President Donald Trump has announced a 10% tariff on Canadian energy, a move intended to minimize the impact on gasoline and home heating prices in the United States. This decision comes as U.S. refiners, particularly in the Midwest, heavily rely on Canadian crude oil. While the U.S. is the largest producer of crude oil and natural gas globally, many American refiners depend on the heavy crude imported from Canada, which is cheaper and of lower quality than domestic light crude.
U.S. refiners, such as Marathon Petroleum, caution that consumers will inevitably face some financial burden due to these tariffs. If implemented, these levies could lead to increased prices for gasoline, electricity, home heating, and automobiles. Canadian Energy Minister Jonathan Wilkinson warned that the tariffs would inflict economic discomfort on both sides of the border.
"We will see higher gasoline prices as a function of energy, higher electricity prices from hydroelectricity from Canada, higher home heating prices associated with natural gas that comes from Canada and higher automobile prices," – Jonathan Wilkinson
In December, the U.S. imported an average of 6.6 million barrels of crude oil daily, with more than 60% originating from Canada. As a result, car prices could escalate by at least $2,000 should the tariffs take effect. However, the initial retaliation from Canada would not target energy or critical minerals but focus on high-volume products like orange juice and Kentucky bourbon.
"Nothing is off the table, but I doubt that's where we would start," – Jonathan Wilkinson
Commerce Secretary Howard Lutnick confirmed that tariffs on Canada and Mexico would commence on Tuesday. However, he indicated that the levies might be adjusted based on ongoing negotiations. Since President Trump announced the tariffs last Thursday, U.S. crude oil prices have increased by over 1%, while gasoline futures have surged by approximately 14%.
Negotiations between the U.S. and Canada continue to evolve, with both nations making headway in discussions. However, the uncertainty surrounding the tariffs remains a pressing concern.
"Whether the president agrees and whether he moves to put tariffs in place, ultimately it's going to be the president's decision, and I'm not sure anybody knows what the answer to that's going to be," – Jonathan Wilkinson
Marathon Petroleum's Chief Financial Officer Maryann Mannen voiced concerns about the potential distribution of costs resulting from these tariffs.
"We believe that the majority of that would be borne by the producer and then frankly to a lesser extent the consumer," – Maryann Mannen