Proposed US tariffs could increase onshore wind costs by up to 7%, says Wood Mackenzie

New trade tariffs and increased import restrictions in the US onshore wind power sector could lead to higher overall costs, threatening project viability and potentially slowing growth in the industry, according to a recent report from Wood Mackenzie.

The report, "Trade war hits US onshore wind power," finds that US proposed tariffs of 25% on imports from Mexico and Canada and an additional 10% on Chinese imports could increase US onshore wind turbine costs by 7% and overall project costs by 5%, with the current US supply chain set up.

"Protectionist policies will drive capex up for wind projects," said Endri Lico, Principal Analyst at Wood Mackenzie. "In a scenario with universal 25% tariffs on all imported products, the impact would be even greater, with turbine costs potentially rising 10% and overall project costs increasing 7%. This would have material impacts on the industry, putting some projects at risk due to economic factors.”

The US wind industry is heavily dependent on imports, particularly for components like blades, drivetrains and electrical systems. In 2023, wind-related equipment imports to the US were valued at $1.7 billion, with 41% coming from Mexico, Canada and China.

“Tariffs are not an unprecedented condition for the wind industry,” said Lico. “Wind peers await the specialization of the tariff legislation to fully assess the impact. Tariffs imposed during the previous Trump’s term had minimal impact on the US wind power segment, while a looser monetary policy may soften tariffs’ impact.”

According to the report, the proposed tariffs will have an incremental impact on US onshore wind power economics, increasing levelized cost of energy (LCOE) by 4% in the near term. In the scenario of universal 25% tariffs, LCOE will rise by 7%.

“The supply chain actors are waiting for the dust to settle, exploring their options,” said Lico. “We anticipate that wind manufacturers will adopt a mix of measures to mitigate tariffs’ impact, including rerouting and restructuring their supply chains and assembly lines, strengthening US localization, and increasing their prices.”