The Effect of Trump's Tariffs on Solar Energy Construction

On March 12, 2025, Trump imposed a 25% tariff on all steel and aluminum imports from all countries and on June 4, 2025, those tariffs doubled to 50%. The tariff increase applies to all countries excluding the United Kingdom, who have only a 25% tariff. Thus far, aluminum and steel pricing domestically has increased by 2% and 6%, respectively. Although the extent of the effects is unknown at this time, it can be assumed that these tariffs will have similar impacts to the steel and aluminum tariffs of 2018, leading manufacturers to expect the same downstream impacts: an increase in manufacturing costs, price increases for consumers, and decreases in overall output—all of which will delay or possibly terminate solar projects.

In 2018, President Trump implemented a 25% tariff on steel and a 10% tariff on aluminum, and the domestic prices rose by 5% and 10%, respectively. These price hikes did not return to their pre-tariff rates until a year or so after the tariff was put in place; partially due to the lift on tariffs for Canada and Mexico in mid-2019, and an increase in domestic production. Furthermore, the Board of Governors for the Federal Reserve System found that, following the implementation of the tariff, manufacturing production declined more than 1.5% due to the increased price of materials and retaliatory tariffs.

In 2018, the Solar Energy Industries Association (“SEIA”) asked President Trump and Congress to reconsider the tariffs because of the net loss in jobs and billions that could be lost as the result of the cancellation of projects. Nevertheless, the solar industry was not spared; US renewable energy companies canceled or froze projects exceeding $2.5 billion in investments. This was a result of the increased cost of materials that made solar modules, racking, and other critical components either unavailable or far in excess of a fair market value price, making the project financially unviable as compared to the previously negotiated power purchase price. For example, the estimated price of modules increased by $0.10-$0.15/W, making them more expensive than pre-tariff prices.

We cannot yet fully measure the impact the 2025 tariffs may have on the solar industry; however, with the tariffs doubling since 2018, it can be gathered that the solar industry and any planned projects will be affected. Furthermore, the severity of the impact is complicated by the addition of a freeze on funding for solar programs and a tariff on solar module exports from Southeast Asia. The only thing that can be expected is that the Trump administration will make it exceedingly more difficult to construct solar projects in the United States.

Although the current effects of the tariffs are unknown, if historic trends are any indicator, then we can deduce solar component manufacturers can expect to see a rise in cost for the technologies and equipment used to create solar modules. This increased cost will inevitably slow down solar production and, in the long run, cancel projects costing billions in investments. Parties will need to explore options related to assumption of risk, rising tariffs, excluded counties of origin, tax benefits, or lack thereof, of domestic content when selecting goods and components. 

So how does this affect current solar projects?

Developers and customers contracting under Power Purchase Agreements (“PPAs”) can expect limited supplies, increased material costs, and construction delays, leading to inevitable amendments to PPA prices. Financial viability of a PPA is an important part of the overall financing for renewable energy projects, and price increases create an undue burden on both parties. Currently, parties are exploring options for mutually agreeable price adjustments, otherwise the parties may walk away from the deal.

For example, if prices escalate above the negotiated rate, the PPAs may be renegotiated for a price adjustment to ensure the contract is still agreeable for both parties. However, with unprecedented price increases, lack of materials, and other regulatory measures, the price adjustment may be too costly for some solar projects. In the worst-case scenario, the contracts may be terminated and projects abandoned.

Moreover, there may be clauses in PPAs that terminate the project or release parties from their performance obligations regardless of renegotiations. Thus, it is important, with current uncertainty, to evaluate PPA terms and the threshold for price increases.

Overall, PPAs may likely have to be adapted to account for the changing market and the cost of technology and construction. Rising costs of electricity ultimately have an impact on the individual ratepayer. Contracts should be closely evaluated for potential risk of termination, and parties should be prepared for renegotiations as needed. With the unprecedented wave of tariffs, it is uncertain what will happen to the price of solar projects; nevertheless, all parties should expect similar if not greater increases in prices, compared to the 2018 tariffs, and prepare accordingly.

For further information or to discuss how DWGP may be of assistance with regards to tariffs, tax credits, FEOC, or successful negotiations of PPA’s, please reach out to Keith Gordon, Peter Scanlon, Gelane Diamond, or Sylwia Dakowicz.