(Oil Price) – When Donald Trump floated the idea of slapping 25% tariffs on Canadian and Mexican imports, it was more than just a shot across the bow—it was a cannonball aimed squarely at North America’s deeply entwined trade ecosystem.
U.S. oil producers are warning that a tariff on heavy oil imported from Canada would raise consumer prices at the pump. Some pundits are dismissing these threats as political bluster, while others are cautioning not to shrug off the notion entirely.
If enacted, these tariffs could strain trilateral relations built over decades. On the other hand, a push for tariffs could open the door to elusive trade negotiations that could reposition the hierarchy of global oil players.
Canada, the U.S.’s largest foreign oil supplier, is particularly on edge. Over 60% of U.S. imported crude comes from north of the border, much of it the heavier kind that U.S. refineries are designed to process. A tariff could make that oil 25% pricier overnight, sending prices at the pump to uncomfortably high levels. It could also create a difficult situation for US refiners who are set up to run this heavy crude as a balance the lighter Texas output.
Mexico wouldn’t fare much better. With 11% of U.S. crude imports coming from south of the border, tariffs could prompt retaliation and fuel a tit-for-tat trade war, further destabilizing markets. It could also just as easily bring negotiators to the table to talk trade terms.
Unfortunately for Mexico, the peso is already backfooted, shedding 2.3% against the dollar in a single day.
Tariffs on oil imports often translate to higher costs for refiners, reduced supply options, and ultimately, inflated prices for everything from gas to heating oil—at least short term. The American Fuel and Petrochemical Manufacturers have already sounded the alarm, urging leaders to avoid policies that could undermine the U.S.’s energy edge.
Longer term, however, tariffs could act as a lever to address deeper issues in trade dynamics.
By Julianne Geiger for Oilprice.com
