Impact of Tariff on the Global Energy Industry

The recent changes brought by the U.S. tariff policies have had a profound impact on the global energy & power industry with impact on various sectors, including oil & gas, renewables, mining, power, battery, and other verticals. The implication of tariffs can cause disruptions in the global supply chain that can raise import costs, particularly in the energy sector, impacting the imports of several components such as wind turbines, solar power plants, and energy products such as liquefied natural gas (LNG) or coal.

U.S. oil & gas companies could see a rise in production costs, thereby affecting long-term contracts with international partners. For instance, some major countries that export petroleum are experiencing significant impacts with Iraq facing 39%, Libya 31%, Algeria 30%, and Venezuela 15% tariffs. Mexico and Canada are the most vulnerable; Europe, India, and China are expected to feel relatively minimal immediate effects. Some of the highest tariff rates are imposed on emerging export powerhouses in Southeast Asia, including Vietnam, Indonesia, Bangladesh, and Thailand. These Asian nations were anticipated to account for 60% of the oil demand growth this year and to lead in the LNG imports in the coming years, which may now be uncertain.

Tariffs are Undermining Clean Energy Investments

• In 2024, clean energy deployment in the U.S. witnessed attractive growth, with wind and solar power generation accounting for a combined 17% of the electricity generation in the U.S., surpassing coal generation.


• Also, the Energy Information Agency (EIA) has stated that the battery scale energy storage capacity increased by 66%, along with electric vehicle (EV) sales increasing by more than 7% reaching a record 1.3 million. The resurgence of fossil fuels could substantially restrict the onshore and offshore wind projects due to reduced funding from the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL).


• The International Energy Agency (IEA) stated that China accounts for between 40-98% of global manufacturing capacity for each key clean technology and component. Also, China produces over 95% of global polysilicon wafers that are widely used in solar panels.


• In 2024, U.S. imported over 54 gigawatts worth of solar panels, the majority of which were sourced from Thailand, Vietnam, Malaysia, and Cambodia.


• Domestic manufacturers in the U.S. accounted for just 30% of the wind turbine blades installed in the country in 2024. The wind power-related equipment imports to the U.S., including drivetrains, electrical systems, and blades, were valued at USD 1.7 billion, with 41% of imports coming from Canada, Mexico, and China.


• The manufacturers of solar panels that rely on imports from China could face higher prices, hampering the expansion of renewable energy. For instance, the tariffs on Chinese solar cells increased from 25% to 50% in 2024. Also, the tariffs raise the costs for consumers in the U.S., as manufacturers and installers transfer the financial impact of trade tariffs onto the buyers.

As a result of a series of tariffs introduced by the new administration, the rate of solar panels has risen to 175% for complete solar panels from China and to 195% for polysilicon, wafers, and cells. The new tariffs will be imposed on two of the largest solar suppliers to the U.S., Vietnam at 46% and Cambodia at 49%, which will probably hinder solar deployment in the U.S.

Tariffs to Deter Private Investments

The Inflation Reduction Act (IRA) was signed as a law in August 2022 and aims to boost the U.S. clean tech manufacturing, which has resulted in more than USD 115 billion private sector investments in EV, solar, battery, and wind manufacturing between 2022-2024. Also, EV battery manufacturing was on track, with ten new electric vehicle battery manufacturing units set to go online in 2025. However, some factories which were delaying or pausing their construction could increase the production cost for the manufacturers, leading to higher prices for consumers & reduced profit margins.

• For instance, KORE Power is bailing on its plans for a USD 1.2 billion lithium-ion battery gigafactory in Arizona.


• Furthermore, the first quarter of 2025 has reported approximately USD 8 billion worth of clean energy industry investment cancellations, and 16 large-scale projects were canceled, closed, or scaled back. This represents more than triple the amount of investment cancellations seen over the previous two years combined which reflects uncertainties prevailing in the clean energy sector.

Impact of Tariffs on Global Trade Relations

The major regions and countries operating in the energy industry, such as the Middle East, Asia, Russia, and other countries are anticipated to experience strain in their trade relations, particularly in oil & LNG exchanges. The impact on trade relations will lead to a shift in global trade flows, leading to the diversification of contracts and the market reach by the exporting countries. The impact of tariffs extends beyond the supply chain, leading to a considerable impact on investors and financial markets. For instance, the imposition of tariffs on the energy stock market will lead to the announcement of new trade policies, causing increased volatility in energy industry company stocks. Thus, the newly proposed but delayed reciprocal tariffs could slow down deployments as they imply much higher tariffs on imports and apply to many countries.