Trump’s tariffs spark backlash across energy, tech and auto industries
Steep U.S. tariffs on China, Canada and Mexico touched off a trade war Tuesday that could make cars and gasoline more expensive and drive up the costs of building power plants and pipelines to fuel America’s booming tech industry.
For the second day, stocks tumbled Tuesday across the energy, big tech, auto and industrial sectors. President Donald Trump’s decision to move forward with higher import duties after a monthlong reprieve for the nation’s largest trading partners fueled concern that the U.S. policy and retaliatory tariffs by Trump’s targets could do considerable damage to the economy and push Mexico into a recession.
“Investment flows, capital investment, labor force expansion, all these things that allow all of this to happen, that won’t happen if you increase the cost of trade,” said Kenneth Medlock, an energy economist at Rice University’s Baker Institute for Public Policy.
On Monday, the Federal Reserve Bank of Atlanta estimated significant negative GDP growth for the first quarter, at -2.8 percent. Moody’s Asset Management Research team warned Tuesday the tariffs are adding to strains on smaller, heavily indebted U.S. companies.
By any historical measure, the first six weeks of Trump’s term have been chaotic. Severe and rapid cuts to the federal workforce and a spending freeze are setting up clashes with Congress and the courts. But Trump also faces the challenges of a campaign promise that never gelled well with Trump’s tariff plans — his pledge to beat back inflation by driving down the cost of energy in the United States.
“Trump promised to lower prices. Instead, he is jacking up the costs of groceries, gas, power and electronics,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee. “The U.S. auto industry will be devastated. American farmers and exporters are already seeing their markets evaporate and jobs destroyed as a result of Trump’s senseless trade war.”
The U.S Chamber of Commerce also opposed Trump’s tariffs.
“American families and businesses are struggling with high costs. It’s one of the top issues that they want policymakers to address,” said Neil Bradley, chief policy officer for the Chamber.
Trump imposed 25 percent border tariffs on Mexican and Canadian imports, limiting to 10 percent tariffs on Canadian oil shipments. Trump also added 10 percent to existing tariffs on goods from China.
In response, China fixed tariffs of up to 15 percent on American farm exports and tightened trade restrictions on an expanded number of U.S. companies. Canada is preparing retaliatory tariffs on more than $100 billion worth of U.S. goods.
“Today, the United States launched a trade war against Canada, their closest partner and ally, their closest friend,” said Canada’s Prime Minister Justin Trudeau. “At the same, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense.”
Speaking to CBS News on Sunday, Treasury Secretary Scott Bessent urged Americans to see the big picture. “It’s a holistic approach. There will be tariffs. There will be cuts in regulation. There will be cheaper energy,” Bessent said. “I’m expecting inflation to continue dropping over the year.”
Some Republicans in Congress, whose constituents could suffer as a result of trade retaliation, are calling Trump’s actions the kind of negotiating ploy the president relishes.
“We’ve seen this movie before, and you’ve watched a lot of those countries turn around and get in line,” Texas Republican Rep. Randy Weber told a POLITICO policy forum last week.
Cars: ‘Prices will go up’
U.S. electric vehicles are likely to get more expensive with Trump’s high tariffs on Canada and Mexico, with the lightest impact on Tesla and heaviest burden on Midwestern stalwarts Ford and General Motors.
Analysts see the auto industry bearing the brunt of tariffs because it involves so much trade activity. Vehicles contain thousands of parts, and automakers’ North American supply chains are tightly integrated, with components crossing borders several times — and each crossing representing a markup.
“Production will be disrupted, supply will be restricted, and prices will go up,” said Jonathan Smoke, the chief economist of Cox Automotive, which tracks auto business trends.
The reason that Ford and GM will feel the tightest pinch is that unlike foreign automakers, their most popular electric vehicles are mostly made in Mexico. Their top EV brands — ones they are starting to successfully compete with Tesla — are made there, including Ford’s Mustang Mach-E there, GM’s Chevrolet Equinox and Blazer EVs. (GM’s plant also makes one of 2024’s EV sales standouts, the Honda Prologue.)
Tesla is likely to feel less tariff pain because among automakers it has the highest proportion of U.S.-made components.
Meanwhile, foreign automakers operating in the U.S. will dodge the trade levies because they either make their EVs in the United States or import them from home countries that so far have not been targeted by Trump’s tariffs.
For example, Volkswagen makes its ID.4 in Tennessee, Hyundai the Ioniq 5 in Georgia, and Mercedes its luxury models in Alabama. But many automakers also imported directly from their home Japan, Korea or Europe at tariff rates far lower than are now in place on imports from Canada and Mexico.
Electric vehicles will see a larger price bump than conventional internal-combustion vehicles because most of them are built with batteries or battery parts from China, said Dan Hearsch, an automotive analyst at AlixPartners. On Tuesday, China was targeted with 10 percent tariffs on top of a 10 percent round from the month before.
Big domestic manufacturers have been spending billions to develop new electric models, along with the factories and battery plants to produce them. If the tariffs remain in place for long, the companies could have a hard time recovering those costs.
“It’s not going to be helpful,” Hearsch said of the tariffs. “If this limits the volume made and sold of particular vehicles that don’t really share a platform with others, that’s much harder.”
It’s unclear what impact the new tariffs will have on GM or Ford’s calculus when they price their EVs, said Alan Baum, an independent auto analyst in Detroit who specializes in EVs.
They have several X factors to consider as they also digest the impact of record tariffs.
Because traditional automakers have not yet reached large-scale EV manufacturing, they lose money with every EV they sell. And the Trump administration has threatened to dismantle tax incentives and other policies that promote EVs. Whether the Republican Congress will act on EV rollbacks is unknown.
