President Trump has announced that 25% tariffs on Canadian and Mexican exports will take effect on March 4, along with a 10% tax on Chinese imports. The oil market is particularly affected, with Canada supplying a significant portion of U.S. heavy crude imports. Canadian public sentiment favors retaliatory tariffs in response, amid an expanding trade surplus with the U.S.
President Donald Trump has declared that 25% tariffs on exports from Canada and Mexico to the United States will commence on March 4. Additionally, he plans to impose a 10% tax on Chinese imports, potentially initiating a trade conflict with major trading partners. Previously, on February 3, he had delayed these tariffs for one month following new border security measures from both countries.
These tariffs primarily impact the oil sector, as they encompass 44% of U.S. oil product imports, 69% of crude oil imports, and 81% of heavy crude oil imports. In 2024, the United States imported approximately 6.6 million barrels per day (mb/d) of crude oil, predominantly heavy oil essential for advanced refining processes. Canada was responsible for 75% of U.S. heavy crude oil imports in 2024, a market share that has steadily increased since 2000, affecting imports from Mexico, Venezuela, and Colombia.
Public sentiment in Canada is largely in favor of retaliatory measures, with a Bloomberg report indicating that 82% of Canadians support the imposition of export tariffs on oil if tariffs on Canadian oil are enacted by Trump. Historically, Canadians have viewed export taxes on energy as divisive; however, widespread anger over Trump’s decisions provides the Canadian government under Justin Trudeau with a mandate to respond.
The backdrop of this potential trade war is marked by escalating trade volumes between the United States and Canada. By the latter half of 2024, Canada’s energy exports to the U.S. had surged, contributing to its largest trade surplus with the U.S. since 2022. Crude oil exports increased significantly, buoyed by a declining Canadian dollar and traders stockpiling before the anticipated tariffs.
By December, the trade surplus increased to C$11.3 billion, up from C$8.2 billion in the preceding months. During the final quarter, crude exports to the U.S. rose by 11.8%. A substantial proportion of Canadian exports—nearly 76%—was directed toward the United States, while 62% of Canadian imports originated from the U.S. Notably, the total value of trade between Canada and the U.S. exceeded C$1 trillion for the third consecutive year.
In summary, President Trump’s announcement of impending tariffs on Canada and Mexico is poised to trigger significant implications for trade and the energy sector. Support for retaliatory tariffs in Canada signals public discontent with U.S. trade policies. As Canada experiences an increase in energy exports, the evolving relationship with the United States may further develop under these economic pressures.
Original Source: oilprice.com
