Trump 25% Tariff Plan Includes Oil Imports
U.S. President-elect Donald Trump does not intend to spare crude oil from his planned 25% import tariffs on Canada and Mexico, sources told Reuters on Tuesday, as the oil industry warned the policy could hurt consumers, industry and national security.
Canada and Mexico are the top sources of U.S. crude oil imports, together accounting for around a quarter of the oil U.S. refiners process into fuels like gasoline and heating oil, according to the U.S. Department of Energy.
The U.S. and Canadian oil industries had been optimistic that Trump's broad plans for protectionist trade measures would spare oil imports because many U.S. refineries rely on the two countries and have equipment designed to process their oil types.
Two sources familiar with Trump’s plans said that oil would not be exempted from the plan. They asked not to be named due to the sensitivity of the issue.
America’s top oil trade groups, meanwhile, said imposing the tariffs would be a mistake - exposing a rare moment of discord between the industry and Trump.
"Across-the-board trade policies that could inflate the cost of imports, reduce accessible supplies of oil feedstocks and products, or provoke retaliatory tariffs have potential to impact consumers and undercut our advantage as the world’s leading maker of liquid fuels," said a spokesperson for the American Fuel and Petrochemical Manufacturers group, which represents oil refiners.
The AFPM said its industries would "continue urging officials to veer clear of any policies that could disrupt America's energy advantage."
The American Petroleum Institute, meanwhile, said in response to a question about the threatened tariffs that keeping up the trade of energy across borders is important.
"Canada and Mexico are our top energy trading partners, and maintaining the free flow of energy products across our borders is critical for North American energy security and U.S. consumers," said API spokesperson Scott Lauermann.
Oil industry analysts and traders also warned the move would likely raise oil prices for U.S. refiners, squeezing margins and driving up the cost of fuel.
The U.S. imported about 5.2 million barrels of crude and petroleum products per day (bpd) from Canada and Mexico in 2024, with more than 4 million of that from Canada, data from U.S. government's statistical arm showed.
The biggest impact would come from the levies on Canadian crude oil, which is an important source of supply to refineries in the U.S. Midwest.
"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. U.S. refiners have a capacity to process more than 18 million bpd of crude oil in total, but often run at lower rates due to maintenance and other issues.
While the U.S. is the world's top oil producer, with output at a record 13.5 million bpd of crude, much of it is light in density and not compatible with domestic refineries that are largely configured to refine heavy crude like Canadian and Mexican oil. Converting units to run lighter crudes economically would require investing in new equipment.
Asked about the inclusion of oil imports, the Trump transition team noted that tariffs against China created jobs, spurred investment and resulted in no inflation. "President Trump will work quickly to fix and restore an economy that puts American workers first by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations, and unshackling American energy," said Trump transition spokeswoman Karoline Leavitt.
(Reuters)
