Many are worried about the potential impact of Donald Trump’s victory in last week’s elections, particularly regarding the issue of tariffs. Trump has threatened to impose tariffs on countries he believes have unfair trade advantages over the U.S. However, Canada is likely to remain unaffected by such measures, thanks to its unique role in supplying oil to the U.S.
Canada is the largest foreign supplier of crude oil to U.S. refineries, providing a critical source of heavy crude that U.S. companies cannot produce in sufficient quantities. U.S. oil is primarily light and sweet, while much of Canada’s oil is heavier and sour. U.S. refineries along the Gulf Coast rely on both types of crude at competitive prices to meet production demands.
Former U.S. Secretary of Commerce Wilbur Ross expressed confidence that tariffs on Canadian oil are unlikely. Speaking to CBC, Ross said, “We import a lot of energy from Canada. I can’t imagine that the president would want to tax that because it would only raise costs without creating more American jobs. I think the fears are overblown.”
According to Bloomberg, Canada’s energy exports to the U.S. were valued at nearly $160 billion, with crude oil, refined products, and natural gas making up the bulk of this figure. In the past year, Canada set a record, exporting about 4 million barrels of crude oil per day, with 97% of that going to the U.S., according to the Canada Energy Regulator. Despite the U.S. being the world’s top producer of crude oil, it still does not produce the variety of grades needed by its refineries, making Canada a crucial partner in fulfilling that demand.
The relationship between Canada and the U.S. is symbiotic. Canada’s vast oil sands reserves are a key source of heavy crude, which the U.S. needs, especially after it imposed sanctions on other major heavy crude producers like Venezuela and Russia. In return, U.S. refineries are equipped to process both light and heavy crude, providing Canada with a major outlet for its oil exports.
A significant milestone in Canada’s oil export capacity came in Spring 2024 when the Trans Mountain pipeline began operating at an expanded capacity of nearly 900,000 barrels per day, up from 300,000. This expansion allowed Canadian oil exports to the U.S. to set a new record in July, reaching 4.3 million barrels per day, according to data from the U.S. Energy Information Administration.
U.S. refiners continue to rely on Canadian heavy crude, and there is little alternative to replace it at the necessary scale. Even if a future U.S. administration lifts sanctions on Venezuela and Russia, Canadian heavy crude is likely to remain the most affordable and convenient option for U.S. refineries. The only potential disruption could come if the Canadian government imposes stricter emissions caps, which could drive up the cost of domestic oil production.
Until then, tariffs are unlikely to target Canada’s oil exports. Tariffs are effective when one party holds a significant advantage over the other. In the case of U.S.-Canada energy trade, both nations rely heavily on each other, making tariffs an unlikely tool in this mutually beneficial relationship.
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