Areas of Concern for Regulated Utilities Following U.S. Tariffs on Steel and Aluminum Imports

On February 10, 2025, the Trump administration unveiled a sweeping 25% tariff on all steel and aluminum imports, effective March 12, 2025. Despite the planned tariffs, we believe the credit quality of utility companies we rate will remain stable in the near term. Here are our key insights:

-- Temporary supply chain disruption and rising costs could curtail utility companies' capital spending.
-- Regulatory independence is important as utilities seek to pass on increased costs from the tariffs.
-- Overall, we expect the sector to remain stable; however, we are concerned about utilities serving industrial regions that heavily rely on imported steel and aluminum.

"We will keep a close eye on a few areas of concern, including elevated capital programs, a broad weakening in credit metrics, potential political interference in the rate-setting process, and reduced demand in relatively vulnerable regions," said Steven Lin, Assistant Vice President, Corporate Ratings. "Should the proposed tariffs persist over an extended period, companies that do not adapt to increasing input costs or experience regulatory delays that significantly affect earnings are at a greater risk of negative credit rating actions."