March 13, 2025 . 8 min read . Sean Huang

How the New 2025 Tariffs Will Impact the Energy Space

The 2025 tariffs are driving up costs and disrupting supply chains in the energy sector. Here’s what you need to know:

Key Tariff Rates:

  • Canada: 10% on energy products, 25% on non-energy imports (USMCA-qualifying goods exempt).
  • Mexico: 25% on energy products, unless USMCA-compliant.
  • China: 20% on all imports.

Major Impacts

  • Higher Costs: $6.5 billion in additional costs expected in the first year.
  • Renewable Energy (H4): Wind turbine costs up 7%, project costs up 5%.
  • Equipment Dependency: 80% of U.S. large power transformers are imported, mainly from Mexico and China.

Strategies for Companies:

  • Shift to local production to reduce reliance on imports.
  • Use GIS tools for supply chain mapping and efficiency.
  • Form partnerships to share resources and reduce costs.

The tariffs are reshaping the energy landscape, increasing prices, and forcing companies to adapt quickly. Read on for detailed strategies to navigate these changes.

How to Design Your Supply Chain for Trump Tariffs and Other 2025 Disruptions

2025 Tariff Basics

The 2025 tariff structure introduces new rates for energy trade between the United States, its North American neighbors, and China. These rates vary by product type and origin, significantly affecting energy resources and equipment. Here’s a closer look at the details.

Tariff Rates for Energy Products

The updated framework includes three distinct rate categories across the energy sector:

CountryGeneral Tariff RateEnergy Products RateUSMCA Qualifying Goods
Canada25%10%Exempt
Mexico25%25%Exempt
China20%20%N/A

Canadian energy products enjoy a reduced 10% tariff instead of the standard 25%, reflecting Canada’s importance as a key supplier. In 2024, Canada accounted for 60% of U.S. oil imports, delivering about 4 million barrels per day [9].

Mexico, on the other hand, faces a 25% tariff on energy exports – such as its 450,000 barrels per day of crude shipments to the U.S. – unless those products meet USMCA requirements [9]. Currently, 50% of Mexican goods and 38% of Canadian goods qualify for exemption under USMCA rules [6].

Below is the timeline for implementing these tariffs.

Implementation Schedule

  1. Chinese Imports
    The 20% tariff on goods from China went into effect on February 4, 2025, at 12:01 a.m. EST [8]. Goods already in transit before February 1, 2025, were allowed entry until March 7, 2025 [7].
  2. North American Trade
    Tariffs on Canadian and Mexican imports began on March 4, 2025, providing extra time for supply chain adjustments [8].

“President Trump will never stop standing up for the safety of the American people and is using tariffs as a tool to take decisive actions that put Americans’ safety and our national security first.” – The White House [5]

Broader Impacts

China responded to these tariffs by imposing a 15% levy on select U.S. energy imports, covering eight tariff codes under Chapter 27 [8]. Additionally, Canadian electricity exports – which make up about 1% of U.S. consumption – along with critical materials like nickel (50% of U.S. supply) and aluminum (60% of imported supply), are also heavily impacted. These changes are influencing not just energy trade but the overall supply chain for essential infrastructure components [9].

Effects on Energy Companies

The 2025 tariffs are reshaping the energy sector, driving up operational costs and forcing companies to rethink their business strategies.

Cost Changes for Energy Trade

The new tariffs are increasing expenses across several energy-related industries. For example, onshore wind projects are seeing higher costs due to a 25% tariff on Mexican and Canadian imports and a 10% tariff on Chinese imports. This has led to a 7% rise in turbine costs and a 5% increase in overall project expenses [4].

The power transmission and distribution sector is also under pressure. Imports now account for 80% of the U.S. market for large power transformers, up from 65% in early 2021 [3]. Mexico supplies 39% of high-voltage transformer imports, while China provides 54% of low-voltage transformer imports [3].

Equipment TypeImport DependencyPrimary Suppliers
Large Power Transformers80%Mexico, China
Wind Turbine Blades70%Mexico (63%), Canada (6%)
High-voltage SwitchgearN/ACanada (20%)
Utility Poles15%Canada (100% of imports)

These rising costs are prompting companies to reevaluate sourcing and logistics strategies.

Supply Chain Changes

The reliance on imports for wind equipment has left the sector exposed, leading companies to make operational changes.

“The supply chain actors are waiting for the dust to settle, exploring their options. We anticipate that wind manufacturers will adopt a mix of measures to mitigate tariffs’ impact, including rerouting and restructuring their supply chains and assembly lines, strengthening US localization, and increasing their prices.”

Battery manufacturers are also adjusting. Fluence, for instance, has signed a multi-year agreement with AESC to produce cells domestically starting in early 2025 [11]. This move helps Fluence avoid a significant tariff hike on Chinese lithium-ion non-EV batteries, which will increase from 7.5% to 25% by January 1, 2026 [11]. Such steps are vital for maintaining operational stability and supporting field services.

