25 percent tariffs on our oil would drive up American gasoline prices by 50 cents per gallon or more.
A 25 percent tariff on our oil would increase U.S. gasoline prices by 50 cents a gallon — or more.
No wonder federal and provincial governments are howling over Donald Trump’s promise to levy a 25 percent tariff on “all” imports from Canada and Mexico on his first day in office.
No wonder Alberta Premier Danielle Smith is seeking anti-tariff support from Canada and U.S. governors; her province sent $134 billion worth of oil and gas to the U.S. last year.
Nearly $3.6 billion worth of Canadian goods and services cross the border each day. Canada is the top export destination for 36 U.S. states, and about a third of Canada’s trade with the U.S. is energy.
“I did talk about energy with everyone,” Smith said after the winter meetings of the Western Governors’ Association. “I made the case that if there’s a 25-percent tariff, that’ll just increase gasoline prices in Nevada.
“In Colorado, it’s the same kind of argument — that all throughout this part of the country, prices are being kept lower because of the 4.3 million barrels of Canadian oil that have, as their destination point, refineries in America.”
Ontario Premier Doug Ford threatened: “We will go to the full extent, depending on how far this goes. We will go to the extent of cutting off their energy — going down to Michigan, going down to New York State, and over to Wisconsin.”
Ontario powered 1.5 million homes in the U.S. in 2023 and is a major exporter of electricity to Michigan, Minnesota, and New York.
B.C. Premier David Eby did not rule out pulling the plug on energy and other exports south of the border as part of retaliatory tariffs if they can’t be avoided.
“Nothing is off the table. We are prepared to support retaliatory tariffs in response to the United States to help them understand the consequences for British Columbians and for Americans.”
Eby said B.C. sells power to Washington State, Oregon, and California. “We sold a billion dollars' worth of electricity to those states last year.” He also pointed out that B.C. is a major supplier of critical minerals as well as manufactured parts.
“When I say nothing is off the table, nothing is off the table — I mean it.”
After an online meeting of provincial and territorial premiers with Prime Minister Justin Trudeau, Ford said federal Finance Minister Chrystia Freeland would put together a list of items upon which Canada could impose retaliatory tariffs. So will the Ontario government.
In 2023, Ontario’s exports totaled $226 billion. More than three-quarters of Ontario’s international trade is with the U.S., and trade with the U.S. represents 39 percent of the provincial economy.
University of Calgary economist Trevor Tombe estimates that a 25 percent tariff would reduce Canada’s economy by 2.6 percent next year, sending the country into a recession.
Freeland told reporters: “A number of premiers offered strong support for a robust Canadian response that included some of the premiers proactively naming critical minerals and metals that their provinces produce, which are exported to the United States.”
Uranium exports could be one example.
When Trump imposed a 25 percent tariff on Canadian steel and a 10 percent tariff on aluminum products during his first term in 2018, Canada hit back with retaliatory tariffs covering $16.6 billion in imports. Many of our charges craftily targeted imports from states with big Trump supporters.
The tariff war ended with a new Canada-U.S.-Mexico Agreement. However, the U.S. has stuck to (and increased) tariffs on Canadian softwood lumber, which have cost Canada $10 billion since 2017 and shut down thousands of Canadian jobs.
Whether Trump can or will implement his tariffs on Inauguration Day, January 20 (or later), is being questioned in the U.S.
“There are no winners from a tariff hike,” said Joe DeLaura, a global energy strategist with Rabobank. For that reason, DeLaura said he expects Canadian crude imports to be exempt from tariffs or subject to a charge of only one to two percent.
Also in question is how Trump proposes to slap a 25 percent tariff on Canadian energy imports while, at the same time, promising Americans he will bring down their energy costs by 50 percent.
Ford’s economic development minister, Vic Fedeli, met American officials in Washington, D.C., and said it was a successful trip.
“We really did talk about how interlinked our economies are. And I think, in some cases, that came as a complete surprise — the fact that 60 percent of all the oil they import in the U.S. comes from Canada.
“Putting a 25-percent tariff on 60 percent of your imports — your price of gasoline would go up astronomically.”
The extra costs would send gasoline prices in the U.S. Midwest up by as much as 50 cents a gallon during summer’s peak driving season, said Patrick De Haan, head of petroleum analysis at GasBuddy.
Alberta Premier Danielle Smith says the price hike would be $1 a gallon.
“It’s not a pretty situation,” De Haan said. “It’s actually counter to Trump’s stances on deregulation for the oil industry, and it’s very negative for refiners.”
Trump presumably hopes the oil tariff will encourage more U.S. oil and natural-gas development. But he has yet to explain (if he even knows) how dependent the U.S. is on imports of crude oil used to make gasoline and diesel.
“Canada and Mexico are our top energy trading partners, and maintaining the free flow of energy products across our borders is critical for North American energy security and U.S. consumers,” said Scott Lauermann, a spokesman for the American Petroleum Institute, the U.S. oil industry’s largest trade group.
Charging 25 percent levies on oil and natural gas would spike gasoline prices in the U.S. Midwest, raise electricity costs along both U.S. coasts, and hammer profitability for America’s refiners, experts say.
Refiners in the upper U.S. Midwest, known as the PADD 2 market, get about 75 percent of their crude from Canada and would be most affected, said Bob McNally, president of Rapidan Energy Group and an adviser in the George W. Bush administration.
“Canada and PADD 2 refiners are inextricably linked, with few options to divert and substitute,” McNally said. Rapidan assigned a 25 percent probability that Trump would go through with the plans.