Trump’s trade strategy: Tariff impact and opportunity from an IRA repeal
Image courtesy 123rf.
North American energy policy and trade strategy is under the lens in this week’s Power Playbook, with Trump’s tariffs dominating global discourse, a bill passed to hamper the IRA, and research from Johns Hopkins showing a full repeal would re-enable global competition in energy sector dominance.
“We have a great big elephant fight going on in the world…the tariff wars: the large economic powers across our world playing games of chicken with each other to see who can push forward tariff prices the most.”
So said Bronwyn Williams, futurist and the UNDP’s strategic foresight advisor earlier this week at Enlit Africa in Cape Town, South Africa.
Indeed, Trump’s ‘elephant fight’ has shaken trade across the world and across sectors.
And despite it being weeks since his strategic announcement – and subsequent pause – it still dominates discourse for those of us in the energy sector, regardless of where.
As aptly phrased by Paul Gerke, content director of Factor This, while hosting a webinar discussion of the tariff’s impact on solar generation and manufacturing in the US: “Unless there’s no internet signal reaching the rock you’ve been living under, news of the shifting US tariff landscape has likely caught your ears or eyes over the last few months.”
Have you read:
EV sales: Record global growth amid economic uncertainty
Jolt to the system: What the Iberian blackout says about grid investment
US impact and battery manufacturing
Indeed, despite the uncertainty, the negative impact on the bottom line of US clean tech companies should not be underestimated, especially in the battery segment.
During the discussion with Gerke, Justin Johnson of independent power producer Arevon highlighted the challenges that the battery sector is already facing.
Said the VP and CCO: “There is significant battery supply coming online … from a number of manufacturers here in the US between mid- this year and mid- next year.”
“But if you were building BESS facilities this summer, it means you were delivering battery cells/DC blocks right when the tariffs hit. So that can be a very untenable situation.
“There’s a little bit of a relief right now, but when you’re looking at a 145% tariff, there’s really not enough margin in the system to deal with that. You just can’t overcome that sort of cost impact.”
According to S&P Global, US imports of various types of batteries and related parts for energy storage systems, electric vehicles, consumer electronics and other uses soared this decade, especially lithium-ion batteries made in China.
Specifically, since 2021, the US has imported over $100 billion in electric storage batteries and components, reaching record heights in 2024. Roughly half of that came from China, highlighting the extent to which battery and component shipments to key US industries are caught in the crossfire of escalating trade tensions.
And in early May, this was felt with significant impact when US-based energy storage company Fluence Energy paused projects in its home country amid economic uncertainty due to the evolving tariff landscape.
One door closes, a supply chain opens?
The tariffs haven’t been the only way Trump has been impacting the US energy agenda.
Besides his drill, baby, drill campaign, POTUS has created an uncertain future for the Inflation Reduction Act (IRA), which was a game changer for the country’s energy sector.
Just yesterday, reported Utility Dive, the Republican-dominated House of Representatives passed the ‘One Big Beautiful Bill’ act, with an amendment that amplifies the impacts of the Administration’s already-steep cuts to IRA funding for energy projects.
The bill requires projects to break ground within 60 days of its signing to qualify for clean electricity production and investment tax credits. A project that breaks ground during that period will then have to be placed in service by the end of 2028 – not exactly a comfortable window.
What are the implications of all these policy changes?
A study published by researchers from Johns Hopkins University, would perhaps paint a silver lining for countries on the other side of the tariff negotiating table.
The study, Trump’s proposed clean energy retreat: US costs and global rewards, posits a scenario analysis that repeal of the IRA would significantly harm US manufacturing and trade and create up to $80 billion in investment opportunities for other countries.
With or without the US, says the study, the global energy transition has incredible momentum.
The researchers, citing RMI, say that in 2023, China added more solar capacity and sold more electric vehicles in a single year than the US has in 30 years.
Additionally, solar is now cheaper than coal almost everywhere in the world and over the next few decades, solar and batteries are likely to boom across the middle-income world as rapidly growing economies add high-quality solar assets to their energy mix.
“Cheap energy has been, for centuries, the foundation of economic prosperity. Those countries that use declining solar prices to fuel development will be the ones to benefit,” say the researchers.
And this takes me back to a comment from futurist Williams at this week’s Enlit Africa: “Things that happen over there affect all of us here…[economic] conflict is putting pressure on globalisation as we know it, and it’s challenging nations and continents and regions to reconsider their sovereignty.
“In other words, while there are lemons out there in the world, there is also an opportunity to make lemonade by focusing on what we can do for ourselves outside of the conflict…
“When globalisation falters or shifts as it is right now – it’s certainly not disappearing, but it is shifting – there are opportunities for us to invest in our own infrastructure, our own economies, and to actually use the chaos around us as an opportunity to claw back some of the competitive advantage that we [in Africa] are unfortunately missing.”
What opportunities do you think will come from Trump’s trade war? Is it perhaps an opportunity for Europe to unite and gain competitively? Perhaps it opens space for new partnerships and deals?
Reach out and let me know so that we can feature your thoughts on the Power Playbook.
Cheers,
Yusuf Latief
Content Producer
Smart Energy International
Follow me on Linkedin
