Crossing the Borders: US–Canada Trade — June 30, 2025
Hello, and welcome to the Economic and Market Watch podcast for the week of June 30, 2025. This is Sam Kem of CFC.
Sam Kem:We have an exciting announcement. Our research teams are launching a new issue brief in two weeks. Here with me today is CFC energy industry analyst, Alisha Pinto.
Sam Kem:She and I are going to give you a sneak peek. Welcome back, Alisha.
Alisha Pinto:Thank you, Sam. Happy to be here. The issue brief, which is called Crossing the Borders, An Overview of US Canada trade, will be out on July 14. When it comes out, it will be featured in all three CFC newsletters and on the Solutions website. You'll be able to find this at www.nrucfc.corp/solutions.
Sam Kem:You know what surprised me the most while doing this research? The U.S. and Canada actually share the longest international border in the world. I had no idea. But that's just the start. There's a lot more to unpack.
Sam Kem:We have identified five key takeaways from the data, which you will find more in details in the issue brief.
Sam Kem:But at the top of that list is how deeply integrated the supply chains between the two countries are, especially when it comes to energy manufacturing and agriculture. Canada is not just our neighbor. It's our biggest buyer of goods and a wider supplier of oil, electricity, and critical components of all good infrastructure. The partnership plays a huge role in strengthening North American energy security and industrial resilience.
Alisha Pinto:That's right, Sam. The main insight on the industry side is how connected the U.S. power grid is with the Canadian grid. We trade electricity across the borders between New England, New York, MISO. And all this contributes to grid reliability and lowers price volatility.
Alisha Pinto:But that's not all. Our interdependence extends to crude oil, natural gas, uranium imports that supply the states along the border with Canada.
Alisha Pinto:Finally, electrical equipment and infrastructure like transformers and conductors are imported from Canada as domestic production is not able to meet demand for these products.
Sam Kem:Another area where the U.S. and Canada are tightly connected is agriculture, especially when it comes to food supply chains. Over the past several years, U.S. demand has surged. Consumers have been shifting toward more high-value, diverse products, and that combined with a strong U.S. dollar between 2020 and 2024 has led us to buying more and more food products from Canada. When we think about international trade, the image that usually comes to mind is a busy port or a handshake between executives in suits. But the real story of trade, at least in the U.S., often begins in small rural towns.
Sam Kem:That's because rural America is where so much of our trade originates. Agriculture, oil and gas, manufacturing, these are all the sectors that produce what we export. And in rural communities, trade-related activity supports up to one in four jobs. That's why tariffs don't just hit the headlines. They hit home, especially for our members.
Sam Kem:Given where we live and the industry that we're in, the impact could be even more direct. So, Alisha, can you walk us through some specific examples of how tariffs beyond bilateral trade could affect the industry?
Alisha Pinto:Sure, Sam. Let's begin with the anti-dumping tariffs and countervailing duties on solar cells and modules on four Southeast Asian countries. These are Cambodia, Vietnam, Thailand, and Malaysia. These tariffs were a result of a long term investigation by the Department of Commerce.
Alisha Pinto:As some of your listeners may know, the domestic market for solar manufacturing is nascent and small, and developers are highly dependent on imports. So in the short term, we may see the residential solar sector and small developers impacted by the price shock.
Alisha Pinto:Similarly, the battery energy storage systems used across The US are reliant on imports, particularly from China. Under conservative tariff scenario, Wood Mackenzie forecasts that cost for battery energy storage systems could increase by at least 12%.
Alisha Pinto:Also equipment like transformers and conductors, which have already been facing supply constraints and bottlenecks over the past few years, may also be impacted by higher prices. One way that some of these higher prices can be mitigated is by bringing production back home or increasing existing domestic manufacturing capacity.
Sam Kem:So I want to ask you this question. If we start manufacturing all of this equipment here in the U.S., does that actually help us avoid tariffs, or are there other factors at play?
Alisha Pinto:Great question, Sam. Even if we manufacture transformers or batteries in the U.S., the key inputs may or may not be available very easily here. For example, steel and aluminum are both key inputs to the utility industry, as well as to many other industries. Currently, and this is as of June 24 when we're recording, there is a 50% tariff on steel and aluminum imports, which will protect the domestic industry, but could impact availability in the short term.
