Trade war exposes risks of ignoring new energy economy

As the trade war between the United States and Canada drags on, a strange sense of inevitability has settled over both countries.

This feeling has a name – “Hypernormalisation”. 

The term was coined by Russian historian Alexei Yurchak, who described life in the final years of the Soviet Union, a time when corruption was an open secret, when even those in power understood the system was failing, yet no one could avoid the looming bleakness. And so, people simply accepted the illusion of normalcy, knowing it was just that.

Though the U.S. and Canada are far from Soviet collapse, a similar atmosphere surrounds economic policy today. Political leaders continue to trade blows over tariffs, celebrating so-called economic victories that feel increasingly disconnected from daily life. Meanwhile, uncertainty grows. Will manufacturing jobs return? Will rising costs stabilize? Will policies benefit workers and consumers or is everything on the brink of collapsing?

People know the system isn’t working as promised. They know their leaders know it too. But for now, the cycle continues—because no one seems to have a way out. Or the will to follow a way out.

For the Canadian Renewable Energy Association, the trade war might just be a gift. It has a to-do list, a jump start if you will, to shift the new energy economy into overdrive: “Adopt a Clean Electricity Standard that puts in place GHG-emission limits that will require Canada’s electricity grid to be decarbonized by 2035; ensure that existing natural gas-fired generation faces steadily increasing exposure to the carbon price, within federal and provincial carbon pricing frameworks, and is fully exposed to the carbon price by 2030”; “define and provide economic value for services that maintain grid stability and security”; and “remove barriers to the participation of these technologies in the electricity system."

The tariffs could dramatically help with all of these goals, creating an economic and political disincentive to maintaining cross-border trade that is reliant on the transaction of natural resources whose use can be easily exploited.   

Sierra Club Canada’s spokesperson Conor Curtis sees the tariffs imposed by the U.S. “as an attack on the whole Canadian economy and are directed against our sovereignty as a country by a hostile U.S. administration hellbent on undoing years of clean energy progress.” 

He argues that U.S. hostility is aimed at expanding oil and gas exploration in Canada rather than reducing it, highlighting the deep ties between the American government and the fossil fuel industry. And the need to break away from these bonds.

Curtis points to U.S. President Donald Trump’s push for the Keystone XL pipeline, the lower tariff on oil—ten percent compared to 25 percent on other Canadian goods, and the Canadian oil and gas sector’s resistance to cutting exports to the U.S.—a stance that ultimately weakens Canada’s negotiating power.

“We need to move quickly to renewable energy, precisely because oil and gas dependency leaves us vulnerable to price shocks from external markets and to the actions of hostile powers like the U.S."

Tensions between the United States and Canada escalated sharply since Trump took control in January as a series of tariff announcements threatened to disrupt trade between the two long-standing economic partners. 

On February 1, the U.S. government’s executive order, imposing a 25 percent tariff on Canadian goods—with a ten percent tariff on energy products—was met with swift retaliation from Ottawa, which announced its own 25 percent countermeasure tariffs on American imports.

A temporary pause on February 3 delayed the implementation of these tariffs, offering a brief window for negotiations. That window closed abruptly on March 4, when the White House confirmed the tariffs would go into effect, prompting an immediate response from Canada. 

“Today, after a 30-day pause, the United States administration has decided to proceed with imposing 25 percent tariffs on Canadian exports and 10 percent tariffs on Canadian energy. Let me be unequivocally clear – there is no justification for these actions,” Prime Minister Justin Trudeau said in a statement.

Ottawa vowed to retaliate with tariffs on $155 billion worth of U.S. goods, with $30 billion in tariffs taking effect immediately and the remainder rolling out within three weeks.

“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures. While we urge the U.S. administration to reconsider their tariffs, Canada remains firm in standing up for our economy, our jobs, our workers, and for a fair deal,” Trudeau said.

The neighbouring countries have enjoyed a tariff-free relationship for decades until now.

Trump has deployed a chaotic on-again-off-again tariff tactic with many wondering if he has any real plan at all. As of publication his latest tariff salvo was still postponed till April. The confusion has itself become a sort of tariff, crippling many industries that cannot afford to guess what Trump might do the next day.

