U.S.-Canada Trade War Threatens AI Buildouts

The current trade war with Canada precipitated by U.S. President Donald Trump’s latest tariffs threatens datacenter growth on both sides of the border.

Power infrastructure in particular could suffer, as the tariffs hit Canada’s electrical equipment market. Also, costs of aluminum, copper, building supplies, and other products required to build AI datacenters could rise enough to produce bottlenecks for AI growth on both sides of the border. Canada’s stores of aluminum in particular could hold up certain projects stateside.

Canada also provides live electricity to several states, notably New York, Massachusetts, and California, among others, which get electricity from Quebec, British Columbia, Ontario, and Manitoba. So far, Canada hasn’t pulled the plug on these deals, but given enough provocation, there may be consequences.

"It almost gives us an opportunity to gut-check whether or not we want to buy full on into the AI space as much as we have, given that the expense will be multiplied in the U.S. and in Canada," Evan Light, an associate professor at the University of Toronto, recently told the CBC.

Where the Tariffs Hit Hardest

With the new, higher tariffs in place, energy costs related to AI infrastructure are likely to increase, putting barriers up in the area where AI infra needs are greatest—power.

Just prior to the recent tariff imposition, Natalia Iamundo and Michelle Yung, commercial real estate lawyers at Canadian firm Bennett Jones LLP, wrote in a blog titled “How Tariffs Are Changing the Math of Data Centre Construction, and How Canada Is Maintaining a Competitive Edge”: “Rising costs for transformers and other power hardware may make it harder to secure reliable and affordable energy.”

The ultimate price may be paid by consumers. "We know that we need to double the size of the [electricity] grid between now and 2050 … with the tariffs going both ways, we have just increased the cost of that for everyone, and that ultimately comes out of the taxpayers pockets," Carol McGlogan, President and CEO of industry group Electro-Federation Canada, told the CBC for the article cited above.