Ontario opens new front in trade war by targeting electricity

John Woodside,
Local Journalism Initiative Reporter

Power grids are the new front in the unfolding trade war with the United States, but  Ontario Premier Doug Ford’s decision to use electricity as leverage  carries major risks worth considering.

On Thursday, Ford said Ontario will charge 25 per cent more  for electricity shipped to 1.5 million Americans across Minnesota, New  York and Michigan starting Monday in response to U.S. President Donald  Trump’s tariffs. The premier has also threatened to shut off power  completely to the three U.S. states by early April if the tariffs  remain.

“You touch the stove once, you get  burned, you don’t touch that stove again,” Ford said. “We’re going to  make sure that we follow through with what we said we were going to do.”

Larry Hughes, an energy system expert and professor at Dalhousie University, told Canada’s National Observer  that cutting the U.S. off from electricity carries significant  downsides that must be weighed if that option is seriously being  considered. A policy directive  under former President Barack Obama, states the United States considers  electricity (and energy broadly) an “enabling function” of critical  infrastructure. That characterization means energy is deemed a “uniquely  critical” component for the functioning of the economy.

For  now, “Ford has backed off turning off the electricity,” Hughes said.  “Adding a surcharge is not the same. We’ll have to see how much this  annoys the Americans.”

“If we start turning  off energy supplies … I think that would give the Americans an excuse  to be even more belligerent,” Hughes said, adding it could be considered  “an attack on their critical infrastructure.”

Beyond  critical infrastructure, it’s a significant shot across the bow of the  American economy to make electricity more expensive for states importing  from Canada. Affordable electricity is a key input for industrial and  manufacturing businesses, and rate hikes hit American pocketbooks.

Canada  exports more electricity into the U.S. than it imports, but in recent  years, the gap is closing, suggesting there is limited leverage in using  electricity exports as a tool to force Trump to back down from his  tariff war.

From 2020 to 2024,  Canada’s electricity exports to the U.S. have fallen about 46 per cent.  At the same time, Canada’s imports over that same period have grown  roughly 142 per cent.

Even though in  recent years Canada has exported less and imported more, the country is  still fetching increasingly more cash for its electrons. In 2024, the  value of Canadian electricity exports was worth $3.1 billion up from  $2.5 billion in 2020 thanks to higher prices per megawatt hour.

But  Canada is spending much more on imports, too. In 2020, Canada imported  $286-million worth of electricity, compared to $1.3 billion in 2024.

“Electricity  exchanges across the United States and Canada — historically each  other’s largest electricity trading partners — remain relatively small,  representing less than one per cent of their respective total  generation,” reports  the U.S. Energy Information Administration. “However, the trade is  important to grid balancing — constantly matching electricity  consumption to electricity production — and helping to shore up  electricity supply during low hydropower production periods particularly  on the western coast of Canada.”

Hughes  said if Canadian provinces began cutting the U.S. off from electricity,  the U.S. could turn around and do the same. And that could harm certain  regions.

Canada does not have an East-West power grid connecting the country, or even robust power grids  effectively connecting regions within the country. Instead, Canada  relies on North-South connections with the U.S. States on the border. In  a crisis, many Canadian provinces would be unable to help one another.  Due to droughts that are becoming more intense and frequent  because of climate change, hydro reservoirs have less generating  capacity, and as a result, last year both British Columbia and Manitoba  (two provinces with significant hydro resources) had to import  electricity from the U.S. to help meet demand.

Nova  Scotia is also a good example of the interconnectedness between the two  countries. The maritime province is phasing out its coal power plants  by 2030 to meet federal requirements, and aims to add more wind, battery  storage, and hydro power from Muskrat Falls to do that. In the  meantime, however, it is using gas to balance the grid, and it gets its gas from the U.S via a pipeline through New Brunswick.

“Our  electricity system in Nova Scotia won’t work if the natural gas is cut  off,” Hughes said. “We need natural gas in Nova Scotia, and if it was to  be cut off, we’d be in trouble.”

The risk  of some provinces using electricity exports as leverage could put  vulnerable provinces that had nothing to do with the decision in the  cross-hairs of American retaliation.

Energy  and Natural Resources Minister Jonathan Wilkinson said in a statement  that the goal of Canada’s retaliatory tariffs is to pressure Americans  by focusing the government’s response on American goods that are sold in  large quantities.

“In terms of other  measures, we haven’t taken anything off the table, and provincial and  territorial governments are free to add additional measures,” Wilkinson  said. “This is an evolving conversation, but that’s not to say that we  will not be looking to do more. There are other tools in our toolbox,  including energy and critical minerals, that may become part of this  conversation down the road.

“To be clear, though — we don’t want that,” he said. “At the end of the day, we want to see the tariffs lifted.”

The  trade blows between two long time allies this week have been chaotic.  On Tuesday, Trump imposed 25 per cent tariffs on Canadian goods and a 10  per cent levy on energy (a spokesperson for Wilkinson’s office said the  Trump administration has not clarified which rate applies to  electricity). Canada responded with 25 per cent retaliatory tariffs on  $30-billion worth of American products and Prime Minister Justin Trudeau  said tariffs on another $125 billion in goods would follow after three  weeks.

Then, Trump announced a month-long  reprieve for the auto sector on Wednesday, and on Thursday paused  tariffs on goods considered compliant with the Canada-United  States-Mexico Agreement until April 2.

Both Ford and Trudeau have said they will not back down from retaliatory measures until all tariffs are removed.

“We have to follow through until he drops tariffs completely,” Ford said.

John Woodside,
Local Journalism Initiative Reporter
Canada’s National Observer