Starting today, Ontario will implement a 25 percent surcharge on electricity exports to three U.S. states as a retaliatory measure against American tariffs on Canadian goods.
According to the Ontario government, this additional charge will impact power supplied to 1.5 million homes and businesses in New York, Minnesota, and Michigan. The total financial burden could reach as much as $400,000 daily.
Under the new regulations, Canadian electricity providers must incorporate a $10 per megawatt-hour fee, which equates to one-quarter of the standard power cost, into their pricing for exports to the U.S., as per a statement issued by Ontario’s Office of the Premier.
The province’s response follows the recent decision by the Trump administration to impose 25 percent tariffs on imports from Canada and Mexico, a move announced the previous week.
Concerns over an escalating trade dispute triggered another stock market decline on Monday. At midday, the Dow Jones Industrial Average had plummeted over 550 points, reflecting a 1.3 percent drop. By 2:30 p.m., the losses deepened to 921 points, or 2.1 percent. The market eventually closed down 890 points, a 2.08 percent decrease.
In an effort to lessen the impact of these tariffs, Trump has introduced certain exemptions.
After the initial tariff announcement, the administration granted exemptions to automobile manufacturers and later delayed enforcement by a month for products included in the U.S.-Mexico-Canada Agreement, which replaced the North American Free Trade Agreement (NAFTA) during his first term.
“We will not stand by as our vital electricity exports are taken for granted,” said Stephen Lecce, head of Ontario’s Ministry of Energy and Electrification. “In a time where prices are going up for families in America, Canada and the United States should be working together to strengthen our trade and investment relationships.”
The United States is Canada’s sole electricity trading partner, with the electrical infrastructure of both countries closely interconnected. In 2023, Canada exported a net total of 27.6 terawatt hours of electricity to the U.S., primarily from the provinces of Quebec, Ontario, British Columbia, and Manitoba, according to data from the Canadian Energy Regulator.
Ontario’s executive council issued a regulatory order denouncing the U.S. tariffs, asserting that they violate international trade laws. China has similarly criticized the United States for disregarding World Trade Organization regulations following an increase in tariffs on Chinese imports.
The order further states that “tariffs pose an existential threat to hundreds of thousands of jobs and whole sectors of the Ontario economy.”
Though the surcharge may eventually influence American consumers’ electricity costs, it will initially be applied at the state level, impacting electricity operators who procure power from Ontario.
Rep. Tom Emmer (R-Minn.) suggested that Canada’s response could ultimately benefit Trump politically.
“The more [Canadian officials] try to make it painful on Americans the more it’s going to strengthen Donald Trump. He told everyone when he campaigned that this is what he was going to do. He was going to work for Americans. With the Canadians are doing is a mistake in my mind. It’s only going to help Donald Trump in his argument that they don’t care about you, I’m the only one who does,” Emmer said.
Energy analysts who spoke to The Hill explained that the responsibility for covering the new surcharge would vary depending on the agreements between Ontario and its electricity buyers.
“It would be paid by the electricity system operator or by the contracting party,” Thomas Timmins, leader of the energy practice group at law firm Gowling WLG in Toronto, told The Hill. “It would be paid by whoever the counterparty is to Ontario, and there might be multiple counterparties … some of them might be governmental, some of them might be private.”
In a statement released Monday, New York’s electricity grid manager, the New York Independent System Operator (NYISO), assured the public that they were taking steps to maintain reliable electricity imports from Ontario.
The organization said it “expects to have adequate reserves to meet reliability criteria and forecasted demand for New York.”
Trump has a track record of announcing tariffs only to reverse them later, creating uncertainty about their scope and enforcement. His March 4 deadline for tariffs on Canadian and Mexican imports left officials at NYISO confused about how they would be impacted.
“It is not yet clear whether imports of electrical energy from Canada are subject to the Canadian tariff order or, if they are, whether the NYISO will be required to play any role in collecting or remitting duties,” the organization stated at the end of February.
Meanwhile, the Midcontinent Independent System Operator (MISO), responsible for overseeing electricity distribution across 15 central U.S. states and Manitoba, clarified that the fee would be collected on the Canadian side.
“MISO is still reviewing Ontario’s recent decision to apply an export tax on electricity, which will be collected on the Canadian side of the border,” Brandon Morris, communications adviser for MISO, said in an email to The Hill.
Energy sector specialists told The Hill that they anticipate the surcharge will have minimal influence on electricity rates.
“There have been limited impacts on real-time electricity prices,” said Rebekah Llamas, a principal analyst at energy research firm Wood Mackenzie.
“We believe this is due to uncertainty in how this gets implemented and what the [Independent System Operators’] obligations are to remit [and] collect [as well as] milder weather and corresponding market conditions in general for this time of year.”
Ontario Premier Doug Ford, a vocal critic of Trump’s tariff policies and a strong proponent of Canadian economic interests, defended his government’s decision to impose the electricity surcharge on Monday. He argued that Trump’s temporary delay on broad 25 percent tariffs did not eliminate the threat to Canada’s economy.
“There‘s still 60 percent of goods that are crossing the borders that will be tariffed, and it‘s hurting both economies,” he told CNN on Monday. “It‘s one person that caused this problem, and that‘s President Trump as he is putting tariffs on us – even if he says he‘s putting it on hold.”
Economic instability has driven financial markets lower over the past week, with Trump’s shifting stance on tariffs adding to investor uncertainty.
Consumer sentiment has declined, and inflation expectations have risen since January. The New York Federal Reserve’s consumer expectations survey, released Monday, showed that American households are increasingly pessimistic about their financial futures.
The proportion of U.S. households expecting their financial situations to worsen in the coming year rose to 27.4 percent in February—the highest level since November 2023—prompting Federal Reserve officials to characterize the trend as a significant deterioration.
Ford cited this economic instability as a justification for Ontario’s surcharge on electricity exports.
“Uncertainty is what people don‘t like hearing … not to mention the markets are tumbling and investors from around the world are looking twice at America and in Canada to invest in,” he said Monday.
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