondary impact of disincentivizing US businesses from pursuing environmental sustainability in production due to lower real cost savings.

TARIFF CONSEQUENCES ON EVS AND EMISSIONS GOALS

This year’s protectionist trade policy has also significantly disrupted the electric vehicle market. With federal EV credits already having expired, costs of electrical vehicle ownership are projected to rise in the next year. However, tariffs on electrical equipment and autoparts enacted early this year have been modeled to cause electric vehicle sales to decline by about 2 percent to 3 percent. With data showing EV usage lowers CO₂ pollution by two-thirds across the US, the decline in electric vehicle sales and ownership in the new macroeconomic climate and the administration’s focus on natural gas and oil usage will almost certainly cause environmental consequences and regressions in carbon emissions reductions progress.

THE BOTTOM LINE

2025 has seen punitive trade policies that have been partially responsible for the rapidly rising utility bills Americans face, with tariffs on Canadian oil, steel, and electrical components driving increased costs of natural gas production and electrical grid maintenance. The administration has shown a clear emphasis on natural gas and oil usage by placing tariffs on sustainable energy materials and components such as solar modules and wind turbines, which will reverse progress towards environmental sustainability goals. Tariffs will drive a decline in EV sales, which will increase carbon emissions and further hinder international climate goals. Ultimately, the trade policy implemented by the second Trump administration demonstrates a complete disregard for environmental sustainability and does nothing to address the rapidly increasing cost of essential expenses for American households.