Doug Ford and Trudeau seem to understand this. “Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas, and cars, and potentially lose thousands of jobs,” the Prime Minister warned. “Tariffs will disrupt an incredibly successful trading relationship. They will violate the very trade agreement that was negotiated by President Trump in his last term.”

The battle over tariffs quickly expanded beyond trade goods and into the energy sector. Being the premier of Canada’s second-largest energy producer, Ford announced a 25 percent surcharge on electricity exports to Michigan, New York, and Minnesota—three states heavily reliant on Canadian energy. 

“If we have to, we won’t hesitate to increase the charge or shut the electricity off completely,” Doug Ford wrote in a social media post along with the letter addressed to U.S. leaders.

(Doug Ford/X)

Ford also warned that Ontario could further restrict electricity exports if tariffs persisted, potentially putting additional pressure on U.S. power grids.

"A tariff on Canada is a tax on Americans," Ford said at a convention on March 3. "I will do everything, including cut off their energy with a smile on my face. And I encourage every other province to do the same."

Fresh off an election victory, Ford’s hardline stance might paint him as the ideal leader—strong, decisive, unapologetic. But beneath the political bravado lies a contradiction: under the PCs, Ontario’s electricity grid has become dirtier and costly.

Ontario’s electricity grid is becoming increasingly reliant on natural gas, a fossil fuel that emits carbon dioxide when burned and acts as an even more potent greenhouse gas when leaked. In 2019, natural gas accounted for seven percent of the province’s electricity supply, but by 2024, that figure had surged to 16.3 percent—a fourfold increase from just four percent in 2017, according to The Atmospheric Fund (TAF).

This shift has led to a measurable decline in Ontario’s clean energy mix. The 2023 provincial budget reported that the grid was 90 percent emissions-free until 2022, down from 94 percent in 2021. While the Ministry of Energy did not explain the drop, evidence points to increased natural gas use under Ford’s policies due to nuclear refurbishments and rising electricity demand. 

The IESO projects that by 2030, fossil gas will account for 25 percent of Ontario's electricity supply, and 23.6 percent by 2040.

(Ontario Clean Air Alliance)

“If Ontario is serious about positioning the province as an energy powerhouse in the face of Trump’s tariffs – it has no choice but to change its current energy focus to one that reduces Ontario’s reliance on fracked American gas and instead builds on Ontario’s strength in natural resources,” Environmental Defence Canada’s Associate Program Director Mike Marcolongo said in a statement.

In August 2024, the province unveiled a major energy procurement plan to secure an additional 5,000 megawatts (MW) of electricity, addressing the projected 60-75 percent rise in energy demand by 2050 driven by the industrial sector, data centres, electric vehicle adoption, and households.

Ontario’s Minister of energy and electrification, Stephen Lecce, promised that the new energy supply would include a mix of natural gas, hydroelectric, renewables, nuclear, and biomass. 

On August 25, he sent a letter to the IESO, instructing them to provide an update on the Long-Term Procurement process (LT2), marking a shift from the government's previous commitment, under former Energy Minister Todd Smith, to focus solely on non-emitting energy sources. 

The new direction allowed gas plants to be considered in the LT2 process, overturning the earlier restriction to wind, solar, hydro, or biomass.

TAF’s climate policy coordinator, Laura McCloskey, expressed concern over the shift to a “technology-agnostic” approach when LT2 was initially designed to meet energy demands quickly and affordably while supporting decarbonization. 

She warned this change could undermine long-term affordability, climate goals, and stability for the clean energy industry.

“The bigger piece is that a little while ago, it seemed that Ontario was ready to get back into the business of building wind and solar power, something which this province has not done since Doug Ford became the Premier,” Environmental Defence’s programs director Keith Brooks told The Pointer. 

This shift was largely due to then-Energy Minister Todd Smith, who recognized that wind and solar are the cheapest sources of new electricity generation globally—and would be here in Ontario as well. 

Brooks noted there was resistance to expanding or building new gas-fired power plants, with Halton Hills voting against a gas plant expansion, Brampton choosing battery storage over a gas plant, and the town of Thorold, near St. Catharines, making a similar decision.

Environmental Defence echoed similar concerns as TAF in a January 10 letter to the IESO, stating that the draft Request for Proposals (RFP) for up to 600 MW of new electricity capacity gives natural gas-fired electricity generation an “unquestionable advantage” at a time when Ontarians would be best served by the most cost-effective resources, especially in the current inflationary environment.

