Trump’s Tariffs: The Impact of Canadian Energy on the U.S

President Donald Trump has long made tariffs a hallmark of his economic strategy, promising to levy duties against a variety of countries to protect American industries and address trade imbalances. Recently, he has floated the idea of imposing tariffs on Canadian oil and gas imports—a move that could have significant implications for both economies. Canada is not just a neighbor but also one of the United States’ largest trading partners, particularly in energy. Understanding the scale of this trade and its potential consequences is crucial for grasping how such tariffs could affect businesses and consumers alike.

The Importance of Canadian Oil and Gas

Canada is the largest foreign supplier of energy to the United States, accounting for a substantial share of U.S. oil and gas imports. In 2022, the U.S. imported an average of 3.5 million barrels of oil per day (bpd) from Canada, representing 51% of its total crude oil imports. This energy flows through a highly integrated supply chain, with pipelines like the Keystone system and Enbridge’s network transporting oil directly to U.S. refineries, especially in the Midwest. Natural gas is another major export. In 2022, Canada supplied approximately 10% of U.S. natural gas consumption, with much of this entering the northern states.

To meet its massive energy demands, the United States relies on imports to supplement its domestic production. While the U.S. produces around 70% of the oil and gas it consumes, it still needs to import approximately 30% of its supply to satisfy its consumption habits. Canada is by far the largest supplier of these imports, making its role in the U.S. energy market indispensable.

This dependence highlights the stakes. Any disruption in Canadian energy imports—whether due to tariffs or other trade barriers—could ripple across the U.S. economy, particularly in sectors reliant on affordable energy.

How the U.S. Consumes Its Oil

Oil and gas are integral to the U.S. economy, fueling transportation, manufacturing, and residential energy needs. Approximately 70% of U.S. oil consumption is used in transportation, including gasoline, diesel, and jet fuel. Another 20% goes toward industrial uses such as petrochemical production, which creates plastics, fertilizers, and other essential materials. The remainder powers homes and businesses, with a smaller portion used for electricity generation.

Given this heavy reliance on energy, tariffs on Canadian imports would likely increase costs across the board. Higher prices for oil and gas would be passed on to consumers, driving up the costs of transportation, heating, and goods dependent on petrochemicals. This would exacerbate inflationary pressures already impacting household budgets, making energy affordability a central concern.

Who Stands to Lose: Companies Most Negatively Affected

Tariffs on Canadian oil and gas would disrupt supply chains and increase costs for several U.S. industries and companies. Here are the sectors and key players most likely to feel the pain:

U.S. Refiners

Many U.S. refineries, particularly those in the Midwest, are optimized to process Canada’s heavy crude oil. Tariffs would raise the cost of this crude, squeezing profit margins and potentially reducing refinery output.

• Marathon Petroleum Corporation: With a significant number of refineries configured for Canadian crude, Marathon could face higher feedstock costs.
• Phillips 66: This company’s refineries rely heavily on Canadian imports, making it vulnerable to cost increases.

Pipeline Operators

Tariffs could reduce the volume of Canadian oil transported to the U.S., hitting pipeline companies that depend on this trade.

• Enbridge Inc.: As the operator of extensive cross-border pipelines, Enbridge would face decreased revenues from lower throughput.
• TC Energy Corporation: The Keystone Pipeline system, which brings Canadian crude to U.S. refineries, would be directly affected.
• Kinder Morgan: Although a U.S.-based company, Kinder Morgan’s pipelines that transport natural gas could see reduced flows and revenues.

Canadian Oil and Gas Producers

Producers in Canada would face significant challenges as tariffs make their products less competitive in the U.S. market, which is their largest customer.

• Canadian Natural Resources Limited (CNRL): As one of Canada’s largest oil producers, CNRL would see reduced demand and lower prices for its crude.
• Suncor Energy: With heavy investments in oil sands production, Suncor’s profitability could take a hit if U.S. refiners reduce purchases.
• Imperial Oil: This major Canadian producer, with operations heavily tied to U.S. markets, would likely experience revenue declines due to reduced exports.

Who Stands to Gain: Companies That Could Benefit

While many U.S. businesses would be negatively affected, certain domestic companies could benefit from tariffs on Canadian energy by capturing a larger share of the market.

U.S. Oil and Gas Producers

Higher tariffs on Canadian energy could make U.S.-produced oil and gas more competitive, boosting revenues for domestic producers.

• ExxonMobil: With significant U.S. production in the Permian Basin, ExxonMobil could gain from increased demand for domestic oil.
• Chevron: Operating extensive upstream assets in the Gulf of Mexico and shale regions, Chevron would benefit similarly.
• EQT Corporation: As the largest U.S. natural gas producer, EQT could see higher demand for its domestic supplies.

Coal Producers

Higher energy costs could push some power utilities to switch from natural gas to coal, benefiting coal companies.

• Peabody Energy: The largest coal producer in the U.S., Peabody could see increased demand as utilities seek alternatives to expensive natural gas.
• Arch Resources: Another major coal company, Arch could benefit from rising energy costs.
• Alliance Resource Partners: This company’s domestic coal production could experience a boost from higher natural gas prices.

Renewable Energy Companies

In the long term, higher fossil fuel prices could accelerate the transition to renewable energy, benefiting companies in this sector.

• NextEra Energy: As the largest U.S. renewable energy producer, NextEra could see greater interest in wind and solar power.
• Tesla (Energy Division): Tesla’s solar panels and battery systems would become more attractive as energy costs rise.
• First Solar: A leading solar panel manufacturer, First Solar could benefit from increased demand for renewable energy solutions.

Conclusion

Tariffs on Canadian oil and gas imports could have consequences on the U.S. economy. While some domestic companies might benefit, the broader impact would likely be inflationary, with higher energy costs passed on to consumers and businesses. U.S. refiners, pipeline operators, and Canadian oil and gas producers would bear the brunt of the disruption, while domestic oil and gas producers could gain a competitive edge.

As the U.S. and Canada share one of the most integrated energy markets in the world, imposing tariffs could strain this relationship and introduce inefficiencies into an otherwise well-functioning system. For now, the possibility of tariffs remains a contentious issue, one that could reshape the North American energy landscape for years to come.