Donald Trump has pledged to lower U.S. energy prices. But the president-elect’s plan to heavily tax imports from Canada and Mexico could send electricity and gasoline costs soaring. Trump has pledged to punish Canada and Mexico for “bringing Crime and Drugs at levels never seen before” by imposing a 25 percent tariff on all imported goods from U.S. neighbors — with no exceptions made for oil and natural gas. Trump promised an additional 10 percent tax on goods from China. The tariffs could inflate the cost of producing and buying energy in almost all forms, possibly sending gasoline prices surging and the U.S. energy industry into a tailspin, writes a team of POLITICO’s E&E News reporters. That’s in part because the United States imports a sizable chunk of its oil. While the country is the largest oil producer in the world, the nation’s refineries were built to process a different type of crude that largely comes from Canada. In fact, Canada supplied 52 percent of imported petroleum last year. About 11 percent of U.S. petroleum imports in 2023 came from Mexico. U.S. reliance on Canadian oil isn’t likely to change, even if Trump’s tariffs make it more expensive, according to Al Salazar, head of macro oil and gas research with Enverus Intelligence. That means the price of gasoline could rise by between 35 cents and 75 cents per gallon in some parts of the country — a far cry from Trump’s campaign promise to dramatically cut gasoline prices in his first year. The tariff fallout wouldn’t be limited to oil. Analysts also told our reporters that Trump’s plan could affect the cost of solar panels and electric vehicles. Foreign suppliers still control many clean energy supply chains. The United States has only recently started investing the hundreds of billions of dollars needed to manufacture clean energy technology domestically. Building on tariffs imposed under Trump’s first term, the Biden administration earlier this year finalized a 50 percent tax on solar cells from China and a 25 percent tariff on lithium-ion batteries. The effort was intended to boost domestic production of clean energy technology. Trump’s proposed additional 10 percent tax would likely increase domestic manufacturing, but raise prices for domestic buyers, according to a recent analysis from Wood Mackenzie. That’s the tricky trade-off that comes with building a domestic industry from the ground up. Until it’s large enough, tariffs that help a manufacturer in Ohio can put the kibosh on the growth of solar distributors outside of Chicago, for example.
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