President Donald Trump has announced that 25% tariffs on Canada and Mexico exports to the United States will go into effect on March 4, adding that he will impose an additional 10% tax on Chinese imports in what could be the beginning of trade wars between the U.S. and its biggest trading partners. Trump paused the sweeping duties on Canada and Mexico on February 3 for one month after both countries’ announced new border security measures. Oil flows facing tariffs represent 44% of U.S. oil product imports, 69% of crude oil imports and 81% of heavy crude oil imports. The U.S. imported ~ 6.6 million barrels per day (mb/d) of crude oil in 2024, of which 4.0 mb/d was heavy oil for use in upgraded refineries with cracking units. Canada provided 75% of U.S. heavy crude oil imports in 2024, with its market share having steadily increased since 2000, squeezing outflows from Mexico, Venezuela and Colombia.  Some 80% of Canada’s crude production flows downstream to U.S. refiners, with U.S. imports of Canadian crude reaching a record high of 4.42M bbl/day in the week ending January 3, according to the U.S. Energy Information Administration.

Canadians overwhelmingly support retaliatory tariffs, with Bloomberg reporting that 82% support export levies on oil exports if Trump imposes tariffs on Canadian oil. Whereas Canadians traditionally considered export taxes on energy to be politically divisive, the robust backing reveals the level of anger amongst the public over Trump’s actions and gives Justin Trudeau’s government greater license to respond in kind if Trump carries out his threat.

The trade war looms large at a time when trade volumes between the U.S. and Canada have been surging. Canada’s energy exports to the United States surged in the latter part of 2024, helping the country record its biggest surplus with its main trading partner since 2022. Crude oil exports jumped amid a weakening Canadian dollar as well as traders stockpiling inventories ahead of Trump’s tariffs. The trade surplus widened to C$11.3 billion in December, up from C$8.2 billion previously, while crude exports to the U.S. jumped 11.8% in the final quarter. Nearly 76% of all exports by Canada went to the U.S. compared to 62% of all imports coming from the U.S. Last year, the value of Canada’s imports and exports with the U.S. surpassed the C$1 trillion mark for a third straight year.

By Alex Kimani for Oilprice.com

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