Trump’s tariffs undermine his energy and manufacturing goals

Energy industry analysts have been scrambling to assess the harms that President Donald Trump’s crushingly high tariffs will impose on the solar, wind, and battery projects now providing the vast majority of new electricity supply in the U.S. It’s not looking good.

They’ve also been trying to determine how the Trump administration’s tariffs on individual countries, as well as on materials such as steel and aluminum, will impact the U.S. manufacturers they’re purportedly meant to help. That includes the factories for EVs, lithium-ion batteries, solar panels, and other nascent cleantech sectors whose growth was just beginning to revitalize the long-stagnant U.S. manufacturing economy. Again, things aren’t looking good.

The broad economic havoc caused by last week’s announcements will itself have wide-reaching consequences. U.S. stock markets saw their worst two-day drop since the 2020 pandemic following Trump’s Wednesday announcement, and fell further on Monday. Many economists now predict the U.S. economy will slide into recession.

The dramatic tariffs come as the Trump administration promises to ​“unleash” the country’s ​“energy dominance,” revitalize U.S. manufacturing, and secure reliable, abundant, and affordable energy for Americans. They also come as the administration embraces the AI data center boom, which is helping drive an unprecedented surge in power demand.

But analysts say the tariffs, if they stick, will threaten all of these goals. They could hobble the clean-energy manufacturing buildout, which was set into motion by Biden-era industrial policy and is poised to deliver tens of thousands of factory jobs, mostly to Republican-led congressional districts. They could also make it far more expensive to build any sort of energy infrastructure in the U.S. — clean or dirty.

“If there’s a recession, that’s bad for all forms of energy,” said Sagatom Saha, a research scholar at Columbia University’s Center on Global Energy Policy. ​“Even if AI and manufacturing investments do buoy some electricity growth, it’s going to be less than it was before.”

Among the suite of imposed new regulations is a 10% universal levy on almost all imported goods, with some exceptions, such as oil and gas, along with so-called ​“reciprocal” tariffs set on individual countries. Those include a 34% tariff on China, the world’s dominant producer of solar, battery, and EV raw materials and finished products, on top of a 20% tariff on Chinese imports announced in March. But they also include tariffs on U.S. trade allies and cleantech suppliers such as Japan (24%), South Korea (25%), Taiwan (32%), and the European Union (20%).

Other tariffs target the automotive industry and foreign-produced steel and aluminum. All in all, ​“given how broad-based the tariffs are, practically every input for U.S. infrastructure across the board will become pricier,” said Pavel Molchanov, investment strategy analyst at financial services firm Raymond James.

That holds true for conventional fossil-fuel projects like oil and gas pipelines, fossil gas–fired power plants, and liquefied natural gas terminals, he noted — all of which are industries favored by the Trump administration. But it’s also the case for renewable and low-carbon energy projects such as solar and wind farms, utility-scale battery projects, green hydrogen plants, biogas plants, and the panoply of materials and equipment needed to expand and modernize the U.S. electric grid.

All of these sectors rely on imports of raw materials such as steel and aluminum, which Trump already slapped with 25% tariffs in February.

“There’s nothing that gets away from steel and aluminum,” Saha said, including types of energy the Trump administration has supported, such as geothermal and nuclear power.

Clean energy projects also depend on critical minerals that disproportionately come from China, which has threatened to restrict its supply in retaliation to the new tariffs.

To make things more complicated, the raw materials and subcomponents that modern industries like EV manufacturing rely on often cross borders multiple times. That makes it hard to track and calculate the impact tariffs will ultimately have on any given manufacturer’s supply chain.

Ranking the risks to solar, wind, and batteries

Despite this complexity, some predictions can be made. One key distinction is between solar and wind power, sectors where tariffs either already exist or may have less impact, and lithium-ion batteries, which will be subject to far higher tariffs than ever before.

Despite a rapid expansion of domestic solar-manufacturing capacity, the U.S. remains dependent on imports — and most of the world’s solar panels are made in China. Even as global manufacturing has diversified, roughly four-fifths of U.S. solar imports still come from Cambodia, Malaysia, Thailand, and Vietnam, which face tariffs between 24% and 49%.

But solar developers in the U.S. are already acclimated to more than a decade of steadily increasing tariffs on imported solar panels. Those tariffs have exceeded 200% in some cases.

On the one hand, this has ​“dramatically inflated the cost of solar in the U.S. to something like three times what it is elsewhere,” Antoine Vagneur-Jones, head of trade and supply chains for BloombergNEF, told David Roberts, Canary Media’s editor-at-large, in a podcast episode last week.

On the other, it has also normalized high costs for imported products in the industry, somewhat softening the blow of the new tariffs. U.S. buyers have also stockpiled large solar panel inventories — some 50 gigawatts — that they can draw down over the coming year.

But in the long run, Saha said, ​“I would not discount that the most highly tariffed countries are the Southeast Asian countries” that make up the majority of U.S. imports. ​“There’s no third alternative there. You have to either absorb the costs or build less.”

The wind power industry, meanwhile, is largely supplied by domestically produced nacelles and towers that make up the majority of wind turbine costs, according to the U.S. Department of Energy. While many components of wind turbines are imported, the overall impact of tariffs could be a relatively muted 10% or so, Endri Lico, an analyst at Wood Mackenzie, told The New York Times last week.

Lithium-ion batteries are another story entirely. Last year, the Biden administration increased tariffs on batteries from China from 7.5% to 25% as part of a broader set of trade measures. But the Trump administration has now more than tripled tariffs on Chinese lithium-ion batteries, Molchanov said.

