US-Canada Power Tariff Threat Returns as Trump's 50% Goods Levy Takes Effect
A renewed trade dispute is putting Canadian electricity imports at risk just as US power demand accelerates toward successive record highs.
Canada was set to announce retaliatory tariffs on US goods on Tuesday (2026-08-25) after President Donald Trump's 50% tariff on approximately $20 billion in Canadian goods took effect over the weekend, with the electric power sector caught squarely in the crossfire.7
The electricity dimension is not incidental. The EIA reported that electricity trade between the two countries totalled $3.2 billion in 2025, with 67% of that flow moving south — Canadian power into the US grid. Any disruption now lands at a moment when American demand is rising fastest.7,5
Ontario Premier Doug Ford discussed a 25% tariff on electricity exports to the United States with Canadian Prime Minister Mark Carney, the BBC reported. Ford's province enacted exactly that levy during a previous trade flare-up in 2025, before both sides stepped back. The pattern is familiar; so is the risk of escalation.7
The broader energy trade relationship is far larger than power flows alone. US-Canada energy trade totalled an estimated $137 billion in 2025, down 11% from 2024 as crude oil prices fell, according to US Census Bureau data cited by EIA. Crude oil dominates the bilateral relationship, accounting for 69% of total trade value. The electricity figure, while small in dollar terms relative to oil, is operationally significant for the northeastern US grid.5
US crude oil imports from Canada averaged 3.9 million barrels per day in 2025, 4% below 2024 levels, partly as Canadian producers directed more volumes through the Trans Mountain Expansion pipeline to Pacific export markets. A 10% tariff on Canadian energy exports to the US has been in place since March 6, 2025, though certain crude volumes qualifying under USMCA preferences may be exempt. Despite that tariff, the US remained Canada's dominant crude export destination given existing pipeline infrastructure.5
The electricity friction matters most where grid dependency is highest. New York City's $6 billion Champlain-Hudson Power Express project is expected to meet up to 20% of the city's electricity needs, drawing on Canadian hydropower. A prolonged tariff standoff would complicate the economics and the politics around that infrastructure.7
Demand pressure makes the timing worse. US electricity consumption hit a record 4,195 billion kilowatt-hours in 2025, driven by AI-related data center growth and rising electrification. The EIA projects consumption rising to 4,269 billion kWh this year and 4,399 billion kWh by 2027, according to OilPrice.com. Data center servers alone accounted for an estimated 7% of commercial sector electricity consumption in 2025, the EIA's Annual Energy Outlook 2026 found, with that share projected to reach 22% to 33% of commercial building electricity use by 2050.4,1
At the same time, US natural gas output is on track for another annual record. EIA's latest Short-Term Energy Outlook projects US dry gas production averaging 122.5 billion cubic feet per day in 2026, according to Gulf News. That supply surplus keeps the NYMEX Henry Hub front-month near $2.80/MMBtu, providing some cushion if Canadian power flows tighten — but domestic generation would need to absorb the gap on short notice in regions that have historically relied on cross-border imports.6
Any Canadian power tariff would also carry an emissions cost. Industry analysts quoted by Utility Dive said they would anticipate emissions in the northeastern US region rising if Canadian hydropower is displaced by domestic gas-fired or coal generation. US coal-fired output already rose 13% in 2025 according to OilPrice.com, contributing to a 3% increase in overall electricity demand that year and pushing North America's share of global emissions growth sharply higher.7,3,2
The key signal to track is whether Canada's formal tariff announcement on Tuesday (2026-08-25) includes electricity, or whether power is held back as a negotiating lever. Ontario used a 25% electricity tariff precisely because it creates acute, visible pain on the US side without the same blowback domestically that a crude oil restriction would generate. Whether Carney's government follows that precedent — or trades power tariff restraint for concessions elsewhere — will shape the near-term outlook for northeastern US grid costs and emissions.7