By Nia Williams
(Reuters) -Ottawa must make sure the Trump administration understands how inter-related energy markets are in the U.S. and Canada, a Canadian government minister said on Thursday, commenting on President-elect Donald Trump’s vow to impose a 25% tariff on imports from the country.
“We have some work to do to make sure we are effectively articulating the way in which tariffs would be counterproductive, and that’s not just true of oil,” Natural Resources Minister Jonathan Wilkinson told Reuters in a phone interview, adding that Americans also benefited from Canadian uranium and hydro exports.
Trump, who takes office on Jan. 20, said on Monday he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs and migrants crossing the border.
Canada is the world’s fourth-largest oil producer and the vast majority of its crude exports go to the United States.
Sources told Reuters Trump does not intend to exempt crude from the tariffs, even though the U.S. imports around 4 million barrels per day from north of its border and many Midwestern refineries are set up to run Canada’s heavy sour crude.
Analysts say tariffs on oil from Canada, top crude supplier to the United States, would drive up fuel prices for Americans.
“There’s a lot of time and effort that will need to go into ensuring that we’re having the appropriate conversations,” Wilkinson said.
“We have a couple of months before the president is inaugurated and I think there’s time for some robust conversations between countries that are actually best friends and have both been benefiting hugely from an economic perspective because of the trade that goes between us, particularly in energy.”
Earlier this year the expansion of the Trans Mountain pipeline, running from Alberta’s oil sands region to Canada’s Pacific Coast, increased access to Asian markets but the pipeline is already running around 80% full and has limited capacity to send more oil that direction.
Analysis:
The proposed 25% tariff on Canadian imports by President-elect Donald Trump could have significant implications for energy markets in the U.S. and Canada. As the world’s fourth-largest oil producer, Canada plays a crucial role in supplying crude to the United States. If tariffs are imposed on Canadian oil, it could lead to higher fuel prices for Americans. This situation highlights the interconnected nature of energy markets between the two countries and underscores the importance of effective communication and negotiation to mitigate any potential negative impacts. Investors and individuals in the financial markets should closely monitor developments in this area to assess potential risks and opportunities for their portfolios.