Canada and the United States Trade Relationship: An Electricity Canada Perspective

As the Canada and United States continue trade relationship continues to evolve, Electricity Canada has been working closely with its members to monitor developments, assess potential impacts, and gather insights from across the sector. In this edition of Current Affairs, Electricity Canada's Manager of U.S. Affairs, Robin Yee, shares an update on the evolving tariff landscape and what it could mean for Canada's electricity industry.

Hi, Robin. Thank you for joining us. The tariff situation has changed dramatically in a few weeks. Can you give us a brief overview of what happened?

I think the most straightforward scenario for this summer would have been a renewal of the Canada-United States-Mexico Agreement, but it became clear as July 1st came and went that that option was no longer on the table. Shortly after, the U.S. threatened much higher tariffs on some key Canadian sectors to bring Canada to the table for further discussions.

In late August, it looked like a deal was potentially going to come together, and for a moment the implementation of those tariffs was even paused. But, based on some last minute developments, requests that came through that suggested constraints on Canada's options, this fell apart, and the negotiating team was asked to come back to Ottawa. The U.S. implemented their tariffs, those tariffs kicked in, and Canada has threatened to retaliate with dollar-for-dollar countermeasures on the United States.

Where does electricity fit into all of this?

Right now, we are looking at two main areas. I'd say supply chain is the most immediate one. There are certain items in the list of retaliatory tariffs that our industry uses that will be impacted. There are steel structures, conductors and cables whose costs might go up. Even if it's not electricity equipment, we have utilities with fleet vehicles, and those will potentially be impacted.

The other area that we're looking at is electricity trade itself, which isn't on the list for retaliation on either side, but it is something that we're watching quite closely.

What does it mean for the electricity industry and what is Electricity Canada doing about this?

For the electricity industry, there is a lot of uncertainty around what this means for costs, for forward planning, and just how to manage general inflationary pressures all around. That is the really big question! In terms of what the association is doing, we are working with our members to identify what the specific areas of highest concern are, and if there's ways that we can work through them together or offer the best support under the circumstances. We have our supply chain committee looking at those issues in a focused way, and a task group that can look at it as a broader, big picture discussion.

There has been some talk about whether electricity could be used as leverage. What is your take on this?

This has definitely been out there in conversation and in the news. It is tricky because electricity is provincial and it's also very regional in terms of flow. The system evolved in a bidirectional, two-way manner that really advantages both countries in terms of flexibility for cost and reliability for future planning. We have over 31 lines that go across Canada and the United States and are able to send power back and forth in case of severe weather or demand. We believe that access is really important to maintain, and using it as leverage would be a pretty significant escalation.

How does energy security come into play with the current negotiations?

Both Canada and the U.S have a strong interest in making sure that we have the energy we need and the costs are reasonable. The system has been built and developed in a way that really underlies the economic strengths of both countries. So, we benefit from being able to trade and lean on each other, especially during extreme weather. And it's pretty hard to change geography. In terms of being able to draw from neighbouring regions, there’s still a very important relationship there.