'Financial pain': Canadian official warns US gas prices will skyrocket under Trump tariffs

17 January

Americans may be in for a nasty surprise at the pump when filling up their cars, should President-elect Donald Trump follow through on a key campaign promise.

Trump has pledged to impose a 25% tariff on goods brought in from Canada, as well as 25% for Mexican goods and 10% for Chinese imports. But the Canadian tariff in particular could result in a big hit to Americans' wallets should Trump make good on his tariff threat, according to a recent report in the Canadian Globe and Mail.

“The imposition of tariffs against the U.S.’s closest friend and economic partner will cause financial pain for Canadian families, no doubt,” Canadian Natural Resources Minister Jonathan Wilkinson said during a panel discussion at the Woodrow Wilson International Center for Scholars. “But it will also increase prices of energy and food for American consumers.”

Data from Trading Economics shows that Canada exported more than $131 billion worth of "mineral fuels, oils and distillation products" in 2023 alone. Wilkinson said that a 25% import tax on Canadian oil could mean that gas prices for Midwestern customers could jump by as much as 75 cents per gallon.

"For Midwestern U.S. refineries there are no real economically viable alternatives," Wilkinson said, adding that the U.S. imports roughly four million barrels of Canadian oil each day. "And for U.S. Gulf refineries, the alternative is to purchase from Venezuela – hardly a friendly or stable partner."

Rather than tariffs that could lead to a costly trade war between the U.S. and its northern neighbor, Wilkinson is instead proposing a closer alliance between the United States and Canada particularly focused on petroleum products (including both crude oil and natural gas). He argued that this would help reduce reliance on countries like China and Russia, especially in regions of the U.S. where there are no resources to extract locally.

"Canadian gas supplies parts of the U.S. where local supply does not exist, such as in the Pacific Northwest and California," WIlkinson said during the panel discussion.

In addition to fossil fuels, Canada also supplies the U.S. with uranium exports, which are used for nuclear power plants. According to Wilkinson, this is all the more reason for an energy-specific trade agreement with the U.S. and Canada given that the only other parts of the world where uranium can be obtained have an adversarial relationship with the United States. He added that this arrangement could also be economically beneficial for the U.S. in the long term.

"The U.S. leverages the resource abundance that Canada possesses for energy and minerals that its economy requires," Wilkinson argued. "And it obtains low-cost energy and low-cost minerals, which allows the U.S. to access energy at a discount, then thousands of American workers refine or transform it, and sell it at a higher price to the rest of the world."

Click here to read the Globe and Mail's report in full (subscription required).

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