“If you’re General Motors, you’re more concerned about the [internal combustion engine] Silverado than you are about the Equinox EV,” Baum said, because traditional trucks like the Silverado are the “movers and shakers of your revenue and profits.”
Oil: What is energy security?
Prices at the pump could soon rise as well, said Patrick De Haan, head of petroleum analysis at the fuel-price-tracking service GasBuddy. But those impacts will likely vary regionally.
“The Northeastern United States has become more accustomed to importing refined products from Canada,” De Haan said. “There, the oil’s already been refined and it’s very much a just-in-time delivery system for gasoline.”
The price increases will next impact the Midwest and Rocky Mountain regions, De Haan said, if the tariffs continue beyond a couple of weeks. If the tariffs last that long, he said, prices in those regions could rise by $0.05 to $0.15 a gallon.
Those responsible for refining crude into gasoline and other products expressed concern Tuesday. In a statement, Chet Thompson, CEO of the American Fuel & Petrochemical Manufacturers, said fossil fuel imports are necessary for U.S. “energy security.”
“Imposing tariffs on energy, refined products and petrochemical imports will not make us more energy secure or lower costs,” he wrote. “So, we continue to hope quick resolution can be found with our North American neighbors.”
Smaller oil producers, represented by the Independent Petroleum Association of America, also expressed concern about the effect of steel and aluminum tariffs on the cost of well construction for U.S. oil and natural gas producers.
“The new tariffs on steel and aluminum imports could undermine the successes of the administration’s goal of American Energy Dominance,” IPAA CEO Jeff Eshelman said in a statement, an ally of Trump’s energy policy.
Building power plants
Beyond any immediate impact to electricity prices, the tariffs could dampen the long-term build-out of the nation’s electric grid.
The U.S. imports some 80 percent of transformers — the electric equipment necessary to either step down or step up voltage on the transmission and distribution system — with most of those imports coming from Mexico.
An analysis published this week by the Atlantic Council citing U.S. Census Bureau data found that about half of transformers imported to the U.S. came through Mexico, which offers the lowest prices. The U.S. already faces a shortage of transformers that has forced developers to wait as long as 120 weeks to get the much-needed equipment. That means a price increase that limits imports or reduces manufacturing in Mexico could have wide-reaching impacts, said report co-author Joseph Webster.
“A policy of raising costs would seem to exacerbate a shortage that already exists and run contrary to making the grid more resilient,” Webster, a senior fellow at the Atlantic Council, told POLITICO’s E&E News. “All things being equal, this would make the grid less reliable. Particularly in a place like Texas that is adding substantial new load and new generation, this could slow down the grid expansion.”
Retaliatory tariffs that raise the cost of U.S. steel exported to Mexico, Webster added, could have “pancaking” effects that further drive up transformer costs.
Debra Phillips, president of the trade group National Electrical Manufacturers Association, which represents companies like Schneider Electric and Johnson Controls, urged Trump in a statement Tuesday to “reach a long-term deal that strengthens trade across North America.”
The NEMA statement says companies invested heavily in North American supply chains after Trump renegotiated the U.S.-Mexico-Canada trade agreement in his first term. And Phillips cited “significant steps” since 2018 to reduce reliance on Chinese materials. China’s share of U.S. imports of electric industry goods went down from 27 percent in 2018 to about 18 percent in 2024.
Importing electricity
Grid operators on the U.S. side of the border are paying attention. Electricity shipments from Canada’s massive hydropower dams are particularly critical to New York and New England. The New York Independent System Operators (NYISO), the state’s grid manager, said it is still unclear whether Trump’s order applies to Canadian electricity imports. It noted that the U.S. International Trade Commission recently ruled that electricity imports are not subject to U.S. tariff laws.
Canada is the top source for electricity imports, accounting for some 33 million megawatt-hours last year. But that is less than 1 percent of total U.S. electricity consumption, so it’s unclear how much a price spike or power shutoff would mean for electric reliability.
Grid operators in California and Texas said they were still unclear whether electricity imported from Mexico and Canada will see higher costs.
The Trump administration’s tariff policies pose a direct challenge to its own vision for a U.S. nuclear revival, according to energy analyst Matthew Wald, with the Breakthrough Institute. For one, tariffs on Canadian imports could significantly disrupt cross-border nuclear collaborations, particularly Ontario Power Generation’s planned purchase of GE Hitachi’s BWRX-300 small modular reactors, or SMRs.
If this project stumbles due to rising costs or trade friction, it could delay similar deployments in the U.S., where the Tennessee Valley Authority is watching closely before committing to the design.
Then there’s the matter of fueling existing nuclear plants. About 27 percent of uranium purchased by U.S. nuclear reactors came from Canada in 2022, more than any other country. Though that could raise nuclear fuel costs, Kee said, “any impact will be long term” due to substantial uranium stockpiles and plants’ infrequent refueling needs.
Meanwhile, Rep. Chuck Fleischmann (R-Tenn.) downplays the impact on the nuclear industry. He notes that the U.S. has ample domestic uranium reserves and that enrichment capacity is the bigger bottleneck in the domestic nuclear fuel supply chain.
“Did the tariffs concern me on Canadian uranium? Not unduly,” he said. “They will move forward with the first of a kind GE Hitachi. And once we get that, America will learn from their strengths and their miscues on that.”
“There will be an adjustment period, but, ultimately, I think this issue will resolve itself in a way satisfactory to the United States.”
Reporters Mike Lee, Francisco “A.J.” Camacho, Jason Plautz, Mike Soraghan and Brian Dabbs contributed.