Oil watchers say inflation risks will stave off Trump’s Canada tariff threat

Oil watchers say inflation risks will stave off Trump’s Canada tariff threat


Working oil pumps against a sunset sky.

Imaginima | E+ | Getty Images

Higher fuel prices could be in the cards if President-elect Donald Trump follows through with his tariff threats on Canada, according to industry experts, who are skeptical on whether the new levies will ever be implemented.

Trump on Monday pledged to implement additional tariffs on China, Canada and Mexico on day one of his presidency, according to his posts on social media platform Truth Social. He said he would sign an executive order on Jan. 20 imposing a 25% tariff on all imports from Canada and Mexico, a move that may breach the terms of a regional free trade agreement.

Goldman Sachs’ Co-Head of Global Commodities Research Daan Struyven said that if a 25% levy hit Canadian crude exports to the U.S. “that could, in theory, lead to some pretty significant consequences for three groups.”

U.S. refiners who rely on Canadian oil barrels could face lower profit margins, and consumers may potentially face higher prices, surmised Struyven. Lastly, Canadian producers may suffer revenue losses if they are unable to reroute their barrels that would have otherwise gone to the U.S.

America’s imports of Canadian crude oil hit a record of 4.3 million barrels per day in July 2024 after the expansion of Canada’s Trans Mountain pipeline, according to the most recent data from the U.S. Energy Information Administration.

If we were to see a 25% tariff on Canadian energy exports, I think it could have some very significant ramifications for trade flows.

Daan Struyven

Goldman Sachs

Additionally, refiners in the Midwest, which are more adapted to process Canada’s heavy sour crude rather than the low sulfur sweet crude produced domestically, could also have problems switching should the Canadian imports be interrupted, Struyven told journalists at an online conference.

“If we were to see a 25% tariff on Canadian energy exports, I think it could have some very significant ramifications for trade flows,” Struyven said. 

Mexico and especially Canada have “notable tightly integrated linkages” with the U.S. when it comes to the oil, natural gas and auto industries, Citigroup wrote in a note following Trump’s announcements this week. 

“Absent carve-outs, this would increase costs for U.S. refiners and U.S. consumers,” said the bank’s research team led by Energy Strategist Eric Lee.

However, Goldman highlighted that it is unlikely that the tariffs will be implemented as announced, on the premise that the Trump administration is focused on reducing energy costs.

Mexico and Canada tariffs would 'never be introduced', but there will be no rollbacks for China

Trump cannot allow inflation to get out of control in the 15 months before the midterm election season, Viktor Shvets, global strategist at Macquarie Capital, told CNBC. Shvets believes that tariffs are used as a negotiating tool to achieve certain objectives such as strengthening the border.

“I do not believe for a second that there will be a massive increase in overall tariffs because that will represent a tax on U.S. domestic manufacturers. That will also represent a tax on U.S. exporters,” said Shvets.

Canada’s trade bodies have shared their concerns, too.

“As Canadians, we need to be eyes-wide-open on the President-elect’s promise for across-the-board tariffs,” the CEO of the Canadian Association of Petroleum Producers, Lisa Baiton, reportedly said.

Danielle Smith, the premier of Alberta which accounts for the largest production of crude in Canada, said that the Trump administration has “valid concerns related to illegal activities at our shared border,” and urged the federal government to resolve said issues immediately to avoid any “unnecessary tariffs” on Canadian exports.



Source

Google hires Windsurf CEO Varun Mohan, others in latest AI talent deal
World

Google hires Windsurf CEO Varun Mohan, others in latest AI talent deal

Chief executive officer of Google Sundar Pichai. Marek Antoni Iwanczuk | Sopa Images | Lightrocket | Getty Images Google on Friday made the latest a splash in the AI talent wars, announcing an agreement to bring in Varun Mohan, co-founder and CEO of artificial intelligence coding startup Windsurf. As part of the deal, Google will […]

Read More
India finds engine switch movement in fatal Air India crash, no immediate action for Boeing or GE
World

India finds engine switch movement in fatal Air India crash, no immediate action for Boeing or GE

Investigative officials stand at the site of Air India Boeing 787 which crashed yesterday, on June 13, 2025 in Ahmedabad, India. Ritesh Shukla | Getty Images A preliminary report by Indian aviation accident investigators said on Saturday the fatal Air India crash that killed 260 people in Ahmedabad last month showed the plane engines’ fuel […]

Read More
This coming earnings season could decide if a stock market at record highs has more room to run
World

This coming earnings season could decide if a stock market at record highs has more room to run

The upcoming earnings season will show investors whether the bull case for equities still holds. The second quarter reporting season comes at a pivotal point for the stock market, with the S & P 500 and Nasdaq Composite trading at all-time highs this week even after an onslaught of bad news regarding higher tariffs, a […]

Read More