In Alberta, Canada’s oil-rich province, there is increasing worry about President-elect Donald Trump’s threat to impose a 25% tariff on Canadian goods. Politicians and energy experts warn that this could have severe consequences for the Canadian economy and raise prices for US consumers.
Dennis McConaghy, a former energy executive based in Alberta, stated that Canada has no option but to find a way to accommodate Trump. “Canada has no choice in this. It has to find an accommodation with Trump,” he told the BBC.
Trump announced on Monday that he would impose tariffs on both Mexico and Canada upon taking office in January, with no indication that oil and gas would be excluded. While it’s still unclear whether these tariffs will actually be implemented—Trump has used such threats in the past as part of his negotiation tactics—the main goal is for Canada and Mexico to take more responsibility in securing their borders with the US and limiting illegal immigration and drug flow.
Canadian officials and industry leaders are working hard to meet Trump’s demands while stressing the importance of the US-Canada energy partnership. Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, explained that the tariff could lead to a decrease in oil production in Canada.
McConaghy added that this reduction in oil output would result in job losses in Alberta, which could affect the entire country. Alberta’s wealth is essential for supporting other provinces through cash transfers, and a fall in oil revenues could devalue the Canadian dollar. “Roughly 80% of Canada’s trade is with the United States, and a majority of that trade is in hydrocarbons. Canadians can’t escape how integrated they are with the US,” he said.
US fuel manufacturers have also urged Trump to exclude oil and gas from any proposed tariffs, as the US relies heavily on Canadian crude. The American Fuel and Petrochemical Manufacturers (AFPM) pointed out that crude oil is a key component in US refineries, and a tariff on Canadian oil could drive up fuel production costs.
Although the US is the world’s largest producer of oil and gas, some regions like the Midwest are dependent on Canadian oil due to limited local infrastructure. The AFPM warned that a tariff on Canadian oil could raise operating costs, particularly in states like Minnesota, Wisconsin, and Michigan, where gas prices could increase by up to 75 cents per gallon. These higher costs would likely be passed on to consumers, including in the airline and freight industries.
Such an increase in oil prices would go against Trump’s campaign promise to lower energy costs for US consumers. He repeatedly said he aimed to bring gasoline prices down to under $2 per gallon, but as of November, prices were around $3 per gallon. While Trump has vowed to boost US energy independence, he also recognizes the importance of Canadian oil for US energy security.
In response to the looming tariff threat, Canadian Prime Minister Justin Trudeau has promised to present a unified front and work with the incoming Trump administration to avoid blanket tariffs. Provincial leaders, including those from Ontario, Quebec, and Alberta, have urged Trudeau to act swiftly. On Wednesday, Trudeau held an emergency meeting with provincial and territorial leaders to discuss strategies.
Danielle Smith, Premier of Alberta, emphasized that her province would actively work with US counterparts to highlight the benefits of a strong Canada-US partnership for energy security. She also acknowledged that Trump’s concerns about border security were valid, pointing out that while the US-Canada border sees far fewer illegal crossings than the southern border, there is still work to be done to address this issue.
Alberta is even considering setting up specialized sheriff units to patrol its border with Montana, as part of its efforts to enhance border security.
McConaghy concluded by urging Canadian officials to act quickly and resolve the tariff threat, stressing the need to protect Canada’s economy and its vital energy relationship with the US.
