Tariffs Keep Energy Industry on Edge

Over the last six weeks, U.S. President Trump has imposed and postponed tariffs on Canada and Mexico several times. The current situation seems to reflect something of a compromise, says Poten & Partners in an opinion released on March 7.

Tariffs are in place, but they will not apply to goods covered by the North American trade agreement known as USMCA. Crude oil and refined products are covered under the USMCA, so provided the energy companies file the appropriate paperwork, they should be able to meet the certification requirements necessary to ensure relief from the 10% and 25% levies.

"Despite this temporary (until April 2nd) reprieve, the energy industry remains on edge."

Canada and Mexico are both significant providers of energy products to the United States, with Canada being particularly important. According to data from the U.S. Energy Information Administration (EIA), the U.S. imported 6.6 million barrels per day (Mb/d) of crude oil in December 2024 (the latest monthly data available). Of this total, 4.2 Mb/d (64%) came from Canada and 451,000 b/d (7%) from Mexico.

Most of the crude oil from Canada is transported via pipelines, so this limits the potential to change flows. U.S. Midwest are highly dependent on Canadian barrels, and producers will likely pass on at least some of the added cost to the buyers.

Newfoundland and Labrador, located on Canada’s East Coast produce about 250,000 b/d of crude from several offshore fields (Hebron, Hibernia, Terra Nova and White Rose). About 50% of this oil (125,000 b/d) ends up in the U.S., shipped directly or indirectly via the transshipment terminal at Wiffen Head. These barrels could be easily redirected to other destinations in the Atlantic Basin.

Another seaborne export outlet for Canadian crude oil is the Westridge terminal in Vancouver, which is connected to the Trans Mountain pipeline. After the Trans Mountain Expansion (TMX) came online in May 2024, seaborne exports from Westridge were boosted. About 50% of the seaborne TMX exports are sold into the U.S. West Coast, with the remainder shipped to Asia. If tariffs are implemented, Canadian producers have the option to sell more to Asia.

There are no pipelines connecting the U.S. and Mexico, so nearly all crude is shipped on tankers. This means they could be redirected based on economics.