Though U.S. battery manufacturing has expanded dramatically in recent years, the overwhelming majority of lithium-ion batteries and components are still imported — and China supplied more than two-thirds of those imports last year, according to BloombergNEF.

Increased costs for lithium-ion batteries, components, and materials will ripple across the power sector. Automakers will be hit hard, too, since batteries are the most expensive parts of EVs.

Ever-cheaper lithium-ion batteries have become an important part of the power mix in states like California and Texas, where they’re shifting gigawatts of solar power from daytime to evening to mitigate grid stresses and take the place of fossil gas–fired generation.

The Biden administration set a lower tariff of 10% on lithium-ion batteries from China for grid-storage applications, with plans to raise that in 2026 to the 25% level already set for smaller batteries. But as of last week, tariffs on Chinese batteries now exceed 60%.

Solar and batteries are the cheapest source of new grid capacity across most of the country and can’t be built fast enough to meet rising electricity demand from data centers, factories, electric vehicles, and general economic growth. Anything that makes those resources more expensive is almost certain to drive up electricity prices, said Michelle Solomon, a manager in the electricity program at think tank Energy Innovation.

“The vast majority of what’s in development in the United States right now is solar and batteries,” she said — more than four-fifths of all new power construction expected in 2025, according to the U.S. Energy Information Administration. ​“And we import a lot of solar and batteries.”

Tariffs will likely alter the equations for those projects, forcing storage developers to either absorb higher costs and accept lower profit margins or pass them through to counterparties, which could include utility customers.

All told, clean energy project costs are set to rise, said Rob Collier, senior vice president of marketplaces at LevelTen Energy. The company operates market platforms that allow project developers to craft power purchase agreements (PPAs) with companies and utilities seeking clean power.

While the news was too fresh to model on Monday, ​“our expectation is that these higher capital costs will work their way into higher PPA prices,” he said in an email. 

The tariff trap for cleantech manufacturing

The Trump administration issued all of these tariffs with the express goal to ​“reshore manufacturing” and ​“drive economic growth.” But economic experts say any benefits that may flow to U.S. manufacturers will take years to emerge, if they do at all.

That’s because it takes about three to five years to finance and build a factory — and companies need long-term certainty to make those investments, Saha said. Given the capricious nature of the Trump administration’s tariff policies to date, ​“if you want to build a factory, you don’t know if the tariffs will be there to protect you tomorrow,” he said.

What’s more, the looming threat of a global recession weakens the case for investing in new manufacturing capacity: Why build a factory now if demand for your product could soon shrink?

“The global economic downturn would discourage any business from investing heavily,” he said. ​“If there’s less money to spend, businesses will need to eke out everything they can from their existing factories.”

In the meantime, tariffs are likely to drive up prices for U.S. manufacturers that rely on any foreign components, making their products ​“costlier and less competitive, especially when it comes to exporting,” BloombergNEF wrote in its Friday note.

That’s a particular threat for U.S. cleantech manufacturers.

The tax credits and incentives created by the 2021 Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act have spurred hundreds of billions of dollars in private investment in EV, battery, and solar-panel factories. But most of them are ​“upstream” producers, BloombergNEF wrote, meaning that they’re assembling final products like EVs and solar modules that ​“rely on upstream inputs and components, many of which are imported from East and Southeast Asia.”

Tariffs that drive up those input costs will hit nascent domestic cleantech manufacturers at a particularly precarious point of their development. Most of the facilities financed since the IRA passed have yet to be built, and those that have opened have not yet grown to a scale that allows them to supply domestic demand.

Meanwhile, a slowdown in cleantech factory investment that started in 2024 has already shifted into a serious downturn given the Trump administration’s U-turn on U.S. climate and energy policy.

Data from research firm Atlas Public Policy shows that clean-technology manufacturing investment announcements fell from a peak of $86 billion in 2022 and $85 billion in 2023 to $39 billion last year. And for 2025 so far, the firm’s tally of cleantech investment announcements has flatlined. While investments and announcements have continued in minerals production and manufacturing of processing and power grid equipment, $7.7 billion for wind, battery, and EV manufacturing was canceled in the first quarter of the year.

Republicans looking to fund a tax cut aimed at wealthy individuals and corporations are considering undoing many of the Inflation Reduction Act’s tax credits supporting domestic manufacturing and deployment of clean technologies. The credits potentially on the chopping block include the 45X Advanced Manufacturing Production tax credit, which is seen as foundational to making U.S.-made solar panels and lithium-ion batteries cost-competitive against Chinese imports.

In the short term, companies with most or all of their production and manufacturing in the U.S. could gain advantage over peers that rely more on imports.

One example is Tesla, which makes its EVs in Texas and California, allowing it to avoid tariffs that will hit competitors with significant overseas production. Another is First Solar, the U.S.-based solar panel manufacturer, which managed to escape the stock-market pummelling experienced by almost every other publicly traded firm in the clean-energy economy.

But even companies seen as ​“winners” in this light are likely to end up losing in the long term, Saha said. ​“There’s no wholly domestic supply chain,” he said. ​“Everything we produce in the United States has some foreign input.”

As tariffs are imposed, ​“the cost of building anything in the United States will go up, so the cost of buying anything in the United States will go up,” he said. It’s hard to see an upside if the tariffs create a recession that blunts demand for products across the board.

“Trade wars are always mutually damaging,” Molchanov said. ​“No one comes out ahead. It’s just a question of how much each side damages its own economy.”

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