How the Trump Administration’s Canadian Tariffs Will Impact U.S. Energy Pricing

President Donald Trump has announced a 10% tariff on Canadian energy imports, set to take effect on March 4, 2025. This decision comes as part of a broader set of tariffs on goods from Canada and Mexico, initially scheduled to begin on February 4 but were postponed for 30 days following negotiations with both countries.

The impending tariffs hold particular significance for the New England states due to their heavy reliance on Canadian energy imports. In 2024, approximately 9% of New England’s electricity demand was met through imports from Canada and New York.

This dependence is especially pronounced during winter months when Canadian power imports play a critical role in maintaining grid stability and meeting peak demand. During a recent cold snap in January, Canadian power imports surged to over 4,200 MW/hour, highlighting the New England region’s vulnerability to potential disruptions in energy supply from Canada.

What’s the current New England energy landscape?

New England’s energy landscape is undergoing a significant transformation. The region is focused on meeting its ambitious decarbonization goals while ensuring grid reliability and stability.

The current energy mix in New England reflects a complex interplay of various sources, with a growing emphasis on clean energy and regional cooperation.

Natural gas remains the dominant energy source in the region, accounting for over 50% of electricity production. Renewable energy sources – including wind, solar, and hydropower – account for just 18%. Nuclear energy consistently provides about 20% of New England’s electricity supply, serving as a key baseload resource.

In 2024, approximately 9% of New England’s electricity demand was met through imports from Canada and New York. This reliance on cross-border energy trade highlights the region’s interconnectedness with its neighbors and the importance of these resources in maintaining a stable and diverse energy supply.

The importance of Canadian hydropower

Canadian energy imports contribute significantly to grid stability and help meet peak demand in New England. The flexibility of hydropower allows it to act as a reliable backup when intermittent renewable sources like wind and solar are not producing sufficient electricity.

This capability is particularly valuable as New England’s peak demand is projected to shift from summer to winter by the 2030s, with overall peak demand expected to double from approximately 27 gigawatts (GW) to 55 GW by 2050.

The integration of Canadian hydropower into New England’s energy mix enhances grid reliability and supports the region’s transition to cleaner energy sources. As New England works towards its goal of tripling electric generation capacity over the next 25 years, the role of Canadian hydropower as both an energy source and a potential storage solution will likely become increasingly important.

What are the potential impacts of Canadian energy tariffs?

New England’s energy ecosystem is intricately linked with its northern neighbor. This interdependence is particularly crucial during winter months when demand peaks and grid stability is paramount. The proposed tariffs threaten to disrupt this delicate balance, potentially impacting energy prices, grid reliability, and the region’s ambitious renewable energy goals.

However, the situation remains fluid.

Grid operators and energy system regulators in the northern United States are actively coordinating with their Canadian counterparts to mitigate the impact of these tariffs. Meanwhile, some Canadian provinces have threatened retaliatory measures, adding another layer of complexity to an already challenging situation.

Here’s what we can expect if the tariffs become effective as planned on March 4.

Expected increase in wholesale electricity prices

The tariffs are projected to significantly raise wholesale electricity prices in New England, with the added cost likely passed on to consumers. Massachusetts Governor Maura Healey has estimated that utility costs could rise by as much as $200 million annually if the tariffs are implemented. For context, roughly 13% of New England’s electricity was imported from Canada in 2023, making this tariff a direct hit to the region’s energy affordability.

Additionally, already volatile natural gas prices could further increase due to heightened competition for supply, exacerbating overall energy costs.

Ripple effect on the economy

Higher energy prices will have a cascading effect across various sectors of the New England economy. Increased costs for electricity and natural gas will raise operational expenses for businesses, including academic institutions, data centers, and property management firms. 

This could lead to higher tuition fees, service charges, or rental costs. Additionally, elevated energy expenses may reduce consumer spending power and productivity across industries.

Grid reliability issues

The potential reduction in Canadian electricity imports raises questions about the reliability of New England’s grid during periods of high demand. During the recent January cold snap, rarely-used oil-burning resources – in addition to 4,200 MW/hour of Canadian imports – were used to meet demand. The U.S. Energy Information Administration described it as a “relatively uncommon” situation. Without Canadian imports, New England may face challenges maintaining grid stability during similar extreme weather events.

The threat of reduced imports due to tariffs or retaliatory measures by Canadian provinces – including Ontario and British Columbia – could leave New England vulnerable to supply shortages during future extreme weather events.

