Ontario Slaps 25% Surcharge on U.S. Electricity Exports as Trade War Escalates
What began as tariffs on steel and aluminum has now crossed into far more sensitive territory: electricity.
Ontario Premier Doug Ford’s decision to impose — and then temporarily suspend — a 25% surcharge on electricity exports to the United States marks a dramatic escalation in the U.S.–Canada trade conflict. For the first time in decades, the North American power grid has become a bargaining chip.
And that changes the stakes entirely.
The Announcement That Shook the Grid
Standing before reporters, Ford delivered a blunt warning:
“We will immediately apply a 25% surcharge on the electricity we export. We will not hesitate to shut off their power as well.”
The measure targeted electricity flowing into Minnesota, New York, and Michigan — states that rely on Ontario power imports, particularly during peak demand seasons.
Ontario estimated the surcharge could add roughly $100 CAD per month to affected American households if fully passed through by utilities.
Though the surcharge was later paused following talks with U.S. Commerce Secretary Howard Lutnick, Ford made clear it could be reinstated at any time if tariffs intensify.
The message was unmistakable: escalation will be met with escalation.
Why Ontario’s Power Matters
The U.S. and Canada share one of the most integrated international electricity systems in the world. Power flows back and forth across the border based on demand, pricing, and grid reliability needs.
In 2024:
New York imported 7.7 terawatt-hours of Canadian electricity
Cross-border flows can reach 4,600 megawatts at peak
Canadian imports account for roughly 11% of New England’s electricity load
Much of that power is hydroelectric — stable, low-emission, and price competitive.
That integration has long been a strength. It smooths volatility, prevents outages, and lowers costs.
Now, it has become leverage.
The Trade War Backdrop
The electricity surcharge did not emerge in isolation. It followed aggressive tariff measures from Washington:
25% tariffs on most Canadian goods
10% tariffs on Canadian energy resources
Later threats of 50% tariffs on Canadian steel and aluminum
Canada retaliated with:
25% tariffs on $30 billion CAD of U.S. goods
Additional 25% tariffs on nearly $29.8 billion CAD in steel and aluminum
Ontario’s electricity move represented a further step — targeting critical infrastructure rather than manufactured goods.
That shift alarmed grid operators on both sides of the border.
Grid Operators Enter Emergency Mode
The New York Independent System Operator (NYISO) and ISO New England filed emergency proposals with the Federal Energy Regulatory Commission (FERC), seeking authority to collect import duties if required by federal policy.
ISO New England estimated that a 10–25% tariff on Canadian electricity could cost consumers $66 million to $165 million annually.
FERC approved tariff revisions effective March 1, 2025, allowing operators to collect duties if imposed and requiring biannual cost reporting for three years.
Grid managers were careful in their messaging:
Electricity markets are built for stability — not political volatility.
Even temporary price distortions can ripple across capacity markets, reliability planning, and long-term infrastructure investment decisions.
Regional Impact: Uneven but Real
New York
Highly exposed. Heavy reliance on Canadian hydro imports means a sustained surcharge would likely raise consumer costs, especially during high-demand periods.
New England
Moderate exposure. Canadian imports represent around 11% of total load. Costs could rise significantly if tariffs persist.
Minnesota
Politically vocal but less economically exposed. Direct purchases from Ontario were limited in 2024, suggesting more symbolic than structural impact.
Michigan
Limited direct consumer exposure, but regulators warned that reduced cross-border flexibility weakens reliability safeguards during peak stress events.
The Oil Factor: Alberta’s Potential Leverage
Doug Ford went further, publicly urging Alberta to consider oil export taxes.
Canada supplies roughly 4.3 million barrels of oil per day to the United States. About 60% of U.S. crude oil imports originate from Canada.
“If gas prices rise by $1 per gallon, Americans will lose their minds,” Ford said, framing oil as a potential “Trump card.”
Alberta has not imposed export taxes. But the mere suggestion injects additional uncertainty into energy markets.
Unlike electricity, oil flows are harder to reroute quickly. Any disruption would likely have immediate price effects.
The Larger Risk: Weaponizing Interdependence
The North American grid was designed around efficiency and cooperation. Electricity moves based on engineering constraints and market signals — not political retaliation.
Turning that system into a pressure tool introduces several risks:
Reduced grid reliability
Higher reliance on fossil-fuel peaker plants
Increased wholesale price volatility
Delayed infrastructure investment
Greater risk of localized outages during extreme weather
Regulators in Michigan warned that limiting cross-border flows removes “a layer of protection” against grid-scale disruptions.
In short, interdependence cuts both ways.
A Pause — Not a Resolution
After negotiations, the surcharge was suspended. The U.S. stepped back from certain tariff escalations in response.
But the pattern is now familiar:
Tariffs announced
Retaliation follows
Escalation threatened
Temporary pause negotiated
Structural uncertainty remains
Markets adjust. Investment hesitates. Consumers absorb higher costs.
Even if no long-term duties are implemented, the precedent has been set: electricity is no longer politically neutral.
What Comes Next?
Quebec is reportedly considering similar measures. Alberta’s oil leverage remains a possibility. Additional U.S. tariffs on autos, dairy, and lumber remain on the table.
Energy analysts warn that prolonged escalation could gradually fragment one of the world’s most integrated electricity systems — forcing both countries to duplicate infrastructure at enormous cost.
The central issue is no longer just tariffs.
It is trust.
Conclusion
Ontario’s 25% electricity surcharge may have been paused, but it marked a psychological shift in the U.S.–Canada trade conflict.
Electricity — once a symbol of seamless cooperation — has entered the geopolitical arena.
The two economies remain deeply intertwined across oil, electricity, manufacturing, and supply chains. Unraveling that integration would not produce a clean break. It would produce higher prices, greater volatility, and weaker reliability on both sides of the border.
The real question is no longer whether tariffs raise costs.
They do.
The question now is whether North America’s energy integration can survive repeated political shocks — or whether the grid itself will become a recurring instrument of leverage in an expanding trade war.