Field Service Impacts

Field service operations are facing additional challenges due to the tariffs. Equipment and maintenance costs are rising, with Mexico playing a key role in supplying critical components. In 2022 alone, Mexico exported $29.5 billion in electrical components and $37.7 billion in computer equipment to the U.S. [12].

To address these challenges, companies are adopting strategies like:

  • Securing bulk purchasing agreements ahead of tariff deadlines
  • Using predictive inventory management systems
  • Improving fleet efficiency with advanced management tools
  • Expanding supplier networks beyond traditional sources

“Energy markets are highly integrated, and free and fair trade across our borders is critical for delivering affordable, reliable energy to U.S. consumers.

  • “Mike Sommers, API President and CEO [10]

GIS Tools and Data Solutions

GIS plays a key role for energy companies preparing for 2025 tariffs, offering valuable insights for managing supply chains and field operations.

Supply Chain Mapping

GIS allows companies to visualize their supply chains, from inventory tracking to transportation routes. This visibility is especially useful as businesses adjust to tariff-related changes in supplier relationships.

With GIS mapping, companies can:

  • Monitor inventory as it moves across borders
  • Assess the best locations for warehouses and transportation costs
  • Explore alternative supplier options

This level of detail supports real-time decision-making for smoother operations.

Real-Time Decision Tools

Integrating real-time data with GIS platforms is changing how energy companies handle supply chain disruptions. For example, a leading engine manufacturer in the oil and gas sector uses Dynamics 365 Field Service and Power BI to create a powerful system. Here’s what it offers:

FeatureBusiness Impact
Real-time Engine Data CollectionFaster detection of issues
Automated Alert SystemShorter response times
Mobile Field UpdatesBetter technician productivity
Streaming AnalyticsSmarter resource allocation

“Real-time data analytics can provide immediate visibility into operations at customer sites and internal resources, enabling faster issue resolution and efficient resource allocation.” – Industry analyst from Wood Mackenzie [13]

These tools make field operations more efficient and responsive.

Field Equipment Management

GIS also improves field equipment management by using real-time data to keep assets in check. Platforms like Matidor’s field service management system combine GIS visualization with real-time tracking to cut down on equipment downtime and improve maintenance schedules.

Studies show that a company with 50 employees can lose over 18,000 hours annually due to misplaced equipment [14]. GIS tackles this issue by enabling real-time tracking, scheduling predictive maintenance, and optimizing resource use.

Additionally, IoT devices integrated with GIS systems further enhance field operations. This combination allows for real-time data processing and quick responses to equipment issues, helping companies maintain operations while managing the cost challenges linked to tariffs [15].

Ways to Reduce Tariff Impact

Energy companies can take practical steps to manage the challenges posed by 2025 tariffs.

Supply Chain Options

  • Increase local production to cut back on imports
  • Build relationships with suppliers across different regions
  • Set up regional distribution hubs to improve logistics

By diversifying suppliers, companies can strengthen their bargaining position and ensure a steadier supply chain. Pairing this approach with advanced software tools can make operations even more efficient.

Industry Partnerships

Collaborating with other organizations can further reduce costs and improve efficiency when combined with diverse supply chains and advanced software.

  • Resource-Sharing Alliances
    Share resources like transportation, storage, and equipment maintenance to spread costs and improve operations.
  • Joint Supply Chains
    Work together on supply chain networks to enhance supplier negotiations and make better use of resources, such as shared warehouses and transport.
  • Technology Partnerships
    Partner with tech providers like Matidor to improve collaboration among stakeholders. This can streamline communication, track deliverables, and maintain strict budget controls [16].

Conclusion

The 2025 tariffs are causing shifts across the energy sector, with 25% tariffs on imports from Mexico and Canada, and 20% on those from China [2]. These changes are transforming how the industry operates.

The energy sector relies heavily on imported equipment. For instance, Mexico supplies 39% of high-voltage transformers, while China provides 54% of low-voltage units [3]. This reliance creates challenges that energy companies need to address with smart strategies.

Here are three ways companies can respond to these challenges:

  • Strengthening Supply Chains: Increasing domestic sourcing is key. Right now, U.S. manufacturers produce only 30% of the country’s blade market [3]. This gap highlights a chance to boost local production.
  • Using Advanced Technology: Adopting tools like GIS-based field management can improve efficiency. For example, Smith Brothers Group saw a 30% boost in field operations by using GIS Cloud‘s mobile apps [17].
  • Forming Strategic Partnerships: Collaborations can help offset tariff impacts. Jason Grumet, CEO of the American Clean Power Association, emphasized this point:
    “While the fuel relied upon by wind and solar energy – complemented by battery storage – is free, some parts for these machines that harness these renewable resources are manufactured in Canada and Mexico. As we have made significant progress manufacturing these components in the United States, the benefits of [the United States-Mexico-Canada Agreement] have been a positive factor in lowering American energy costs” [1].

These steps can help energy companies adapt to the evolving landscape while maintaining efficiency and cost-effectiveness.

Matidor Qi - Next-gen project management software for field service | Product Hunt Matidor Qi - Next-gen project management software for field service |Product Hunt

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