Renewable energy goals

The tariffs could disrupt New England’s progress toward its renewable energy goals by increasing the cost of importing low-emission hydropower from Canada. Hydropower is a cornerstone of the region’s decarbonization strategy and is often used to fill gaps left by variable renewable sources like wind and solar.

If Canadian provinces restrict exports in retaliation for the tariffs, New England may be forced to rely more heavily on fossil fuels during these gaps, undermining its clean energy initiatives and increasing greenhouse gas emissions.

Long-term renewable energy projects involving Canada—such as expanded transmission lines or coordinated dispatch systems—may face delays or increased costs due to strained diplomatic relations caused by the tariffs. Adding 4 GW of transmission capacity between New England and Quebec could lower zero-emission power system costs by up to 28%, but such projects require strong cross-border cooperation. Tariffs threaten this collaboration and could slow the region’s transition toward a sustainable energy future.

How will Canadian energy tariffs affect specific industries?

New England’s heavy reliance on Canadian energy imports means any tariffs imposed by the Trump administration will likely have a significant impact on businesses and institutions across the board. The interconnectedness of energy costs with overall economic health suggests that the effects of these tariffs will ripple through multiple sectors, affecting operational costs, budgets, and long-term planning.

For academic institutions, nonprofits, franchises, hospitality and property management companies, and data centers, the implications of these tariffs are noteworthy. Each of these sectors has distinct energy needs and vulnerabilities that will require tailored strategies.

Colleges and universities

Universities and colleges often have large campuses with high energy demands for heating, cooling, lighting, and powering research facilities. With New England already facing some of the highest electricity rates in the country, the additional costs from these tariffs could place further strain on institutional budgets.

Increased utility costs

Academic institutions that rely on imported Canadian hydropower or natural gas for their energy needs will see higher utility expenses as wholesale electricity prices rise. For example, Connecticut’s utilities have already indicated that these costs will likely be passed through directly to consumers, including large-scale energy users like universities.

Budgetary challenges

Rising energy costs may force institutions to reallocate funds from other critical areas, such as research, student programs, or infrastructure upgrades. This could also lead to increased tuition or fees to offset the higher operational expenses.

Sustainability goals

Many universities have committed to ambitious sustainability targets, including reducing carbon footprints by transitioning to renewable energy. However, higher costs for clean Canadian hydropower could complicate these efforts and force some institutions to delay or scale back their plans.

Data centers

Data centers, which are some of the most energy-intensive facilities in operation today, are particularly vulnerable to the effects of the Canadian energy tariffs. With energy consumption in U.S. data centers projected to grow from 4.4% of total electricity use in 2023 to as much as 12% by 2028, any increase in electricity costs could significantly impact their bottom line.

Higher operational costs

The tariffs will likely lead to increased electricity prices across New England, directly affecting data centers that rely on steady and affordable power. Given the region’s reliance on Canadian hydropower for clean energy imports, data centers may need to absorb these higher costs or pass them on to customers.

Sustainability challenges

Many data centers have adopted aggressive sustainability goals, including sourcing power from low-carbon or renewable sources. The tariffs could disrupt access to clean Canadian electricity, forcing data centers to rely more heavily on fossil fuels and potentially undermining their environmental commitments.

Energy supply uncertainty

The integrated nature of the North American energy supply chain means that retaliatory measures by Canada—such as withholding exports—could create additional uncertainty for data centers. This unpredictability may complicate long-term planning and investment decisions for operators.

Hospitality and property management

The hospitality and property management sectors are also expected to feel the effects of the Canadian tariffs through rising utility expenses and potential shifts in pricing strategies. Hotels and property managers already face challenges managing energy costs, which typically account for 4–6% of revenue in full-service hotels and even higher percentages in luxury properties.

Rising utility costs

The tariffs will exacerbate existing trends of rising electricity and natural gas prices in New England. For hotels and property managers, this means higher operational costs that could cut into profit margins or necessitate price increases for guests and tenants.

Operational adjustments

To mitigate these impacts, businesses may need to implement energy efficiency measures such as upgrading HVAC systems or optimizing peak load management. For example, shifting high-energy activities like laundry operations to off-peak hours can help reduce demand charges.

Pricing strategies

Hotels may need to adjust room rates or service fees to offset rising utility expenditures. However, this could pose challenges in a competitive market where customers are sensitive to price changes.

Nonprofits and franchises

Nonprofits and franchise businesses often operate on tight budgets with limited flexibility to absorb rising costs. The proposed tariffs could force these organizations to make difficult financial decisions.

