America’s power grid is due for some big investments. Tariffs could now make that much costlier.
As surging power demand from places such as data centers is set to strain the system, transformers, the nuts and bolts of the power system, look particularly vulnerable. These are devices that step up or down voltages as electricity moves from power plants to homes and factories. New ones are also required every time a new source of electricity—whether wind, solar or natural gas—connects to the grid. The lack of these components can therefore hold up more power from being brought online.
The power industry has already been experiencing a shortage of transformers, for which demand is expected to jump even more in the coming years. Suppliers have been reluctant to invest large sums of capital to expand production capacity because such investments have long break-even timelines. The National Renewable Energy Laboratory estimates that about 55% of in-service distribution transformer units are older than 33 years and approaching their end of life.
So far, the Trump administration has imposed 25% tariffs on steel and aluminum, as well as a 10% across-the-board tariff on China. But more could come: The one-month pause on Trump’s proposed 25% tariffs on Canada and Mexico is set to expire in early March. Meanwhile, Trump has ordered federal agencies to explore reciprocal tariffs on trading partners around the world. He has also floated tariffs on copper.
Transformers could become a chokepoint. Only about 20% of transformer demand can be met by the domestic supply chain, according to Wood Mackenzie, which also estimated that transformer prices have already risen 70% to 100% since January 2020 because of inflation for raw materials such as electrical steel and copper.
Mexico, Canada and China are important sources of electrical equipment to the U.S. In 2024, China accounted for over 32% of U.S. low-voltage transformer equipment imports and Mexico accounted for 36% of high-voltage transformer imports. Canada accounted for about 16% of U.S. imports of high-voltage switchgear and 100% of imported utility poles. Utilities typically go through a lengthy process to test the reliability of transformers they are purchasing and tend to require custom specifications, so it isn’t an easy process to switch to a new supplier.
Tariffs will pile new cost pressures on an already-tight grid. The New Jersey Board of Public Utilities said its residential customers’ average monthly bill is expected to increase by 17% to 20% for the 12-month period starting June 2025, partly due to data center-driven demand growth. Nationwide, electricity prices have increased at a compound annual growth rate of 5.7% over the last five years, a considerable acceleration since the preceding five years when prices were roughly flat, according to data from the U.S. Bureau of Labor Statistics.
Also worth watching: If the 25% tariffs on steel and aluminum do result in a reshoring of those energy-intensive industries, that itself would add to long-term power demand.

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