Milk and alcohol, paper and steel, semiconductors and pharmaceuticals - an array of products are currently subject to tariffs in the ongoing trade dispute between the United States and Canada.
But there is one crucial commodity that has so far avoided tariffs: electricity. In addition to sharing a border, the two countries operate deeply interconnected power grids, linked by 86 cross-border transmission lines.
A new Cornell study finds that tariffs or export surcharges on Canadian power could reduce the amount of imported electricity, raise prices, increase carbon emissions and make the power system more vulnerable to extreme weather conditions.
The findings were reported Oct. 1 in Nature Communications. The lead author is postdoctoral researcher Siyuan Wang.
"If electricity becomes this bargaining tool, it has some implications because it's not the typical goods or products that we see in other markets," said Fengqi You, the Roxanne E. and Michael J. Zak Professor in Energy Systems Engineering in the Cornell Duffield College of Engineering, who led the research. "So we're trying to understand the consequences. What would be the cost to the economy? What would be the impact to the environment and broader energy systems?"
The motivation for the study came in March 2025 when, as tension between the two countries began to build, Ontario announced it would implement an export surcharge of 25%, or 10 Canadian dollars per megawatt hour, to electricity that is delivered to the U.S. - specifically New York, Michigan and Minnesota. The surcharge only lasted for a day, but that was long enough to inspire You and his team to explore what kind of effect such trade barriers would have on the U.S. power system.
The researchers decided to use New York as a case study because it is a major energy importer, with cross-border electricity flows from Ontario and Quebec. Both provinces provide exceedingly clean energy due to their use of nuclear and hydropower. From 2015 to 2024, Canadian imports, on average, supplied 9.89% of New York's electricity load, with 4.25% coming from Ontario and 5.64% from Quebec, according to You. Combined Canadian imports reached as high as 45% during some five-minute intervals.
New York was also ideal because it has unusually extensive public market and operational data - including 165 million bidding records, from 2015 to 2024, from the New York Independent System Operator (NYISO) market, through which the state's electricity is bought and sold via auction.
The researchers accessed that data and then fed it into market, emissions and grid-reliability simulations, and studied the effects of a range of tariffs. Among their findings: Under historical market conditions, a tariff of roughly 55% or more would result in Ontario imports being nearly priced out of the market. If applied to both Ontario and Quebec, that threshold increased to roughly 90%.
"Tariffs always make the cost higher, and eventually somebody needs to pay for that," You said.
With costs that high, New York would be forced to rely more on in-state generation and buy additional electricity from other U.S. regions, such as New England, that depend more on fossil fuels - sources that would ultimately increase carbon emissions.
"Nearby states are not so low-carbon as our northern neighbors because of the energy systems we have in the U.S. and because of the market we already built," You said. "Many people may not realize that a trade policy could also have a climate consequence."
Even more critical, he said, is the system's resilience.
"We always build more capacity than we need because we want to be flexible. In extreme weather disruptions, like hot summer days or cold winter days, our electricity load is going to peak, and we lose this reserve," You said. "We lose those flexibilities to support extreme events that introduce a lot of stress to our existing systems and could potentially increase the risk of blackouts. It could be catastrophic."
While the study focuses on New York, the researchers say that tariffs' ability to undermine power system efficiency, decarbonization and reliability are relevant for other interconnected U.S.-Canada border regions.
"It would be helpful for policymakers to talk to the power grid operators before imposing electricity trade restrictions, so they understand the reliability issues and the market consequences," You said. "The reliability issue matters a lot, and that's something that's hard to quantify. It's not only about how many dollars you collect from the tariffs. It's also about the reliability and energy-security value of keeping interconnected grids available when the system is under stress."
The research was partially supported by the Eric and Wendy Schmidt AI in Science Postdoctoral Fellowship, a program of Schmidt Sciences, LLC.
