Low-Energy Fridays: Trade Boosts America’s Energy Security, Tariffs Threaten It

Over the last 50 years, America has seen domestic energy production grow much faster than energy consumption. As a result, we now export more energy than we import. International trade in energy, both imports and exports, has been an important part of the energy industry’s success; however, recently proposed tariffs threaten this achievement.

On Feb. 1, the Trump administration announced tariffs on imports from Canada, Mexico, and China. Then they paused the tariffs on Canada and Mexico for 30 days. Then they announced new tariffs on steel and aluminum and, more recently, on autos, pharmaceuticals, and computer chips. It’s not yet clear what tariffs will emerge from the flurry of announcements, but implementing any one of them would harm U.S. energy producers and consumers.

The simplest way to understand how these tariffs will affect U.S. energy is by looking at individual industries within the energy sector.

Let’s start with the biggest one first. As the world’s largest producer of crude oil, the United States has become a net exporter (though we also import it). American refineries are some of the most sophisticated industrial processors in the world, capable of turning heavy, sour crude oils into a wide range of valuable products from jet fuel, gasoline, and diesel to propane and asphalt.

U.S. refineries work well with heavy crude oil, while many foreign refineries prefer lighter oil. As it happens, Mexico and Canada produce lots of heavy crude, while U.S. fracking mainly yields light, sweet crude. Trading oil across borders helps match each type of oil with the refineries that can process it best, creating better value for both oil producers and refineries.

Over the past few years, the United States has also become the world’s largest exporter of liquefied natural gas (LNG). But thanks to an old law designed to prop up U.S. shipbuilding, we have to import natural gas at terminals in Massachusetts and Puerto Rico. This law—the Jones Act—makes it illegal to ship between U.S. ports in ships built overseas. The problem is that U.S. shipbuilders have not made any LNG tankers. So when New Englanders and Puerto Ricans need to purchase domestic LNG, the law effectively stops them. LNG imports are critical in both of these cases. They help New Englanders heat their homes and keep the lights on through the winter, and they are vital to generating power and supporting industry for Puerto Ricans all year long.

LNG imports aren’t the only Achilles heel for New England. The proposed tariffs on Canadian electricity could push energy costs even higher for the region. New England, and nearby New York, have spent decades building an integrated electricity system with their Canadian neighbors, and both areas now import about 9 percent of their electricity from across the border.

These imports proved crucial during the January 2025 cold snap, with Canadian power imports surging as New England struggled with natural gas shortages. When Canadian imports weren’t available, the region resorted to oil-burning power plants, increasing both energy costs and harmful air emissions. Electric utilities in the Western United States also trade power with Canadian producers, generally sending power north in the winter and bringing it south in the summer. Tariffs threaten these long-standing industry relationships.

Ultimately, the energy industry is more than just fuel and power generation. The proposed 25 percent tariff on steel will raise costs for everything from gas pipelines to wind turbine towers to transmission lines to refinery equipment. Electrical transformers—already facing shortages, new regulatory requirements, and prices up more than 70 percent since 2020—will become even more expensive with steel tariffs, hampering updates and upgrades to the grid connecting power plants and consumers. Combining this impact with targeted tariffs on Canadian oil imports and Chinese solar components effectively throws sand in the gears of every major energy system we have—and that’s without considering the retaliatory tariffs our neighbors have suggested they’d employ on American exports to their nations. China immediately responded with a tariff on U.S. LNG and additional goods, and other nations threatened with tariffs are likely to respond with their own retaliatory tariffs.

The most pernicious effect of energy tariffs is how they undermine economic growth. Modern economies run on abundant, affordable, reliable energy. When we artificially raise energy costs through tariffs, we’re essentially choosing to make American businesses less competitive and American households poorer. Even if none of the announced tariffs go into effect, policy instability is bad for business.

The fundamental problem with energy tariffs is that they represent a 19th-century solution to 21st-century challenges. In an era where economic growth depends on global supply networks and efficient energy markets, tariff-based barriers to trade don’t protect our economy—they handicap it. Just look at our LNG exports: In less than a decade, American companies built a world-leading industry by participating in global markets, not hiding from them.

The push for energy tariffs threatens to unravel these gains while raising costs for every American household and business. Until policymakers recognize that energy security comes from market participation rather than isolation, we risk sacrificing America’s hard-won energy advantages on the altar of protectionism.