A new scenario-based analysis from consulting firm McKinsey & Company explores how evolving tariff dynamics could affect solar, wind, battery storage, transformers, and electric vehicles (EVs) across the United States and the European Union through 2035.
The analysis looks at the markets just from a tariff scope and does not take into account the investment tax credit rollback made by the U.S. government in HR1.
McKinsey’s analysis indicates that moderate tariffs alone would likely have limited effect on the adoption of clean technologies, especially in Europe. However, under a sustained application of the highest-tariff scenario, the outlook shifts. By 2035, system costs could rise in both geographies, renewable energy adoption may stall in the United States, and solar and wind deployment could soften in the EU. The analysis also suggests that higher tariffs would increase the share of gas in the 2035 energy mix, displacing renewables.
The study examines three tariff scenarios, ranging from a continuation of current trade policies to a “Global Tensions Escalate” highest-tariff scenario, in which tariffs on clean energy technologies are substantially raised.
“The clean energy landscape today is bumpy, marked by broad uncertainties across a fast-changing space,” said Christian Therkelsen, Partner at McKinsey. “While clean technologies are still projected to grow through 2050 and beyond, our scenario analysis shows that higher tariffs could impact the pace and cost of that transition, especially if they persist.”
The analysis shows installed solar capacity could be 9% lower in the United States and 7% lower in the EU by 2035 under the highest-tariff scenario compared to the status quo in late 2024. Battery energy storage system deployment could also slow, with 4% less capacity in the United States and 10% less in the EU under the same conditions. In the EV sector, projected EU market penetration by 2030 drops to 41% under the highest-tariff scenario, compared to 50% in the baseline — which could create additional considerations for the EU’s planned 2035 ban on internal combustion engine vehicles.
Wind deployment appears more insulated to tariffs. In the United States, tariff scenarios are unlikely to affect offshore wind deployment by 2035, while in the EU, the highest tariff scenario could lead to a 6% reduction in installed offshore wind capacity compared to the status quo.
At the system level, tariffs could increase overall energy costs. McKinsey projects that by 2050, the total cost of resulting energy systems could be 2% higher in the United States and 3% higher in Europe, compared to scenarios with lower or status quo tariffs. In the United States, independent of tariffs, the analysis suggests a slightly greater share of gas in the 2035 energy mix under these conditions.
“Tariffs introduce new layers of cost and complexity to an already precarious clean energy landscape,” said Humayun Tai, Senior Partner at McKinsey. “Our scenario analysis indicates that depending on their duration and scale, tariffs could raise system costs by up to 3% and delay deployment timelines by as much as two years. These shifts carry real implications for how companies plan and invest.”
Despite these headwinds, McKinsey believe solar, wind, battery storage and EVs remain poised to grow through 2050. However, capital deployment, supply chain strategy and policy will all play critical roles in determining how that growth is realized.
“In a world where trade dynamics are rapidly shifting, these five technologies remain on track for significant growth through 2035 and beyond — but not without cost,” added Diego Hernandez Diaz, Partner at McKinsey. “Our research is designed to help executives think through the potential effects of higher tariffs, enabling them to stress-test their strategies and uncover opportunities to build greater resilience into the supply chains that underpin global decarbonization efforts.”
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