The clean-energy landscape today looks bumpy, marked by broad uncertainties across a fast-changing space. Global decarbonization and European energy independence rely on the deployment of clean-energy technology. Yet geopolitical and technological developments are creating potential disruptions, shifting focus from a rapid energy transition to other priorities, including the race to lead in gen AI, increased defense budgets in European countries, and new trade alliances.
Today’s evolving tariff environment piles on top of the uncertainties and has the potential to significantly affect the global economy, energy and transportation demand, commodity prices, and supply chains.
To help executives think through the possible effects of higher tariffs, we considered three potential tariff scenarios and their likely impact on the supply chain across five clean-energy technologies—solar, onshore wind, offshore wind, battery storage, and electric vehicles (EVs)—and we projected the capital expenditure and energy capacity outlook to 2035.
Our analysis considers the United States and the European Union1 and does not include any effects on energy demand that could occur from a slowdown in economic growth resulting from tariffs. It also does not incorporate policy changes other than tariffs—including export controls or changes to subsidies—whether they result from ongoing tariff scenarios or not. We don’t suggest any scenario is more or less likely than another.
Our results are notable both for what may change and what likely won’t. Moderate tariffs alone would likely have limited effect on the adoption of clean technologies, especially in Europe. However, under sustained application of the highest-tariff scenario we considered, by 2035, renewable-energy adoption could stall in the United States, and solar and wind adoption could soften in Europe.
Our analysis indicates that only in a scenario of very high tariffs could the energy landscape change substantively. More important, the tariffs that have been applied and then paused against the fast-moving backdrop of spring 2025 as this analysis was developed may meet or approach this threshold for change. Regardless of the scenario, these five technologies are still poised to expand through 2035 and beyond. However, across the board, tariffs likely mean clean-energy technologies will cost more.
Three scenarios offer insight into the future of the clean-energy technology supply chain
The scenarios we evaluated for this article are based on scenarios developed by McKinsey in collaboration with Oxford Economics in March 2025. These scenarios map out a few possible futures and illustrate the sensitivity of technologies to tariffs in different locations. We recognize the terrain of announced and enacted tariffs changes daily and may or may not match the scenarios presented here.
- Productivity acceleration assumes a status quo similar to late 2024, including tariffs of 50 percent on solar panels, 25 percent on batteries, and 100 percent on EVs entering the United States—and up to an additional 35 percent on EVs entering the European Union—from China.
- No real disruption assumes tariffs by the United States of 20 percent on all goods from China, 25 percent on goods from Mexico and Canada, and an average of 52 percent on solar modules from Southeast Asian countries.
- Global tensions escalate assumes tariffs of 60 percent on all goods entering the United States from China and 20 percent on goods from other trading partners. It assumes an average tariff by the European Union of 47.7 percent on solar panels and batteries from China and 140 percent on wind turbine imports from China.
As of June 2025, China and the United States have paused the more than 100 percent tariffs between their countries. The United States has applied an additional 30 percent2 tariff on all goods entering from China, and China has responded with a 10 percent tariff on all goods entering from the United States.
The European Union continues tariffs of up to 35 percent on Chinese EVs but has otherwise not proposed or received new tariffs.
Solar photovoltaics’ (PV) manufacturing supply chain is concentrated in China and Southeast Asia. China is rich in raw materials, including silicon, required for module manufacturing.
Following more than 60 percent cost reductions for PV between July 2022 and July 2023,3 we project that solar capacity could increase more than twofold in both the United States and the European Union by 2035 in any tariff scenario (Exhibit 1). By 2035, the global tensions escalate scenario could result in 9 percent less installed solar capacity in the United States and 7 percent less in the European Union than in the productivity acceleration scenario.
Wind power manufacturing capacity is spread across China, the European Union, Mexico, and the United States. The United States imports 17 percent of its wind equipment from China. The European Union imports 36 percent from China.
Onshore wind capacity is expected to increase approximately 50 percent in the European Union and approximately 40 percent in the United States by 2035 from a materially lower base. Our modeling suggests that neither tariff scenario is likely to have an effect on wind capacity in the United States by 2035. The global tensions escalate scenario, in which the European Union introduces tariffs on Chinese turbines, could result in 6 percent less capacity in the European Union relative to the productivity acceleration scenario by the same year.
Offshore wind faces a moratorium in the United States, which will likely pause new capacity additions until the end of the decade, limiting growth to projects already in progress. Meanwhile, offshore wind is expected to increase nearly threefold by 2035 in the European Union.
In a global tensions escalate scenario, EU capacity installed by 2035 could be 6 percent less than in the productivity acceleration scenario.
Battery energy storage systems (BESS): China dominates the supply chain as the primary global exporter. Unlike in solar PV modules, critical raw materials for batteries such as lithium and cobalt are accessible across Latin America, Africa, and Australia (lithium in Chile and Argentina, cobalt in the Democratic Republic of Congo and Australia), providing opportunities for manufacturing supply chains outside ASEAN countries.
