By Mark Jaffe, EUCI energy writer
The Trump administration’s tariffs on aluminum, copper, and steel are posing a challenge to the utility sector as it faces the need to make “historic capital investments” in infrastructure, according to financial services company Morningstar.
“The timing of these tariffs collides with an ambitious agenda to upgrade and expand the U.S. power grid,” Morningstar said
In June, tariffs on aluminum and steel were doubled to 50%, and on Aug. 1, a 50% tariff on copper took effect.
“These tariffs,” Morningstar said “… citing national security, target an array of imported inputs critical to the utilities sector – from structural steel for transmission towers to aluminum conductors and copper wiring.”
“Policymakers argue the measures will bolster domestic metal production, but economists warn of higher costs for U.S. consumers and infrastructure developers,” Morningstar said.
Regulated electric and gas utilities are in a “super-cycle” of investment fueled by the Infrastructure Investment and Jobs Act’s $73 billion for grid modernization through 2026, and $270 billion and $400 billion in new clean energy projects by mid-2024.
“These massive grid modernization and clean energy buildouts are now facing new headwinds from escalating material prices,” Morningstar said.
“Policymakers argue the measures will bolster domestic metal production, but economists warn of higher costs for U.S. consumers and infrastructure developers,” Morningstar said.
In the steel market, for example, U.S. steel mills have gained “price power” when the steel tariffs were imposed in June and import volumes fell. Similarly, domestic aluminum saw higher domestic premiums amid tighter import supply.
Utilities consume large quantities of steel for poles, pylons, rebar and aluminum for conductors and, transformers.
“The tariffs could exacerbate existing supply chain challenges. The U.S. simply does not produce enough aluminum domestically, as limited bauxite deposits constrain its ability to meet demand.” Morningstar said. “As a result, some international manufacturers are diverting shipments away from U.S. ports and toward other markets to avoid the steep duties.”
Alcoa Corp., for example, operates smelters in both Canada and the U.S. Since March, 2025, it has sold more than 100,000 metric tons of Canadian metal to consumers outside of the U.S, reflecting a deliberate reroute to avoid 50% duty, Morningstar said.
Electrical steel – a specialty steel used in transformers – also is in short domestic supply, and the 50% tariff covers manufactured steel product including imported transformers.
“These dynamics complicate an already fragile supply chain for large transformers and other long-lead items,” Morningstar said.
The result, the financial service company said, is that transmission and grid investments are still moving forward, but at a slower pace or with altered scope, particularly projects not yet under construction.
The tariffs present an additional risk for regulated utilities from a credit perspective. They may need to seek additional short-term financing and need to recover all the additional cost from regulators, who may face pressure to keep electricity rates in check.
“U.S. regulated utilities are confronting the current 50% tariffs on steel, aluminum, and copper with a mix of caution and resilience,” Jasper Shi, Morningstar assistant vice president for corporate ratings, said in a statement. “Credit impacts should be manageable for most, provided regulators continue to support prudent cost recovery, but there is little doubt the tariffs have introduced incremental risk.”
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