Hanif Montazeri is trying not to be pessimistic. But the CEO of Enersion, a Canadian clean tech pioneer developing a potentially revolutionary new heat pump, has reason for concern in the wake of U.S. President Donald Trump's threat of leveling a 25 per cent tariff on all exports out of Canada.
The start-up, named to the prestigious Global Cleantech 100 list for 2025, sources the main components for its nanomaterial-based heat pump from the U.S., ships them north for manufacturing near Toronto. ON, and then delivers the units back across the border to American customers.
Enersion's business model is now “in limbo” ahead of February 1, the date U.S. President Donald Trump has pledged the tariffs will kick in.
"The best outcome is that it doesn't happen, and the worst case is that we might have to cancel some of our U.S. projects and find other sources for our parts," Montazeri told Canada's National Observer.
"In the meantime, we will try to work out how to mitigate these changes by looking at our supply chains and considering shifting contracts to Canadian suppliers, [and] exploring other international markets,” he said.
"We are a little like the automotive industry, where our parts cross the border a couple times, and it means the U.S., which is our lowest cost option for parts, suddenly isn't."
Hefty U.S. tariffs would be a serious blow to Enersion, particularly at a time when it is moving into mass production of its heat pumps. This will be true for most Canadian cleantech companies manufacturing hardware, that is, physical products and technology.
Yet the overall impact on the sector, which currently accounts for 3.5 per cent of Canada's gross domestic product, could be "decimating," said Peter McArthur, chair of the Canadian Cleantech Alliance (CCA), an industry advocacy body.
Government figures show the cleantech sector – defined as making products that improve energy efficiency and/or are environmentally beneficial – was valued at over $80 billion in 2023, with almost 77 per cent of all exports going to the U.S. The worldwide cleantech market, according to CCA calculations, is worth $5.5 trillion.
Expanding an emergent cleantech sector now facing existential challenges, while not losing traction on the longer-view global industrial export opportunity it represents, is a tall order, McArthur said, speaking with Canada's National Observer.
Tariffs could ‘decimate’ cleantech in Canada
"These are not good days. Any cleantech business is going to take a hit if a 25 per cent tariff is levied. But if there is a divide, it's broadly between hardware and software,” he added. The hit will be felt more keenly by hardware makers.
"If you're a hardware company, unless you have a unique, transformative technology, you likely won't have a 25 per cent gross margin. So a 25 per cent tariff would decimate your business,” said McArthur.
"If you are an AI software company…you're arguably better insulated from such a tariff because you could have a 90 per cent gross margin,” he noted.
The small but once-promising Canadian solar sector was undermined by industrial tariffs during Trump's first term, leading to many players – including now international developer Canadian Solar, which has a market capitalization of $730 million and employs over 22,000 people – moving manufacturing to the U.S.
Farming is increasingly morphing into a cleantech sector. Karen Schuett, CEO of Livestock Water Recycling (LWR), a sustainable agriculture start-up, is "remaining cautiously optimistic" about the impact of pledged U.S. tariffs, given the company's existing commercial deals with American farmers.
"Closely monitoring the situation"
Schuett told Canada's National Observer she was "closely monitoring the situation" but was hopeful. She said LWR is counting on being buffered by existing trade relationships with U.S. customers for its AI-driven waste treatment systems. The technology converts livestock manure into high quality fertilizers — a $6.2 billion market last year — as well as producing bulk nutrients, biogas feedstock and purified water.
"Our equipment helps U.S. farms enhance sustainability and boost revenue, and we hope the administration carefully considers the potential impact tariffs could have on the family farm," she said.
"At the same time, we are actively building partnerships on both sides of the border to ensure we can continue to support farms that depend on our solutions."
Charging up for the long-term
Another rising star on the Canadian cleantech scene, long-duration energy storage developer Hydrostor, expects to face somewhat less peril from the threatened U.S. tariffs.
The Toronto-based firm has an industrial-scale version of its energy storage technology, which uses wind and solar power to compress air and store it in underground caverns for later release onto the grid — a kind of giant natural battery, under development in California.