According to the IESO’s procurement data, natural gas is significantly more expensive than clean energy, with clean storage projects costing $672.32 per MW compared to $1,681.14 per MW for gas-fired generation.

The RFP awards full points to natural gas facility operators for continuous delivery through a "Non-Electricity Storage Facility," a move that critics say gives them an unfair edge. The RFP requires electricity storage facilities to provide continuous electricity for 12 hours, a threshold no Lithium Ion battery storage in Canada can meet.

“The only “non-electricity storage” proponents able to be awarded full points are natural gas facility operators. This gives the impression of favouritism and is clearly not a technology agnostic approach,” the letter mentioned.

Environmental Defence warns that this procurement process will ultimately cost Ontarians more and goes against the government's goal of keeping energy affordable. They recommend changing the RFP criteria to remove biased terms like “non-electricity storage facilities” and the 12-hour continuous electricity requirement, suggesting a more realistic six-hour continuous electricity requirement to better meet actual peak demand in Ontario.

Essentially, the PC government “really put up a lot of hurdles in the way of wind and solar power projects,” Brooks said.

Wind and solar are central to nearly all recent models focused on reducing carbon intensity and expanding Canada’s electricity supply.

(David Suzuki Foundation)

A February 2025 report from the Pembina Institute warns that increasing reliance on natural gas not only risks hindering Ontario's efforts toward a cleaner energy grid but also exposes residents to price volatility and energy security threats tied to fossil fuel imports.

“Over-expanding the use of natural gas (beyond what is needed for short-term reliability during planned nuclear refurbishments) would make Ontario’s grid less affordable and less reliable in the long run, as well as much less clean. This would go against what is needed to create a strong, resilient economy into the 2030s and beyond,” the report noted.

The IESO's 2024 Annual Planning Outlook forecasts by 2030, greenhouse gas emissions from the province’s gas plants will be 570-580 percent higher than they were in 2017.

The Ontario government initially promoted the LT2 process as a way to provide certainty for future energy procurements, ensuring renewable energy developers could confidently collaborate with local and Indigenous communities, Environmental Defence noted. Over the past year, confidence in LT2 has ‘steadily declined’ due to shifting procurement goals and the introduction of new restrictions. 

The Ministry of Natural Resources and Forestry has burdened wind energy developers with excessive consultation requirements for installing wind measurement towers on Crown Land, complicating project development. 

Then, a June 2024 directive imposed significant restrictions on developing energy projects on prime agricultural lands, limiting smaller-scale projects despite the positive intention to protect Ontario’s farming regions.

There has also been confusion around Agricultural Impact Assessments (AIAs). The lack of clarity and guidance, combined with the expectation that local municipalities with little experience handle approvals, has created uncertainty. 

Delays in the release of grid connection information by IESO have further hindered project development and diminished confidence in the LT2 process.

In response to these challenges, Environmental Defence has called for a formal working group composed of industry experts, municipalities, and relevant Ministries to guide the LT2 procurement process moving forward.

“We had hoped that even though this government had an ideological distaste for renewable energy, that they had come around and seen the light,” Brooks said, pointing out their change in stance on electric vehicles, from removing incentives and charging stations to now strongly supporting them.

“The economics of wind and solar power are so compelling that we had hoped that the government had left its ideological position to the side and was prepared to do what was actually in the best interests of Ontarians, although now we certainly have questions about whether that is indeed the case.”

Reliance on natural gas is becoming increasingly concerning, not only because of its environmental and financial impacts but also due to the potential risks posed by the trade war. Until two decades ago, all of Ontario's natural gas came from Western Canada. Today, the majority of the gas imported into the province is fracked in the Appalachia region of the U.S.

“For Ontario, nearly all of the gas used in our power plants comes from the United States, primarily from fracking operations in Ohio and Pennsylvania. It's highly problematic from an environmental perspective. And with gas prices on the rise, this will affect both home heating and electricity generation,” Brooks said.

Given Ontario's ongoing dependence on U.S. natural gas for heating and electricity, the province's upcoming energy procurement still focused on gas-fired power reliant on American fracked gas, especially with escalating trade tensions, makes little sense.

