The sweeping tariffs imposed by the Trump administration are inflicting severe damage across the United States’ energy sector, from oil production to renewable power development, according to new research.
An analysis by Wood Mackenzie, a leading energy and natural resources consulting firm, reveals that these trade policies could erode projected growth in oil demand, hinder renewable energy investment, and force the country into high-cost energy isolation that undermines its global competitiveness.
The research indicates that President Trump’s tariff announcements represent a pivotal moment for the global economy. Unlike China’s 2001 entry into the World Trade Organization, which significantly boosted global growth, the U.S. tariffs and international retaliation threaten to devastate established trading relationships and accelerate a retreat from globalization.
Wood Mackenzie developed three scenarios to assess the impact of the tariffs, with the most severe projecting U.S. effective tariff rates exceeding 30 percent. Under this scenario, global GDP is projected to contract by 2.9 percent by 2030.
The oil industry, a cornerstone of U.S. energy independence, faces particularly severe consequences. In the worst-case scenario, global oil demand would experience an outright fall in 2026. Although demand growth would resume from 2027, overall demand by 2030 would still be 2.5 million barrels per day lower than under the most optimistic scenario.
Oil prices could plummet to an average of $50 per barrel in 2026, dealing a devastating blow to U.S. shale producers. The economics of shale drilling might not support production growth at such prices, leading to significant reductions in investment and lower U.S. oil production through 2030.
In the power sector, the added costs and uncertainty created by the tariffs build barriers to investment and make it more difficult to increase supply. “In a business with a five-to-ten-year planning cycle, not knowing what a project will cost next year or the year after is extraordinarily disruptive,” the report stated. Many companies have already reported adjustments to their strategies and business plans, including deferrals of investments.
The metals and mining sector, essential for energy infrastructure, will also suffer severe impacts. Aluminum demand is projected to fall by almost 4 million tonnes in 2026, with significant drops in demand for steel, copper, and lithium as well.
The analysis warns that companies in the energy and natural resources industries must now reckon with uncertainty over tariffs persisting for months, and probably years, to come. Riskier investments are likely to be pared back, and strategies that create increased flexibility will be prioritized, fundamentally altering the trajectory of U.S. energy development for years to come.
