Unlock the White Home Watch publication free of charge
Your information to what the 2024 US election means for Washington and the world
Donald Trump’s plan to slap punitive tariffs on Canadian imports will drive up costs for American motorists, oil producers warned, as corporations scrambled to answer the US president-elect’s threats.
Trump proposed late on Monday imposing a 25 per cent tariff on all imports from Mexico and Canada, accusing the US’s closest neighbours of failing to sort out unlawful migration and drug trafficking.
Canada’s oil trade — which provides greater than half of US crude imports — could be among the many industries hit hardest. Producers warned that US shoppers would really feel the repercussions ought to imports slide and costs rise.
“A 25 per cent tariff on oil and pure fuel would seemingly end in decrease manufacturing in Canada and better gasoline and vitality prices to American shoppers whereas threatening North American vitality safety,” stated Lisa Baiton, head of the Canadian Affiliation of Petroleum Producers, an trade group.
Canadian Prime Minister Justin Trudeau known as Trump on Monday night time as Ottawa scrambled to answer the announcement. Mexico’s President Claudia Sheinbaum urged the president-elect’s plan may escalate right into a tit-for-tat trade war.
Danielle Smith, premier of Alberta, the place the majority of Canadian oil is produced, said Trump had “legitimate considerations associated to unlawful actions at our shared border” as she urged the federal authorities to “work with the incoming administration to resolve these points instantly”.
Brent crude, the worldwide oil benchmark, rose virtually 1 per cent on Tuesday morning, whereas shares within the greatest Canadian oil producers — Cenovis, Suncor and Imperial Oil — slid as a lot as 2 per cent.
Regardless of being the most important oil producer on the earth, the US imports giant quantities of crude which is transformed in its refineries into petrol and different petroleum merchandise.
US refiners, particularly within the north of the nation, are reliant on imports of Canadian crude, which is far heavier than the kind of oil produced within the Texas oilfields that drives US output. Analysts say native producers would battle to plug the hole if Canadian oil was restricted.
“If tariffs are utilized to grease imports the primary and first direct impact can be larger US pump costs and weaker US refining margins given the next price of crude feedstock — a lot of which nonetheless must be imported and greater than half of which comes from Canada,” stated Rory Johnston at Commodity Context, a Toronto-based vitality consultancy.
US imports of crude oil from Canada hit a report excessive of 4.3mn barrels a day in July following the enlargement of Canada’s Trans Mountain pipeline, which funnels crude from the oilfields of Alberta to refineries within the US midwest and Canada’s west coast.
Because the pipeline enlargement got here on-line in Could refiners on the US west coast have turn into huge consumers of Canadian oil.
Analysts stated US west coast refineries had been tailored to course of heavy bitter crude imported from Canada, which made it troublesome to quickly swap to US shale oil that’s decrease density so-called candy grade ought to Canadian provide be interrupted on account of tariffs.
Some Canadian trade individuals hoped the spat would possibly shine a light-weight on the US’s continued reliance on Canadian crude imports.
“The silver lining in all that is that the American and Canadian public has by no means recognized extra in regards to the significance of Canadian oil to the American economic system than they do at the moment,” stated Heather Exner-Pirot, a coverage director at Ottawa think-tank Macdonald-Laurier Institute.
Further reporting by Aime Williams in Washington