We estimate that BESS capacity will increase approximately 70 percent by 2035 in the United States and nearly sixfold by 2035 in the European Union.4 The global tensions escalate scenario could result in 4 percent less capacity in the United States and up to 10 percent less capacity in the European Union by 2035 relative to the productivity acceleration scenario. The volume of imports from China to the European Union is higher than to the United States, which has substantial domestic production, partially explaining the larger effect on BESS in the European Union.
EV manufacturing capacity is spread across the globe, with high production volumes in China, the United States, the European Union, Mexico, and Canada, the last two of which host facilities for EU and US OEMs. EV imports excluding parts represent approximately 30 percent5 of the EU market, mostly from China. In the United States, imports from Mexico, Canada, and the European Union represent 35 percent of the market.
By 2030, adoption of EVs in the United States is projected to be 14 percent under the productivity acceleration scenario. Meanwhile, in the European Union—where penetration is already higher than in the United States—EVs could have approximately 50 percent sales penetration in the productivity acceleration scenario versus 41 percent in the global tensions escalate scenario by 2030. The global tensions escalation scenario could create additional considerations for the European Union’s planned ban on internal combustion engine vehicles set for 2035.
High tariffs could slow adoption and increase cost of energy technologies
In the United States, sustained high tariffs could delay penetration of renewable energy after 2035. In a productivity acceleration scenario, the United States is poised to achieve a 69 percent clean-energy mix by 2035 (Exhibit 2) and 68 percent under both tariff scenarios, compared with 49 percent today. However, the sustained imposition of tariffs in the global tensions escalate scenario could stall the expansion of the share of clean energy beyond 2035.
Independent of tariffs, the United States will generate more energy from natural gas in 2035 than it does today, according to McKinsey analysis6; tariffs could make the proportion slightly larger. In 2035, gas represents 29 percent of capacity in the productivity acceleration scenario and 30 to 31 percent of capacity in the no-real-disruption and global tensions escalate scenarios.
In the European Union, tariffs at the global tensions escalate level begin to change the landscape. This scenario could result in a roughly one percentage point greater share of natural gas capacity relative to the productivity acceleration scenario by 2035, coming at the expense of renewables.
With the assumptions present in these scenarios, reaching the 86 percent clean-energy mix achieved in 2035 in the productivity acceleration scenario could happen one to two years later in the global tensions escalate scenario.
Our scenarios suggest that the speed of the energy transition would likely not be drastically altered, at least in the European Union, by introducing tariffs. The cost of the resulting energy systems could be approximately 2 percent more in the United States and approximately 3 percent more in the European Union by 2050, according to our analysis. These amounts have large uncertainty, but we already see rising costs in these industries.
Charting a way forward
Even after testing an array of tariff scenarios, much remains unpredictable. Our analysis focuses on the manufacture and deployment of energy technologies, but it does not encompass all the supply chain interconnections that could be affected by tariffs. Nor does it account for possible changes to energy demand triggered by tariffs. It’s also uncertain how long tariffs may stay in effect.
Faced with this uncertainty, it is still helpful to consider the results of a scenario analysis for what we may learn directionally from how interactions play out under the conditions imposed by a forward-looking energy system model. Clean-tech OEMs, energy producers, and network operators could consider examining their portfolios, their geographical footprints, and their supply chains to identify their vulnerabilities and strengths in the face of tariffs and to minimize their risks.
OEM leaders face challenges that differ depending on their technology and region, leading them to different strategies. The future of legislation, such as the US Inflation Reduction Act, could matter as much as or more than tariffs. Similarly, export controls of rare earth materials could have a large impact on OEMs. Even so, focusing on investing where the market is relatively insensitive to tariffs, stepping back where demand is poised to fall, and diversifying the supply chain could help OEM manufacturers adapt their operations to the tariff landscape.
Energy producers in the United States face lower returns for clean technologies under tariff scenarios. Wind energy costs are likely to be less affected than solar, and, regardless of tariffs, natural gas is likely to be an increasing part of the US energy mix because of its low cost combined with rising energy demand. In the European Union, assuming tariffs don’t lead to a reprioritization of its energy independence goals, investment in renewables is likely to continue.
Network operators in both the United States and the European Union could consider aligning their investments with energy producers, planning for industrial electrification over the long term—especially in Europe—and continuing to invest in grid maintenance.
Tariffs add uncertainty to the clean-energy landscape. In the broadest sense, our scenario analysis indicates that adoption of clean-energy technologies will likely take longer and cost more the longer tariffs last and the higher they are. Even so, we see that adoption of clean technologies will continue. Stakeholders who evaluate their supply chains for vulnerabilities and strengths in the face of tariffs will be poised to better navigate the uncertain landscape.