• Budgetary constraints. Nonprofits may face increased utility bills due to higher wholesale electricity prices stemming from the tariffs. This could reduce available funding for programs and services that directly benefit communities.
• Cost-cutting measures. Nonprofits and franchises may need to explore cost-cutting strategies such as reducing staff hours, scaling back operations, or delaying planned expansions to manage rising expenses.
• Energy-efficient investments. Some organizations may turn to energy efficiency upgrades as a long-term solution for managing utility costs. However, these investments require upfront capital that many nonprofits and small franchises may struggle to secure.

What are some effective mitigation strategies?

The proposed 10% tariffs on Canadian energy imports present significant challenges for New England businesses and institutions. However, proactive mitigation strategies can help offset potential impacts. 

Focusing on energy efficiency, diversifying energy sources, and implementing long-term planning, helps organizations navigate rising costs and maintain operational stability while working toward sustainability goals.

Energy efficiency measures to offset price increases

Improving energy efficiency is one of the most effective ways to reduce overall energy consumption and mitigate the financial impact of rising energy prices. Organizations can lower their utility bills and reduce dependency on imported electricity through energy optimization.

Here’s how:

• Building upgrades. Retrofitting buildings with energy-efficient technologies such as LED lighting, smart thermostats, and high-efficiency HVAC systems can significantly cut electricity usage. 
• Energy audits. Conducting a professional energy audit can help identify inefficiencies and opportunities for improvement. Energy procurement specialists can help with this task.
• Behavioral changes. Simple operational changes—like scheduling high-energy activities during off-peak hours or encouraging employees to power down equipment when not in use—can also yield meaningful savings.
• Demand response programs. Participating in demand response programs allows businesses to adjust their electricity usage during peak demand periods in exchange for financial incentives, helping reduce costs while supporting grid reliability.

Exploring alternative energy sources and procurement strategies

Diversifying energy sources and adopting innovative procurement strategies can help organizations reduce their exposure to rising costs caused by tariffs on Canadian imports. One of the most popular options is on-site renewable energy.

Investing in on-site renewable energy systems, such as solar panels or small-scale wind turbines, can provide a stable and cost-effective source of electricity. Behind-the-meter solar installations have already reduced grid demand in New England by over 4,000 GWh annually, proving their effectiveness.

Some other alternatives include:

• Community solar programs are ideal for organizations unable to install on-site renewables. They offer an opportunity to buy shares in local solar farms, reducing their reliance on traditional grid electricity.
• Power purchase agreements allow organizations to lock in stable electricity rates while supporting clean energy development. These agreements are particularly attractive for large-scale energy users like data centers or universities.
• Natural gas procurement helps businesses reliant on natural gas to work with an energy procurement specialist to secure favorable contracts or explore hedging strategies to manage price volatility.

Importance of long-term energy planning and risk management

Given the uncertainty surrounding the duration and future scope of the tariffs, long-term energy planning is essential for mitigating risks and ensuring resilience in a changing energy landscape.

Organizations should conduct scenario analyses to understand how different tariff scenarios could impact their operations. This allows them to develop contingency plans for worst-case outcomes.

Energy budget forecasting incorporates potential tariff-related cost increases into budget forecasts to prepare organizations for higher expenses without being caught off guard. Investing in backup power systems enhances grid resilience against supply disruptions caused by geopolitical tensions.

Lastly, consider partnering with energy procurement specialists who can access market insights and risk management tools, and provide tailored strategies to align with budgets and organizational goals.

Prepare for the Impact of Canadian Tariffs on New England Energy Pricing

As New England braces for the potential impact of Canadian energy tariffs, it’s clear that the region faces significant challenges in maintaining affordable and reliable energy supplies. 

The interconnectedness of the North American energy market means that these tariffs will likely have far-reaching consequences. New England, which relies heavily on Canadian imports for approximately 9% of its electricity demand, could see wholesale electricity prices rise significantly. This increase could translate into higher costs for consumers, businesses, and institutions across the region.

However, the situation remains fluid. Grid operators and energy regulators are actively coordinating with their Canadian counterparts to mitigate potential impacts. Meanwhile, some Canadian provinces have hinted at possible retaliatory measures, adding another layer of uncertainty to an already complex situation.

Stay informed by working with an energy procurement specialist who can anticipate potential changes in energy pricing and availability. They can use their expertise to implement energy-efficient measures, explore alternative energy sources, and engage in long-term energy planning.

Ultimately, the coming months will be critical in determining how New England’s energy future unfolds. As stakeholders across the region work to address these challenges, the resilience and adaptability of New England’s energy infrastructure will be put to the test.