Could Trump impose tariffs on electricity? Electricity Canada says it’s not that simple

Angela Amato/LJI Reporter/Investigative Journalism Foundation Because Canada and the U.S. have an integrated system for sharing electricity, tariffs could impact reliability and costs for both.

Angela Amato
Local Journalism Initiative Reporter

Investigative Journalism Foundation

While details on U.S. President Donald Trump’s two-stage tariff plan remain obscure, Canadians are wondering which of their bills might go up. Groceries? Fuel? What about electricity?

Michael Powell, vice president of government relations at Electricity Canada, said tariffs on electricity aren’t as simple as planting a 25 per cent tax on auto parts or dairy.

“There’s a reason that for over 100 years we have chosen to build an integrated system,” said Powell. “Physics and economics and good sense have driven us towards having a wholly integrated grid that benefits all of the people we’re here to support.”

Electricity Canada advocates for electricity providers across the country on policy change and energy security.

Many provinces, including B.C., Alberta, Manitoba, Ontario and Quebec, have long-term contracts with jurisdictions in the U.S. that provide electricity reciprocally when one area needs it and another has a surplus.

Powell said there has never been a tariff on electricity between the U.S. and Canada, so it’s hard to determine how a tariff would even work.

“Both countries have built a system which works under the assumption that electrons move across the border without restriction, without a tariff on it,” said Powell. “There literally hasn’t been a mechanism with which you would apply a tariff to these sorts of transactions.”

He added that during NAFTA renegotiations, there was a letter between Canada and the U.S. which reinforced the energy relationship between the two countries as being tariff-free.

Since the two grids are so intertwined, Powell said tariffs could see electricity bills for both countries take a hit.

“The impact that it would have on the cost of a service would increase power prices to our friends in the U.S. [and] it would potentially cause reliability issues with that.”

A unique feature of the Canada-U.S. electricity relationship is that often when there are periods of high demand in one country, it is a period of low demand in the other, adds Powell.

“You have to build for a peak load either way so that you can share a resource that makes it more efficient for everyone,” said Powell. “Absent Canadian power, it could get pretty dicey in some parts of the U.S., particularly in the northeast where during a very hot or a very cold spell there are capacity limits to how much they can generate.”

With potential reliability issues due to tariffs, jurisdictions could have to pay extra to ensure their regions are getting power, especially during peak times using the spot market. The spot market operates as a trading mechanism to deal with unplanned differences between load and electricity supply where companies will bid into an auction to get the best price on electricity when grids need it unexpectedly.

In December, Ontario Premier Doug Ford threatened to cut energy to the U.S. if 25 per cent tariffs are imposed on Canada. And recently, Liberal leadership candidate Mark Carney said Canada should be open to limiting electricity exports if Trump proceeds with his tariff threat.

Alberta Premier Danielle Smith has taken a different approach, focusing her advocacy on national, energy and border security.

“We were concerned when we saw federal government officials publicly and privately float the idea of cutting off energy supply to the U.S. and imposing export tariffs on Alberta energy and other products to the U.S.,” said Smith in an emailed statement. “Thankfully, a consensus is emerging to take a new approach and to prioritize the things that unite us — rather than divide us.”

The Province of Alberta recently began lobbying in the U.S. Its fourth-quarter report released on Jan. 20, 2025, said its lobbyist “monitored and advised on U.S. energy policy issues.”

In an email, Peter Chura, a spokesperson for Manitoba Hydro, said “It’s too soon to say how potential policy change might affect its fixed price agreements and spot market sales without specific details on the application of proposed tariffs.”

“[We] will continue to monitor this issue as it evolves, but we aren’t speculating on any effects or outcomes,” said Chura.

Manitoba Hydro has also been lobbying in the U.S. on “U.S.-Canada cross-border energy policies” and “federal policies impacting the electricity sector.”

In 2024, Electricity Canada spent $150,000 on lobbying in the U.S. on issues regarding cross-border electricity transmission, but terminated its registration in November.

During a confirmation hearing Wednesday, U.S. secretary of commerce nominee Howard Lutnick said “action-oriented” tariffs could hit Canada Feb. 1 if border security is not tightened in an effort to stop fentanyl from coming to the U.S.

“This is a separate tariff to create action from Mexico and action from Canada,” said Lutnick. “As far as I know they are acting swiftly and if they execute it there will be no tariff.”

Alberta has taken measures to avoid these “action-oriented” tariffs with RCMP Black Hawk helicopters patrolling the Alberta-Montana border as of Tuesday. Similar flights took off in Manitoba earlier this month and are scheduled in Eastern Canada for later this week.

But Canada isn’t in the clear just yet. The Trump administration implemented the America First Trade Policy on Jan. 20, ordering studies on tariffs on Canada and Mexico to be completed by April 1, 2025.

“We need to grow domestic manufacturing,” said Lutnick. “I think a thoughtful tariff policy that drives domestic manufacturing is fundamental to American workers.”

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