Trump’s proposed tariffs to hit Canadian, Mexican crude oil
US President-elect Donald Trump is not planning to exempt crude oil from his proposed 25 per cent import tariffs on Canada and Mexico, sources told Reuters on Tuesday.
The oil industry has raised concerns about the potential negative impact on consumers, industry, and national security.
Canada and Mexico are the primary sources of US crude oil imports, supplying approximately a quarter of the oil processed by US refiners into fuels such as gasoline and heating oil, as reported by the US Department of Energy.
Two anonymous sources familiar with Trump’s plans said that oil would not be exempted from the plan, citing the sensitivity of the issue.
America’s leading oil trade groups oppose imposing tariffs, creating a rare disagreement with Trump.
A spokesperson for the American Fuel and Petrochemical Manufacturers (AFPM) group warned that broad trade policies could raise import costs, limit oil supplies, and trigger retaliatory tariffs, potentially harming consumers and undermining our position as a top liquid fuel producer.
The AFPM said its industries would “continue urging officials to veer clear of any policies that could disrupt America’s energy advantage.”
Oil industry experts cautioned that the decision could lead to higher oil prices for US refiners, reducing margins and increasing fuel costs.
In 2024, the US imported approximately 5.2 million barrels of crude and petroleum products daily from Canada and Mexico, with over four million barrels coming from Canada.
The tariffs on Canadian crude oil, a significant supply source for Midwest refineries, would have the most significant effect.
“The Midwest will have to deal with higher gasoline prices as it will be difficult to replace the Canadian crude that they are using currently,” ship tracking firm Vortexa analyst Rohit Rathod said.
“Applying tariffs on over 4 million barrels per day of crude from your leading supplier seems self-destructive,” said Matt Smith, an analyst at ship tracking service Kpler.
US refineries have a total capacity to process over 18 million barrels per day (bpd) of crude oil, but they often operate at lower rates due to maintenance and other issues.
Despite being the world’s leading oil producer, with a record output of 13.5 million bpd, much of the US oil is light and not easily processed by domestic refineries, which are mainly set up to refine heavy crude from Canada and Mexico.
Adapting refineries to process lighter crudes would require significant investments in new equipment. The Trump transition team highlighted that imposing tariffs on China led to job creation, increased investment, and did not result in inflation.
Attribution: Reuters
