Trump’s tariffs on Canada and Mexico exports, starting March 4, could escalate trade tensions, especially in the oil sector, which heavily relies on Canadian crude. Public sentiment in Canada supports retaliatory tariffs, indicating a potential response from the Trudeau government, as trade volumes surge between the two countries.
President Donald Trump has confirmed that the 25% tariffs on Canadian and Mexican exports to the U.S. will start on March 4. Additionally, Trump intends to levy a 10% tax on imports from China, indicating the onset of potential trade conflicts between the U.S. and major trading partners. Previously, these tariffs were paused on February 3 after new border security measures were introduced by both countries.
Oil imports subject to these tariffs represent a significant portion of the U.S. market—44% of all oil product imports and 69% of crude oil imports, with heavy crude oil imports at 81%. In 2024, the U.S. imported approximately 6.6 million barrels per day of crude, predominantly heavy oil from Canada, which supplied 75% of these imports. This dependency, alongside a record high import rate of 4.42 million barrels per day from Canada, underscores the critical nature of this trade relationship.
Public reaction in Canada indicates a strong support for retaliatory measures, with a recent Bloomberg report stating that 82% of Canadians favor export levies on oil if the U.S. enforces tariffs. Historically divisive, such export taxes have gained acceptance due to rising public dissatisfaction with Trump’s policies, providing the Trudeau government the opportunity to respond effectively against these tariffs.
The backdrop of increasing trade between the U.S. and Canada amplifies the stakes, revealing a substantial trade surplus for Canada, largely driven by energy exports, which surged in late 2024. This trend, combined with a declining Canadian dollar and inventory stockpiling prior to tariff implementation, resulted in a trade surplus of C$11.3 billion in December—an increase from previous months. Notably, nearly 76% of Canada’s exports were to the U.S., compared to 62% of imports from its southern neighbor, with total trade values surpassing C$1 trillion for the third consecutive year.
In summary, President Trump’s announcement of tariffs on Canada and Mexico signifies the potential for escalating trade tensions, particularly within the critical oil sector. Canadian support for retaliatory tariffs illustrates the public’s readiness to respond to U.S. actions, while the increase in trade surpluses highlights the deep economic interdependence between the two nations. This situation could lead to significant shifts in the dynamics of North American trade going forward.
Original Source: oilprice.com