“It’s time to revisit the LT2 procurement. Now is the time to move away from American fracked gas in favour of made-in-Ontario energy generation,” Marcolongo said.

This shift would not only strengthen local energy production but also deliver significant environmental benefits. A report by the Canadian Renewable Energy Association (CanREA) states Canada's path to achieving net-zero greenhouse gas (GHG) emissions by 2050 relies heavily on wind energy, solar power, and energy storage technologies.

“Canada must decarbonize and double its electricity production. Luckily, this country has massive, untapped potential for low-cost wind and solar energy,” the report stated.

“While the wind, solar and energy storage industries are ready to take on the challenge, immediate action is required from legislators, regulators, and other key decision makers, to enable these industries to deliver the results Canada needs.”

The IESO's technology-agnostic approach could support this transition, but rising trade tensions and tariffs on Canadian exports pose major challenges for the energy sector.

While Canada exports oil, gas, and alternative energy products, tariffs disrupt these industries by making Canadian goods more expensive in the U.S. and vice versa. In the short term, this could lead to surpluses and lower prices domestically, but in the long term, reduced production and layoffs may drive costs higher.

“For alternative energy, particularly solar panels, the startup costs are high, and profitability often depends on access to large export markets. With tariffs limiting U.S. sales, Canadian producers may struggle to compete, as a smaller domestic market drives up costs. Many successful small economies in Europe, like Finland and Estonia, rely on exports to justify investment in clean energy. Without that, Canada risks losing competitiveness,” Toronto Metropolitan University’s global management studies professor Sui Sui told The Pointer in an interview.

She explained that U.S. policies are also incentivizing companies—including those from Taiwan and Japan—to invest directly in American manufacturing. With unpredictable tariff policies and a larger U.S. market, businesses may see more stability and opportunity in producing within the U.S. rather than in Canada.

In 2023, China accounted for nearly 60 percent of global EV sales.

(International Energy Agency) 

Many experts fear the tariffs will also exacerbate the challenges facing Canada’s already fragile electric vehicle sector. Despite recent growth and $52.5 billion in government investment, new plant plans could shift to the U.S., stalling investment in Canada’s EV industry and giving Chinese automakers an advantage in the global market.

If the trend continues, Ontario and the rest of Canada could face declining investment in clean energy manufacturing, as companies prioritize the U.S. market to avoid trade barriers.

“In terms of building new electricity generation, the impact is likely neutral. For example, nuclear fuel and its supply chain are largely Canadian, with little involvement from the U.S.,” Ontario Tech University’s energy and nuclear engineering associate professor Daniel Hoornweg told The Pointer.

Ontario Power Generation's recent contract with GE-Hitachi for four new and costly nuclear reactors at Darlington, east of Oshawa, complicates this outlook. These reactors—the first of their kind—introduce significant financial and energy security risks, particularly due to their reliance on enriched uranium imported from the U.S..

“If we were to build new solar facilities, most panels would be made in China, so U.S. tariffs wouldn’t affect that. Similarly, wind turbines are mostly sourced from European suppliers, particularly Germany, so they aren’t likely to be impacted either.” 

Another hindrance comes with the provincial government’s proposed ban on foreign components, particularly Chinese-made ones, in new energy projects with about 80 percent of the solar industry, along with key parts of the wind and battery sectors, relying on Chinese components. 

“China has become a global leader in manufacturing clean energy technologies, driving down costs worldwide. If we want to access affordable, clean energy, we should be able to use these Chinese imports,” Brooks explained. 

“Putting a prohibition on Chinese imports wouldn’t make any sense at all, given the trade war we are now embarking upon with the United States; why fight with the two largest economies?”

For Hoornweg, the main challenge isn’t the tariffs themselves but the broader impact of the U.S. pulling out of the Paris Agreement and halting the Inflation Reduction Act, which aimed to boost clean energy. “That has had a far larger effect on climate mitigation and low-carbon electricity in North America than anything else happening right now.”

With hypernormalization, Hoornweg anticipates a growing trend of people thinking, “'Wait a second, the world is getting a whole lot crazier. I'm going to see if I can island my property,' especially in cottages and rural areas. I could see people putting wind and solar on their residential properties to be able to go off the grid if they have to. I would do that if I could."

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