When President Trump reintroduced tariffs on imported goods, the move was framed as a push to protect American manufacturing, but of course Trump Tariffs also impact US energy Projects.
The policy imposes steep duties on a wide range of equipment sourced from countries like China, India, Brazil and key European suppliers. For US energy projects, the effects are highly sector-dependent: oil and gas operators, with their diversified sourcing and strong margins, can largely absorb the added costs. But clean energy developers, reliant on imported technology and already operating on razor-thin or negative returns, face a far tougher road ahead.
The percentage of Trump tariffs is quite variable depending on the country, the full list is available here on the White House website.
Oil & Gas: A Small Bump in the Road
For oil and gas projects, tariffs are more of a speed bump than a roadblock.
Our models, developped from Project Smart Explorer, suggest that even with new import duties, most projects remain firmly in the “go” category.
Here are few figures to explain why:
- On a typical $1B Oil & Gas project, 35–45% of the total Capex goes to equipment procurement.
- About 50% of that equipment is imported to US as loacal manufacturers are not enough to supply the market.
- If we estimate it is uniformly applied on all US projects, it means only 20% of the project’s CAPEX is tariff-exposed.
- At an average 30% tariff rate, the total project CAPEX rises just 6%; turning the $1 B investment into a $1,06 B investment.
It is still a lot of money, but when spread over a a project lifetime of 20 years, the rsult is pretty small.
The Net impact on Return of Investment (ROI) is a drop by roughly 1 percentage point, hardly enough to change the investment calculus.
Given US projects’ higher profitability compared to global peers (with a industry ROI around 20% in USA) , the sector remains highly investable.
Once tariff rates stabilize, expect a wave of greenlit projects that have been sitting on the sidelines.
Clean Energy: From Marginal to Unviable
The clean energy transition sector isn’t as fortunate as in the Oil & Gas, as Tariffs in that case combine with political headwinds to create a double hit:
- Policy reversal : Public subsidies for energy transitio implemented by Biden Presidency are no longer active. Plus the carbon-neutrality mandates for 2050 are being rolled back, giving less regulation traction to clean energies.
- Import dependence — the US clean energy projects relies almost entirely on Chinese and European technology for these projects.
While we were accounting 50% of the equipment being imported for Oil & Gas, the figure reaches 90% for clean energy.
With 55–70% of CAPEX tied to equipment procurement, tariffs inflate project costs by around 15%.
For projects of clean energy where margins that were already thin, they are now squeezed into the range of -5% to 5% ROI territory, with many projects still facing technology risks.
The result is unfortunate: project pipelines are freezing, and public companies tied to those US clean energy projects, inclucing the supply chain, are seeing sharp declines in stock market value.
Bottom Line for Operators
- Oil & Gas: Still strong, with minimal ROI erosion, potential backlog release once tariffs settle for good.
- Clean Energy: Severe headwinds, with FID likely to flow elsewhere in term of region and applciations until economics improve.
In short, tariffs are redrawing the energy investment map in US, in the same direction Trump administration was already aiming at.
Smart capital allocation will most likely follow the sector with the best resilience; and right now that means oil and gas.
Interested in knowing more about Energy Projects?
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