US steel tariffs set to hike costs, lead times in clean power

Reuters

14-04-2025

April 14 - Last month, President Donald Trump raised steel and aluminum tariffs by 25%, ending all country exemptions, in addition to higher tariffs on China already hitting the clean power sector. The Trump administration expanded the list of derivative products subject to tariffs, covering a broader range of manufactured goods, including items used by the energy industry.
In a rapidly evolving tariff war, Trump on April 9 abruptly paused an additional hike in tariffs on global trading partners for 90 days, leaving an additional baseline 10% tariff on all imports from all countries in place, on top of the tariffs on steel and aluminium and tariffs imposed on individual countries like China, Canada and Mexico.
The U.S. is the world's largest steel importer, excluding the European Union, with a total of 26.2 million tons of imported steel in 2024, up 2.5% from 2023, according to the U.S. Steel Imports Report from the U.S. Department of Commerce's International Trade Administration (ITA). Finished steel imports accounted for 23% of domestic consumption in 2024, according to the American Iron and Steel Institute.
"From an energy perspective the impact will certainly be large, as we don't currently have the capacity to manufacture everything domestically," Lynlee Brown, partner in Ernst & Young LLP's Global Trade practice, told Reuters Events.
CHART: Top sources of US steel imports
Steel and aluminum are widely used in power grid projects, wind farms and solar farms. Affected components include cables, wires, conductors, generators, substations, transformers, energy storage systems, wind and transmission towers, solar racking and infrastructure.
Transmission and wind power projects may be the most affected by the new tariffs due to large amounts of steel and aluminium required.
"Tariffs are inherently inflationary and will drive up both domestic and imported steel prices," said Earl Simpkins, partner at PwC.
"Overall, the supply chain will face increased costs and extended lead times as companies prioritize securing reliable supply and pricing stability," he said.
Costs jump
Building domestic production capacity can take time and broad tariff implementation across sectors without a strategic approach is likely to hurt American consumers and communities, according to Vanessa Sciarra, vice president of Trade & International Competitiveness for the American Clean Power Association (ACP).
'Just as other major sectors understand, history shows building a robust supply chain doesn't happen overnight,' Sciarra said in a statement. 'The policy whiplash from these tariffs will ultimately undermine the ability to realize a domestic supply chain and will constrain efforts to deliver energy security and reliability for Americans.'
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Supply chain companies may try different valuation and classification cost methodologies to mitigate the impacts of tariffs on their product prices, but not every company will be able to absorb the tariff-related costs.
The combination of tariff changes issued by the Trump administration could increase the total tariff burden for the Energy, Utilities and Resources Industry from $400 million a year to approximately $53 billion a year, according to PwC's US Tariff Industry Analysis. This does not include the latest universal 10% hike on a large number of countries.
CHART: US annual clean power installations
New tariffs on steel and aluminum will make it "more expensive to deploy wind in the US," according to Endri Lico, analyst of Wind Supply Chain & Technology, Power & Renewables at WoodMackenzie.
The higher tariffs on metals alone could increase the cost of wind power projects by 1%, Lico said.
'The challenge is not only on the steel tariffs but also on all the tariffs that the new administration imposes," he noted.
Uncertainty hurts
President Trump's tariffs and reforms to energy policies will create uncertainty that affects decision-making and strategies in clean power deployment, according to David Victor, Professor of innovation and public policy at the University of California at San Diego's School of Global Policy and Strategy.
"These tariffs will raise the costs of some of the technologies, so that will slow down the energy transition, but I think the much bigger impact is the uncertainty and the anxiety that is going to happen over the longer term," he said, referring to logistics and supply chain disruptions as industries try to adapt to the shifting tariff and policy scenarios.
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Developers are becoming more cautious about making significant financial commitments, Benjamin Snowden, Clean Energy and Environmental lawyer at Fox Rotshchild, said.
Regulated contract structures like power purchase agreements (PPAs) should be adapted to account for changes to tariffs and other market drivers, Snowden said. These can be adapted at state or network level.
Contract changes could include clauses that allow developers to terminate contracts under certain circumstances or price adjustment clauses that allow renegotiation following tariff and tax policy shifts that materially affect project costs.
"We need to evolve our contract structures to have a more nuanced way to allocate risk that protects rate-payers, ensures reliability, and makes it possible to build these projects," Snowden said.