Oil pump working under sunset sky.
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Industry experts say fuel prices could rise if President-elect Trump follows through on his threat to impose tariffs on Canada, and they are skeptical that new tariffs will be implemented.
Trump on Monday pledged to impose additional tariffs on China, Canada and Mexico on his first day in office, according to a post on the social media platform Truth Social. He said he will sign an executive order on January 20 to impose a 25% tariff on all imports from Canada and Mexico, a move that may violate the terms of regional free trade agreements.
Daan Struyven, co-head of global commodities research at Goldman Sachs, said that if a 25% tariff were imposed on Canadian crude oil exports to the United States, “in theory, this could have quite serious consequences for three groups.”
Struvan speculated that U.S. refiners that rely on Canadian oil barrels could face lower profit margins, while consumers could face higher prices. Finally, Canadian producers could suffer revenue losses if they are unable to reroute oil barrels destined for the U.S.
U.S. imports Canadian crude oil According to the latest data from the U.S. Energy Information Administration, after the expansion of Canada’s Trans Mountain pipeline, production reached a record 4.3 million barrels per day in July 2024.
If we put a 25% tariff on Canadian energy exports, I think that could have some very significant impacts on trade flows.
Daan Struvan
Goldman Sachs
In addition, Struvan told reporters at an online conference that refineries in the Midwest are better suited to process Canada’s heavy, high-sulfur crude oil rather than domestically produced low-sulfur crude oil. If imports from Canada are disrupted, refineries in the Midwest will be Factories may also encounter conversion issues.
“If we put a 25 per cent tariff on Canadian energy exports, I think that could have some very significant impacts on trade flows,” Struvan said.
Citigroup wrote in a report after Trump’s announcement this week that Mexico, and Canada in particular, have “significantly close ties” to the United States in the oil, gas and automotive industries.
“Without a spin-off, this would increase costs for U.S. refiners and U.S. consumers,” said a research team led by the bank’s energy strategist Eric Lee.
However, Goldman Sachs stressed that the tariffs are unlikely to be implemented as announced as the Trump administration focuses on reducing energy costs.
Viktor Shvets, global strategist at Macquarie Capital, told CNBC that Trump cannot allow inflation to spiral out of control 15 months before the midterm election season. Shvets believes tariffs are used as a negotiating tool to achieve certain goals, such as strengthening borders.
“I don’t believe for a moment that there will be a significant increase in overall tariffs because that would mean taxes on U.S. domestic manufacturers. It would also mean taxes on U.S. exporters,” Shvetz said.
Canadian trade bodies have also expressed their concerns.
“As Canadians, we need to be wary of the president-elect’s promise to impose sweeping tariffs,” Lisa Baiton, CEO of the Canadian Petroleum Producers Associationaccording to reports.
Danielle Smith, Premier of Alberta The company, Canada’s largest crude producer, said the Trump administration has “legitimate concerns about illegal activity at our shared border” and urged the federal government to address the issues immediately to avoid “unnecessary levies on Canadian exports.” Tariffs”.
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