Get ready for the showdown between “America First” and “Energy Dominance.”
President Trump’s decision on Thursday to enact new tariffs on steel and aluminum could break his promise to protect the coal miners he adores so much, leaving everything from oil pipelines to wind turbines vulnerable to foreign retaliation.
As part of his “America First” doctrine, Trump wants protections for US manufacturers from foreign competition and is tacking on a 25 percent tariff on steel and 10 percent on aluminum (Canada and Mexico are exempt).
But as Vox’s Alexia Fernández Campbell writes, almost every US industry hates the idea (except, of course, steel and aluminum) because these metals are critical to so many products manufactured in the US. The tariffs may also start a chain reaction of retaliation around the world; the European Union is already suggesting duties on US goods like bourbon and Harley-Davidson motorcycles.
In the energy sector, where steel and aluminum go into everything from coal-fired power plants to power lines, these tariffs are likely to undermine Trump’s pursuit of “energy dominance”: the goal of using US coal, oil, and gas supplies as a diplomatic weapon.
It’s also giving the fossil fuels sector whiplash from a White House whose energy policies have otherwise been very good to them, from starting to undo greenhouse gas regulations to opening more public land to mining and drilling and tax cuts.
Exxon Mobil CEO Darren Woods told CNBC on Thursday that the tariffs would “take us back in the opposite direction.”
“We see the president’s announcement on the steel and aluminum tariffs as inconsistent with his broader energy vision,” Jack Gerard, president of the American Petroleum Institute, told the Washington Examiner.
For his part, Energy Secretary Rick Perry tried to allay concerns at a major energy conference this week in Houston, downplaying, and perhaps gleefully oblivious to, the fallout of the looming trade war for US energy.
“I think strategically deploying tariffs, and messaging and regulations, is the key here,” Perry said. “There are concerns out there. Don’t get me wrong, but the overall message here is one of just sheer optimism.”
The metal tariffs hit the US energy industry both at home and abroad
But the tariffs aren’t just going to drive up prices of pipelines and wind turbines (which will need more steel and aluminum as they become more massive). Backlash from other countries could undermine sales of energy hardware and resources abroad.
For example, Brazil, the largest importer of US coking coal, reminded the US that this material, also known as metallurgical coal, is used to make the very steel that Trump wants to tax. Since the bulk of the United States’ coking coal is sold to other countries, tariffs on foreign steel would shrink the international market for coal and may break Trump’s promise to resuscitate the US coal industry.
And the new levies stand to be yet another blow to solar installers in the US on top of the 30 percent tariffs on imported solar panels the White House announced in January, a move that was meant to corner China and shore up US solar panel manufacturers.
Nonetheless, Tesla CEO Elon Musk, whose company is manufacturing solar roof tiles and will soon be manufacturing solar cells in Buffalo, New York, saw the tariff discussions as an opportunity to shore up his other product line, electric cars.
Trump, in turn, cited Musk’s tweet as justification for the new levies during a press conference Thursday.
For a sector that’s as globally interconnected as energy, any changes to trade could ripple all the way down to the gas pump or the power outlet. So while the White House wants the US to be a major international player in energy, particularly with natural gas, the aluminum and steel tariffs would force the energy sector to scramble to keep what it already has as other countries back away from buying US fuels and technology.