A proposed Trump tariff on Canadian oil could significantly raise fuel prices for Americans and disrupt decades of oil trade with the United States’ largest crude supplier. With nearly two-thirds of U.S. crude oil imports coming from Canada, analysts warn that implementing such tariffs could drive gasoline prices up by an average of 30 cents per gallon within days of enforcement.
If the president-elect does impose the tariffs, it would violate a clause in the United States-Mexico-Canada Agreement (USMCA), which he signed during his first term in office to replace the North American Free Trade Agreement, the 1990s-era pact he has long railed against. Adding to the potential fallout of a USMCA violation, if Trump imposes the tariffs on Canadian oil, the move would also likely trigger retaliation from Canada and Mexico.
Officials in both countries warn that a trade war would significantly impact both economies. Mexico’s economy is highly dependent on exports to the U.S., with manufactured goods and automotive parts accounting for most of the country’s exports to America last year. Agriculture products like avocados were also popular in the United States.
A USMCA violation could also stall the growth of Mexico’s rapidly expanding auto industry, which relies heavily on imported components from the United States. If the tariffs are imposed, Mexico’s car manufacturers may face higher production costs and lower sales in the United States, which could hurt their bottom lines.
Canada’s economy is likewise heavily dependent on trade with the United States, with the vast majority of its exports headed south of the border. Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland both warned that a trade war with the United States would be “catastrophic” for the country.
The pair urged the incoming Trump administration to negotiate with Canada and Mexico rather than resort to threats. They said the country should be willing to make concessions but would not tolerate “aggressive tactics or unreasonable demands.”
In a Tuesday news conference in Mexico City, Freeland dismissed the president-elect’s claims that Canada’s steel and aluminum exports pose a national security threat as “absolutely absurd.” She reiterated that her government was ready to retaliate with its own set of tariffs.
In the United States, House Democrats on Tuesday introduced a bill to require congressional approval before a president could impose sweeping tariffs using the power of a declared national emergency. The bill is unlikely to pass, as Republicans take over the House this week, but it is a symbolic act to put in place Congressional oversight before any president—Democrat or Republican—could use tariffs to raise costs on consumers.
The Trump administration’s threats to impose tariffs on Canada and Mexico were a negotiating tactic, but they would have real-world consequences for consumers. The tariffs could raise the price of gasoline, which is already near a four-year high, and other consumer goods manufactured in either country.
