Dive Brief:

• The Trump administration on Thursday said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union beginning Friday.

• The tariff on steel imports is set at 25%; the tariff on aluminum imports is set at 10%.

• The tariffs were met with almost immediate responses from the three trade partners, sparking concerns of potential trade wars.

Dive Insight:

The effect of the tariffs on the energy industry could be far reaching, Joshua Zive, a senior principal at the Bracewell law firm, told Utility Dive via email. 

The tariffs "will inject additional and unnecessary costs and uncertainty into the energy sector," Zive wrote. The power industry, like many others areas of the economy, is dependent on an affordable and reliable supply of materials such as steel and aluminum for virtually all of its major projects, he noted.

"These tariffs will increase the costs of all steel and aluminum products, whether imported or domestic, and they have been having that effect since March." The tariffs have also resulted in longer and unpredictable lead times for obtaining needed steel and aluminum, Zive noted.

Energy sector opposes

Various energy sector players weighed in against the tariffs.

"The implementation of new tariffs will disrupt the U.S. oil and natural gas industry’s complex supply chain, compromising ongoing and future U.S. energy projects, which could weaken our national security," Jack Gerard, president and CEO of the American Petroleum Institute, said in a statement.

Gerard said the tariffs could threaten the continued production of oil and natural gas and natural gas liquids. In addition, they could raise energy costs for U.S. businesses and consumers, while threatening the nation’s ability to achieve President Donald Trump’s goal of energy dominance. He said the action was "a step in the wrong direction."

Higher tariffs on steel and aluminum could also raise the costs of solar projects, particularly large scale projects. "We believe that these tariffs and those imposed on solar cells and panels are detrimental to American jobs and economic growth," Dan Whitten, a spokesman for the Solar Energy Industries Association, told Utility Dive via email.

The Trump administration imposed a 30% tariff on imported crystalline silicon photovoltaic modules and cells in January.

Asked for comment, the American Wind Energy Association reiterated the position it took in March when Trump first announced the tariffs and echoed the views of the solar and gas trade groups.

AWEA CEO Tom Kiernan previously said steel tariffs would decrease competition and trade and make capital intensive energy infrastructure projects more expensive by adding costs for U.S. manufacturers. The policy, he said, would "run counter to the administration’s goal of U.S. energy dominance and harm the U.S. manufacturing workers supporting the wind industry’s rapid growth."

Trade partners, others respond

When Trump ordered tariffs on imported steel and aluminum in March, he exempted Canada, Mexico and the EU. Those exemptions expired on Thursday and the Trump administration moved ahead with the tariffs, setting the stage for potential trade wars with some of the U.S.’ closest allies.

Canadian Prime Minister Justin Trudeau responded quickly, saying that Canada would impose a 25% tariff on U.S. steel imports and a 10% tariff on U.S. aluminum imports, as well as other U.S. goods, including some food and agricultural products. Trudeau said the tariffs would not take effect until July 1. Canada accounted for about 17% of U.S. steel imports last year.

Mexico’s Economy Ministry is targeting several U.S. goods in response to the tariffs, including some steel and pipe products, as well as a variety of agricultural products.

Calling the tariffs "protectionist," European Commission President Jean-Claude Juncker said he would mount a legal challenge against them at the World Trade Organization. The EU plans to impose tariffs on $7.5 billion of U.S. goods starting June 20.

The tariffs even came under attack from within the Republican Party. "This is a tax hike on American manufacturers, workers and consumers," Sen. Orrin Hatch, R-Utah, said in a statement. Hatch called the magnitude of the tariffs "misguided" and said they would undermine the benefits of the new tax law.

The diplomatic consequences of the tariffs are "likely to be significant and complex," Bracewell's Zive wrote. The retaliation will likely get worse before it gets better, he noted. Zive called the imposition of the tariffs a "disappointment, but not a surprise."

Trump’s trade moves are widely seen as an appeal to American industrial workers. But even the United Steelworkers Union (USW) expressed "profound disappointment" in the decision to include Canada in the tariffs. The USW called the decision "unacceptable" and said it "calls into serious question the design and direction of the Administration's trade policy."