Ontario’s Electricity Surcharge Expected to Impact US Power Grid
Ontario’s recent decision to impose a 25 percent surcharge on electricity sales to Michigan, Minnesota, and New York is expected to have broader effects on the US power grid, according to Ontario Energy Minister Stephen Lecce, Newsweek reports.
The move comes in response to new tariffs introduced by US President Donald Trump on Canadian goods, marking an escalation in trade tensions between the two countries.
Ontario Premier Doug Ford announced the surcharge on Monday, stating that the measure was intended to counter the economic impact of Trump’s tariffs, which originally applied to a range of Canadian goods at a rate of 25 percent, excluding oil. Some of these duties, particularly on the motor vehicle industry, have since been delayed for a month.
Ontario sells approximately $700 million in electricity to the US each year, powering about 1.5 million homes. The province’s energy minister warned that the surcharge would not only affect the three states directly targeted but could also influence electricity pricing and supply throughout the eastern US.
“They need our power,” Lecce said at a press conference.
He explained that states like Michigan, which transmit electricity to other regions, could spread the effects of the surcharge beyond their borders. He suggested that states further along the I-95 corridor could also feel the impact.
The surcharge is part of a broader trade dispute between the US and Canada. During his 2024 presidential campaign, Trump emphasized his commitment to boosting American industries and reducing reliance on foreign imports. While he has argued that tariffs will generate revenue and strengthen the US economy, critics, including many economists, warn that they could contribute to inflation and economic instability.
On Monday, the S&P 500 dropped by 2.7 percent amid growing recession fears. Trump has not ruled out the possibility of an economic downturn, telling Fox News:
“I hate to predict things like that.”
Canada supplies the US with 93 percent of its electricity imports, with 22 states relying on Canadian power to some degree. According to trade data, Minnesota, Vermont, and Washington accounted for over half of US electricity imports from Canada in 2024. Other states that receive Canadian electricity include New York, Maine, Michigan, California, Texas, and Pennsylvania.
While Ontario’s surcharge targets only three states, a broader disruption in Canadian electricity exports could have widespread consequences, potentially leading to higher energy prices and supply shortages in certain regions.
Premier Ford has indicated that Ontario is prepared to take more drastic action if trade tensions continue. He warned that he would consider increasing the surcharge or even cutting off electricity exports entirely if the US escalates its trade measures.
“I feel terrible for the American people because it’s not the American people who started this trade war. It’s one person who is responsible, that’s President Trump,” Ford said.
Trump responded on Truth Social, writing:
“Canada is a Tariff abuser, and always has been, but the United States is not going to be subsidizing Canada any longer. We don’t need your Cars, we don’t need your Lumber, we don’t need your Energy, and very soon, you will find that out. MAKE AMERICA GREAT AGAIN!!!”
It remains uncertain whether negotiations between Ottawa and Washington will lead to a resolution or if further retaliatory measures will be introduced. Many analysts believe that a prolonged trade conflict could have economic consequences for both countries, affecting industries beyond energy.
