The Nuclear Option
How Tariffs Could Disrupt America's Energy Future
Recently, President-Elect Donald Trump announced plans to impose hefty tariffs of 25% on both Canada and Mexico, and an additional 10% tariff on China, on day one of his presidency. Such blanket tariffs are risky by nature. Trade with other countries is intricate, and one-size-fits all policies can’t accommodate or account for the many moving parts in our relationships with our trading partners. If realized, these new tariffs would almost certainly result in unintended consequences, like supply disruptions and price hikes. While Trump frames the tariffs as tools for curbing illegal immigration and fentanyl smuggling, goals like supercharging the development of AI and renewable energy could be jeopardized. To illustrate potential unintended effects, let’s take a closer look at what the impact of tariffs could be on just one critical commodity: uranium.
Critical demand
As I recently noted, continued tech innovation requires increasing amounts of clean, abundant, and cheap energy. Rapid simultaneous tech developments in AI, cryptocurrency, media streaming, and electric vehicles are driving a perfect storm of energy supply and demand. In September, Dominion Energy, a supplier of energy to hundreds of data centers concentrated in northern Virginia, announced that developers of new energy-intensive projects can now expect delays of up to three years as the utility strains to keep up with demand. Energy constraints are already starting to slow and even cap tech development.
Nuclear energy seems to be the consensus, go-to solution. Meta announced just this week that it seeks suppliers of nuclear energy to meet its ballooning needs for AI and compute. Amazon Web Services and Dominion recently signed a $500 million deal to build out nuclear energy capacity, and Google recently signed a similar deal with Kairos Power. Meanwhile, Microsoft plans to reopen the long-shuttered Three Mile Island nuclear power plant. Favorable political winds, like Trump’s pro-nuclear stance and Biden’s recently signed Advance Act promoting nuclear development, are backing this potential nuclear gold rush. As a leading indicator of rising demand: Uranium prices have surged 233% in 5 years, wildly outpacing prices for other essential minerals such as gold and copper.
As politics and economics drive increasing demand for energy, the supply of uranium must keep pace. If Trump’s tariffs proceed, however, they may have the unintended effect of combining with a highly complex web of competing trade policy moves to deeply and suddenly constrain the supply of this essential fuel.
Supply Chain Reaction
In the lead up to Trump’s potential day-one tariff move, policy has already begun choking Uranium supply. In May, President Biden signed the Prohibiting Russian Uranium Imports Act, placing a moratorium on imports of Russian uranium to further Russia’s economic decoupling from the West and choke off trade that could supply funds for Russia’s military operations. The act’s passage has started something of a Uranium trade war: Russian uranium was redirected to China, which can be used as a legal passthrough nation for exports to the U.S. Congress responded in July with a second bill that tightened restrictions on certain Chinese uranium fuel imports. In November, Russia hit back with its own export controls.1
These tit-for-tat actions will almost certainly have a big impact. Until November, Russia was a major supplier of uranium to the U.S., providing 12% of uranium and 20% to 25% of fuel-grade-enriched uranium imports in 2023.
Thankfully, the U.S. and western nations have a backup supplier: Canada. Canada, with 10% of total known reserves and some of the highest quality ore on earth,2 is by far the United States’ biggest uranium supplier, accounting for 27% of 2023 U.S. imports. Market and political signals suggest reliance on Canada for uranium will only increase: Canadian uranium mining companies have seen a massive 400% increase in market valuation in just four years, and the Biden Administration has just joined with Canada, the UK, France, and Japan to form a new group, the Sapporo 5, whose goal is to develop a secure and stable supply chain for nuclear fuel. Canada’s massive uranium reserves are the group’s clear geostrategic lynchpin (Canada is a primary supplier to 3 other members in the group and the group’s only net exporter of uranium).3
Meltdown Risks
A sudden imposition of tariffs on Canadian imports, just as markets and U.S. allied leaders are turning to Canada’s uranium reserves for supply of nuclear fuel, could turn the current supply crunch into a manufactured catastrophe. With the addition of 25% duties, 39% of existing U.S. uranium sourcing would be battered by some form of steep trade barrier in just six months. For nuclear energy in the U.S., these tariffs mean either massive fuel cost increases, if industry sticks with Canadian supply chains, or massive disruptions to power production as industry desperately seeks an alternative fuel supply.
For downstream consumers, and tech innovators hungry for new sources of energy, this could be disastrous.4 Predictions already suggest an increase in fuel costs of up to 20% due to the Russian import ban alone, promoting speculation that nuclear reactors might have to power down if alternate supplies aren’t found within 18 months (or even less if demand spikes). Add in tariffs, and the 20% of the U.S. energy market already relying on nuclear power could see significant cost increases. For an industry already constrained by heavy regulatory burdens, this could be an undue hardship.
A sudden fuel supply shock could easily crumble many schemes currently in the works to build out the nuclear sector. As the cost of nuclear fuel increases over times and the supply of fuel becomes uncertain, corporations could revert to dirtier energy produced by fossil fuels, or perhaps scale back their ambitions entirely.
Uncertain Fallout
The potential uranium crunch illustrates the deep uncertainty of blanket tariffs. While the tariffs are aimed at fentanyl smuggling and illegal immigration, their impact in the real world is unlikely to be limited to just those targets. The blunt tool of tariffs will entangle untold other cross-border flows and risk many industries.5 Just as knocking out the uranium domino could unleash a complex economic crisis for tech and energy, other sectors could face similarly complex fallout. All industries face forward risk from heavy tariffs.
By pulling the tariff lever in service of just one political goal—border security—the Trump Administration puts at risk its policy goals in AI, energy and other areas. The executive branch wields significant power over trade policy. Come Inauguration Day, the new president should tread carefully and avoid uncertain economic gambles.
Biden had initially granted some waivers for uranium imports from Russia to ensure steady supply. Those waivers are now void.
Concentrations in Canadian deposits reach 18%, compared with an average of 1% in across other global deposits.
France is likely to need more uranium, likely from Canada, as it too is going through a sudden supply crunch. This past week, France’s uranium operations in its biggest supplier, Niger, were taken over by the West African nation’s military. Across all U.S. allies, access to this critical resource is faltering.
According to the Nuclear Energy Institute, nuclear fuel represents about 20% of nuclear energy costs, a proportion substantial enough to likely drive price increases.
Note that Canada is the second best source of countless energy and tech essential critical minerals outside of China. For hard tech, these tariffs will not doubt scramble countless supply chains. In many critical mineral cases the tangible impact will be far more immediate than the potentail slow burn of nuclear’ s often plodding timelines.