Sam Kem:So, I just wanna stress that it's not all downside. Right? Reshoring, bringing production back to the U.S. could boost job creation and enhance security in some of our most critical industries. But setting tariffs aside for a moment, what are some of the real world challenges we face in increasing electrical equipment production in the U.S. to meet domestic demand?
Alisha Pinto:Let's stay on the topic of transformers a bit longer. Only 20% of the U.S. demand for large part transformers is met by domestic manufacturing. Transformers have a pretty long lifetime and we are at a unique moment where demand for transformers has increased while most of the existing ones are reaching the end of their useful life.
Alisha Pinto:Now prior to the pandemic, lead times for transformers were about thirty to sixty weeks, and that has shot up to about one hundred and twenty weeks currently. These delays are impacting co-ops, as well as affecting the availability and costs for new transformers.
Alisha Pinto:Across the country, co-ops have their own suppliers and manufacturers. But the value chain for transformers is diverse and it's global. For our members who are interested in learning about the supply chain and utility equipment, CFC hosted United Utility Supply and Armco at a webinar in May. The recording can be found on the CFC member website under the webinar archive for the financial webinar series. We will also have a link to it in our show notes.
Sam Kem:Well, thanks for giving our listeners more resources. Before we go on further, I also want to take a moment to highlight just how much uncertainty factors into business decisions, especially when it comes to production. We've been talking for a while now about the growing demand for electrical equipment. So naturally, the question comes up, why haven't U.S. manufacturers ramped up fast enough to meet that demand?
Sam Kem:Well, let's rewind a bit.
Sam Kem:If you think back to five or six years ago, no one was forecasting this kind of surge in the electric utility sector. But fast forward to today, we're seeing not just high growth, but strong projections even more. The challenge is that scaling up domestic production doesn't happen overnight or even over a few months. For U.S. manufacturers, meeting this kind of demand takes years, and it requires massive upfront investment long before a single dollar of that investment turns into revenue.
Alisha Pinto:That's true. And it's when uncertainty turns into risk. Right?
Sam Kem:Exactly. That's where the risk really comes in. First, how confident can a manufacturer be that today's projections will hold up years down the line? And second, even if the man stays strong, will that last long enough to justify the time and money spent getting there?
Sam Kem:Think about it this way. If demand is expected to grow for the next five years, but it takes three years and hundreds of millions of dollars just to scale up, is that really a worthwhile bet? In today's fast moving economy, those long-term investment risk are getting even bigger, and that's a huge factor in the decision-making process for any domestic producer.
Alisha Pinto:That's right. And then there is also the risk of policy uncertainty. Investors are always looking for a stable policy environment that they can depend on when making their decisions. Of course, they'll factor in uncertainties and risk, but traditionally, major policy shifts happen over a longer period of time.
Sam Kem:Exactly. And we all know that there's nothing investors hate more than uncertainties. Now just to be clear, there are a lot of benefits in increasing domestic productions, even if there are some challenges. In fact, strengthening our ability to manufacture key products here at home, that is an important step toward building a more reliable and secure supply chain for the industry. But at the same time, we can't overlook the real challenges that come with it.
Sam Kem:If we want to achieve true reliability and resilience, we need to have an honest conversation about the obstacles we will need to overcome to get there.
Alisha Pinto:You said it, Sam. And I would encourage your listeners to check out the issue brief where we talk about this in-depth. It'll be out in two weeks. And if you're listening after July 14, you'll be able to find a link in our show notes. If you're joining us at Forum in New York, Sam and I will be at the Solutions Booth with some hard copies of the publication for those who would like an early preview.
Sam Kem:And as always, if you have any questions or comments, please feel free to reach out to the economic research team at economicresearch at nrucfc.coop.
Alisha Pinto:And reach out to the utility research team at utilityresearchpolicy at nrucfc.coop.
Sam Kem:Thank you, Alisha, for joining us today.
Alisha Pinto:Always a pleasure to be here.
Sam Kem:Well, that's it for today. Thank you for listening. Be sure to download the Economic and Market Watch intelligence brief and dashboard. Talk to you soon.