CEO Curtis VanWalleghem told Canada's National Observer the North American market, especially the U.S., is crucial to the company's growth.
"Right now we're hopeful that the proposed tariffs will have limited impact on those plans," he said, adding Hydrostor’s project in the U.S., the 500 megawatt Willow Rock Energy Storage Center, would be built with American components and labour.
Though U.S. tariffs could be delayed — if they materialize at all — clean tech is already suffering from "uncertainty shock," the market-destabilizing effect of unknown future factors.
Angelo Dicaro, director of research at trade union Unifor, points to the damage already being done to the nascent sector's ability to secure finance.
"What are the implications of posing a threat, beyond the threat itself? It's unsettling. And that's problematic for a market. Clean tech — like any sector — is seeing the foundations of the Canadian economy being shaken. That is not good for business."
Dicaro said the executive orders signed by Trump this week would set alarms ringing for the cleantech sector, not only in the potential for competition-slanting tariffs, but also for Washington’s apparent pivot back to a fossil fuel-fired industrial economy.
"This is going to stunt a market that was still in its early stages but growing excitedly, and now will have to change course.”
Unifor director of research Angelo Dicaro
The Trump government has made plain its plans to undo some of Biden’s landmark climate and renewable energy initiatives,” he said, which “supported investments in heavy industry and incubated the clean energy market supply chain.”
Canada's industrial connection to the North American cleantech supply chain means it will not escape feeling the chill from the new U.S. administration pausing or pulling the plug on a number of programmes that support the energy transition, Dicaro added.
"This is going to stunt a market that was still in its early stages but growing excitedly, and now will have to change course.”
That “disturbs” the integrated markets that have taken shape between Canada and the U.S., he said.
The ripple effect will impact the more than 23,000 Canadians employed in cleantech, said Bea Bruske, president of the Canadian Labour Congress, a national trade union representing 3.3 million workers.
“Green tech and smaller clean economy companies that aren't as established, do face a different level of [jeopardy] and that means future good green jobs for Canadians are vulnerable too” if Trump makes good on his tariff threat, she said.
“Trump is an anti-science, climate change denier, so we are very worried about what that means to Canadians who hold jobs in the clean tech sector — as well as all sectors, of course.”
The numerous unknowns in Trump's tariff threat have led to tangential financial discussions in Canadian government and industry circles. One concerns the dollar. Tariffs would debilitate the Canadian economy - RBC chief economist Frances Donald said a 25 per cent levy would hobble Canadian markets for three years - but a weaker loonie could partly offset that impact.
Made-in-Canada cleantech - almost $10 billion of which was shipped abroad last year, or 13 per cent of the country's total exports — would be cheaper on international markets and so potentially see an uptick in demand.
Another is the "opportunity" that lies in the fundamental change in the U.S-Canada relationship for Canada. Dicaro believes there is a chance now for Ottawa to "carefully review our economic strategy with the U.S. and rethink our industrial policy to focus on the sectors growing through the energy transition.”
As well as diversifying into other international markets, Canada could capitalize on sustainability-minded financial institutions and green funds looking for a new home, as Trump's anti-renewables ideology decelerates the U.S. energy transition.
"In Trump 1.0 a lot of financial and human capital moved up to Canada. I wouldn't be surprised if it happened again,” said McArthur. “We have a population of 40 million that could all work in cleantech and buy cleantech in one way or another.
"We need to see this present challenge for what it is. We need to skate to where the puck is going. Cleantech is a generational opportunity."
Comments
Hope for the best but plan for the worst.
I have already started boycotting US products and will continue. I also am in need of transitioning from oil to energy efficient heating. I d be delighted to buy Canadian, otherwise it was going to be China.
And sorry to the few suppliers, e.g., LLBean, Braggs, oranges, are among those off my shopping list now. It s a big world where lots of stuff is grown and made and I look forward to exploring it.
The man is Bad for Business, and the sooner Business figures that out, the better.