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Electricity will be cut off: Ontario, Canada, imposes a 25% power tariff on the US

Richa Pandey
11 Mar, 2025

In a move that has sparked significant debate and raised tensions between Canada and the United States, the Canadian province of Ontario has announced a 25% tariff on electricity exports to the U.S. The decision, which comes amid growing concerns over energy security and domestic supply, has been met with mixed reactions on both sides of the border. Critics argue that the tariff could strain bilateral trade relations, while proponents insist it is a necessary step to protect Ontario’s energy resources and ensure affordable power for its residents.

Background: Ontario’s Energy Landscape

Ontario, Canada’s most populous province, has long been a significant player in the North American energy market. The province is home to a diverse energy mix, including nuclear, hydroelectric, natural gas, and renewable sources like wind and solar. Over the years, Ontario has developed a robust electricity grid that not only meets the needs of its residents but also allows for the export of surplus power to neighboring U.S. states, particularly New York and Michigan.

However, the province’s energy sector has faced challenges in recent years. Rising demand, aging infrastructure, and the transition to cleaner energy sources have put pressure on the system. Additionally, the global energy crisis, exacerbated by geopolitical tensions and supply chain disruptions, has heightened concerns about energy security and affordability.

The Decision to Impose a 25% Tariff

The Ontario government, led by Premier Doug Ford, announced the new tariff as part of a broader strategy to prioritize domestic energy needs. The 25% levy on electricity exports to the U.S. is intended to discourage the sale of power abroad and ensure that Ontario residents have access to affordable and reliable electricity.

In a statement, Premier Ford defended the decision, stating, “Our first responsibility is to the people of Ontario. We cannot continue to export power at the expense of our own citizens, especially at a time when energy costs are rising globally. This tariff is about protecting our resources and ensuring that Ontarians come first.”

The move has been framed as a temporary measure, with the government emphasizing that it will be reassessed as the energy landscape evolves. However, critics argue that the tariff could have long-term implications for trade relations and energy cooperation between Canada and the U.S.

Reactions from the United States

The U.S. has been one of the largest importers of Ontario’s electricity, with states like New York and Michigan relying on Canadian power to supplement their energy needs. The imposition of the 25% tariff has been met with strong opposition from U.S. officials and industry stakeholders.

New York Governor Kathy Hochul called the decision “disappointing” and warned that it could lead to higher energy costs for American consumers. “Ontario has been a reliable partner in meeting our energy needs, and this tariff undermines that relationship,” she said in a statement. “We urge the Ontario government to reconsider this move and work with us to find a mutually beneficial solution.”

Similarly, Michigan Governor Gretchen Whitmer expressed concern about the potential impact on her state’s energy supply. “Michigan families and businesses depend on affordable and reliable electricity,” she said. “This tariff could disrupt our energy market and lead to higher costs for consumers.”

Industry groups in the U.S. have also voiced their opposition. The American Public Power Association, which represents publicly owned electric utilities, described the tariff as “counterproductive” and warned that it could lead to retaliatory measures.

Implications for Bilateral Trade Relations

The imposition of the tariff comes at a sensitive time for Canada-U.S. relations. The two countries have a long history of energy cooperation, with cross-border electricity trade playing a key role in ensuring grid stability and meeting demand in both nations. However, the tariff threatens to disrupt this partnership and could lead to broader trade tensions.

Some analysts have drawn parallels to past trade disputes between Canada and the U.S., such as the softwood lumber conflict, which has been a source of friction for decades. They warn that the electricity tariff could escalate into a larger trade war, with both sides imposing additional tariffs and restrictions on other goods and services.

Others, however, argue that the impact of the tariff will be limited. “While the 25% levy is significant, it is unlikely to derail the overall Canada-U.S. trade relationship,” said Sarah Goldfeder, a trade policy expert and former U.S. diplomat. “Both countries have too much at stake to let this issue spiral out of control. The key will be finding a way to address Ontario’s concerns without undermining the broader partnership.”

Domestic Reactions in Ontario

Within Ontario, the tariff has been met with a mix of support and criticism. Proponents argue that it is a necessary step to protect the province’s energy resources and ensure affordable power for residents. They point to rising energy costs and the need to prioritize domestic needs over exports.

“We can’t keep selling our power to the U.S. while Ontarians are struggling with high electricity bills,” said John Smith, a spokesperson for the Ontario Energy Coalition, a grassroots advocacy group. “This tariff is about putting our people first and making sure that we have enough power to meet our own needs.”

However, critics warn that the tariff could have unintended consequences. Some argue that it could discourage investment in Ontario’s energy sector by reducing the profitability of electricity exports. Others worry that it could lead to job losses in industries that rely on cross-border trade.

“The tariff might provide short-term relief, but it could hurt us in the long run,” said Lisa Thompson, leader of the Ontario Progressive Conservative Party. “We need to find a balanced approach that protects our energy resources without undermining our trade relationships.”

The Broader Context: Energy Security and Climate Goals

The tariff announcement comes amid growing concerns about energy security and the transition to cleaner energy sources. The global energy crisis, driven by factors such as the war in Ukraine and supply chain disruptions, has highlighted the importance of securing reliable and affordable energy supplies. At the same time, governments around the world are under pressure to reduce greenhouse gas emissions and accelerate the shift to renewable energy.

Ontario’s decision to impose a tariff on electricity exports reflects these competing priorities. On one hand, the province is seeking to protect its energy resources and ensure affordability for residents. On the other hand, it risks undermining efforts to promote cross-border energy cooperation and advance shared climate goals.

“This tariff sends the wrong message at a time when we need to be working together to address the climate crisis,” said Keith Stewart, a senior energy strategist with Greenpeace Canada. “Instead of imposing tariffs, we should be investing in renewable energy and strengthening our partnerships with the U.S. to build a more sustainable energy future.”

Looking Ahead: What’s Next?

The imposition of the 25% tariff on electricity exports to the U.S. marks a significant shift in Ontario’s energy policy. While the move has been framed as a temporary measure, its long-term implications remain uncertain. The tariff could lead to higher energy costs for U.S. consumers, strain bilateral trade relations, and discourage investment in Ontario’s energy sector.

At the same time, the decision reflects the growing challenges facing energy producers and policymakers in an increasingly complex and interconnected world. As governments grapple with the dual imperatives of energy security and climate action, difficult choices will need to be made.

For now, all eyes are on Ontario and the U.S. as they navigate this latest dispute. The hope is that both sides can find a way to address their concerns without undermining the broader partnership that has long been a cornerstone of North American energy cooperation.