The energy transition risks being the first real victim of the trade war with unpredictable outcomes initiated by Donald Trump. The protectionist turn of the United States is, in fact, already having direct repercussions on the global energy sector, thanks to the reaction of the main producers of clean technologies, primarily those in Southeast Asia, the response of the oil market and the worsening crisis in the steel industry.
If one were to put it in mathematical terms, one could say that the relationship between tariffs and energy transition is directly proportional to the number of tariffs imposed on clean technology supply chains and inversely proportional to the favouritism shown towards Big Oil. Consistent with his own motto, “Drill, baby drill”, Trump has seen fit to spare the oil companies that supported him in the election campaign from the global sting. This is also why there is talk of a customised tariff offensive, in which the targets are basically Europe and China.
Solar panels and wind turbines, supply chains under pressure
Since Trump’s tariffs officially kicked in, stocks around the world have plummeted, indicating the critical direction in which the world economy is heading. Among the energy sectors most affected by the trade war are photovoltaics and wind power, which rely on raw materials and components from China, Vietnam, Thailand and Cambodia. Due to the new tariff regime, supply chains in these countries will be forced to find outlets elsewhere. In more detail, the tariffs, ranging from 10% to 49%, on electrical components, battery storage systems and other equipment from China, Southeast Asia and Europe represent a double blow to an industry already tested by Trump’s support for the fossil fuel industry and his lack of openness to clean energy.
According to the Financial Times, imports of Chinese energy storage cells will be subject to an additional tariff of 34%, on top of the 20% previously announced by the administration. In total, between the existing tariffs, the new tariffs wanted by Trump, and the planned increases during the Biden presidency, the total tariffs on Chinese cells will reach 82.4 per cent by 2026.
The risk of higher bills in the US
Domestically, the tariffs provide an additional reason for US companies to delay investments in renewables. US executives have warned that the extra costs resulting from the tariffs could lead to higher electricity bills. According to Bank of America, electricity prices rose at twice the rate of inflation in 2023, with many utilities requesting double-digit increases to cover price hikes for materials, labour and grid modernisation.
‘This could be a decisive brake just as we need to usher in a new era of energy leadership that can place the US at the centre of the AI anddata center universe,’ said Sandhya Ganapathy, CEO of EDP Renewables North America. ‘From a business perspective, it is an element of great instability and uncertainty.’
The crisis in the European steel industry
Domestic disputes are not holding back the US President, who justifies his decisions with the need to strengthen domestic production and reduce dependence on foreign markets. The situation in the steel sector is also not reassuring. In fact, the application of the Tycoon’s tariffs risks aggravating the crisis in which the sector already finds itself, particularly in Europe, where the strategic sector for the development of renewable technologies, as well as batteries, electric cars and building systems, is already threatened by ruthless competition from China, which floods the market with cheap steel. The figures speak for themselves: EU steel exports have plummeted from 29 million tonnes in 2014 to only 16 million in 2023. Shipments to the United States, one of the key markets, fell from an average of 3.3 million tonnes (in the period 2014-2018) to 2.2 million between 2019 and 2024.
Oil and Gas prices are down, but at what cost?
In recent hours, there has been much talk about the falling cost of fossil fuels in the US. Oil prices in the US have fallen rapidly below $60 per barrel, the lowest level in four years. An apparent boon for consumers and businesses but a wake-up call for the economy. Should the downward trend continue, many oil and gas companies could cut investments, reduce production, and lay off staff, with serious consequences for the US industrial fabric.
