A booming AI sector along with the relocation of tariffed resource industries to the United States risks straining the supply chain supporting the American economy.  

The 2026 American economy is expected to be fuelled by two drivers: first, tariffs intended to protect and re-shore selected industries and second, growth of Artificial Intelligence (AI) Industries to global scale.  Each driver has large environmental and financial footprints on affordable power, water and capital for household and business sectors.

Tariffs

The industries selected for tariff protection include softwood lumber, potash, aluminum, steel, , and automobiles & auto parts.  The USA imports these products in part because they are price competitive against domestic production.  Four of the tariffed sectors process natural resources into intermediate goods that are inputs into upstream industries. The four tariffed sectors are: (1) softwood lumber is produced by harvesting and processing trees (2) potash is mined and processed for agricultural fertilizer, (3) bauxite ore is refined into aluminum to be used in sundry upstream manufacturer and (4) iron ore is refined into steel one of the critical materials of the modern economy.

 A simple and admittedly imperfect measure of the environmental footprint of each industry is the ratio of cost of energy, water utility and vehicle fuels to value added. The higher the ratio the greater pressure on the environment to produce economic value. These values are calculated for Canadian industries from Statistics Canada Table 16-10-0117-01. The average values are for 2024 .

               Manufacturing Industries                          5.5%

               Sawmills                                                         11.2%

               Agricultural Chemicals                               5.3%

               Iron & Steel                                                     22.3%

               Aluminum                                                       12.5%

               Automobile Manufacturing                       2.3%

               Motor vehicle parts                                     3.1%

The resource processing industries sawmills, agriculture chemicals, iron & steel and aluminum have the highest environmental impact. Manufacturing (automobiles and motor vehicle parts) have lower values since the environmental impact has already been incorporated into their processed inputs. The environmental footprint includes carbon emissions associated with fuel used in the processing stage.  Canadian steel and aluminum are largely produced using hydropower and are amongst the lowest carbon metals in the world.

AI

The AI sector is relatively new and is not well defined nor documented in publicly available business statistics. AI is “weightless” in a digital sense, nevertheless it is very resource intensive. At this stage of its development there are two programs. First training. Training a large AI model can require as much electricity as powering thousands of homes for a year. Second the data centres. Data centres use water to cool equipment. In many U.S. states, this water use now rivals municipal demand levels. New AI centres will compete with households and industrial users for land, water and grid capacity that does not yet fully exist. Even now unities are warning that demand growth is accelerating for the first time in decades.

The Choice

The tariffed resources sectors and AI depend on (1) abundant, reliable electricity; (2) massive capital investment; (3) heavy infrastructure (transportation and communication); (4) high water availability; and (5) stable supply chains. But that the United States is facing (1) grid strain; (2) permitting delays; (3) water scarcity in key regions; and (4) rising infrastructure costs. And we are not even bringing up the impact of historically high federal government financial demands and the impact on interest rates.

Conclusion

1. Costs and prices rise: Tariffs + AI growth = upward pressure on industrial energy costs, manufacturing input costs and consumer prices
2. Emissions Rise: Restricting Canadian low-carbon output may drive production toward higher-carbon producers globally — even as AI inflates U.S. electricity emissions unless lean power scales rapidly.
3. Competition for Financing: If AI delivers higher returns on capital than traditional manufacturing, capital may increasingly flow away from heavy industry — even as tariffs try to force it back. Policy and market incentives may end up pulling in opposite directions.