By Mark Jaffe, EUCI energy writer
The Trump administration’s 25% tariffs on all imports of steel and aluminum – set to begin March 12 – will challenge the utility sector, but in the short run should not undermine company finances, according to the credit rating service Morningstar DBS.
Still, the tariffs may have a ripple effect that could hamstring the sector, such as creating temporary supply chain disruptions and rising costs that could lead to some utilities cutting capital spending.
Morningstar said it was also concerned about utilities serving industrial regions that heavily rely on imported steel and aluminum. The tariff-imposed costs could lead to a decline in industrial activity and in turn, a drop in power demand.
“The new tariffs and the slower-than-expected moderation in inflation will heighten affordability concerns,” the rating agency said. “This, coupled with a politically charged environment, could incentivize political interference in rate-setting processes and undermine the regulator’s ability to approve rates in response to rising costs.”
On Feb. 10, President Donald Trump signed a proclamation imposing an across-the-board 25% tariff on steel and aluminum imports.
“President Trump is taking action to protect America’s critical steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity,” a White House fact sheet said.
During his first term, Trump imposed steel and aluminum tariffs, but exempted close allies, including Canada, Mexico, South Korea, the European Union, and the United Kingdom.
“By granting exemptions to certain countries, the United States inadvertently created loopholes that were exploited by China and others with excess steel and aluminum capacity,” the White House paper said.
Morningstar noted that “the U.S. is very reliant on foreign aluminum, importing approximately 80% of its supply, while also relying on imports for 25% of its steel consumption.”
“We expect steel and aluminum, which are essential materials for building and maintaining infrastructure across all utilities, to see immediate and considerable cost increases if the tariffs go into effect, compounded by supply chain disruptions,” the credit agency said.
In 2024, Mexico and Canada accounted for 40% of U.S. steel imports – about 10.1 million tons.
China is the world’s largest steel producer and exporter, but has faced 25% U.S. tariffs since 2018. In 2024, China exported 508,000 net tons of steel to the U.S., 1.8% of total American steel imports.
Almost all the aluminum imported into the U.S. comes from Canada. In 2024, Canada shipped 3.2 million tons of aluminum to the U.S.
Utilities are already facing elevated capital expenditures that are placing stress on the sector’s credit metrics, according to Morningstar.
“As a result, we expect some utilities, particularly those with aggressive spending plans or limited regulatory flexibility, may have to postpone projects to manage cash flow deficits and protect their balance sheets,” Morningstar said.
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