Trump Tariffs on Canadian, Mexican Oil Set to Drive Up Pump Prices

The proposed 25% tariffs on Canadian and Mexican oil imports, announced by President Donald Trump, are set to significantly impact the U.S. gasoline market, particularly in regions heavily reliant on Canadian crude. According to a new analysis by the Congressional Research Service, Canada and Mexico supplied 71% of U.S. oil imports in 2023. This means that a tariff on Canadian and Mexican oil could lead to a substantial increase in gasoline prices, especially in regions that rely heavily on Canadian crude.



In the Great Lakes region, where refineries are most reliant on Canadian oil, gasoline prices could jump by 20 to 50 cents a gallon, according to Patrick De Haan, head of petroleum analysis at GasBuddy. This is because the tariffs would increase the cost of crude oil, which is a key input for gasoline production. The increased cost would then be passed on to consumers in the form of higher gasoline prices. The Midwest and the Rockies could also see a smaller but still noticeable impact of 10 to 30 cents a gallon, as these regions also import gasoline, diesel, heating oil, and jet fuel from refineries in New Brunswick and Quebec. Drivers in other parts of the United States would likely experience smaller increases in gas prices because there are better options to replace Canadian crude.

The inclusion of crude oil in the tariffs could have significant global implications, particularly for the closely integrated North American energy market. Canada is the largest source of foreign crude oil imports for the United States, shipping about 4 million barrels a day across the border. This integration makes the U.S. Midwest refineries vulnerable to disruptions caused by tariffs. If Trump imposes a 25% tariff on Canadian crude oil, it could initially raise gasoline prices in the U.S. Midwest, as refiners may cut production to offset the increased cost of Canadian crude. This could lead to a decrease in demand for Canadian oil, weighing on global crude prices, and especially in Canada, where producers have limited export options.

The tariffs could also impact Canadian producers, as they may face reduced demand and lower prices for their oil. This could lead to a decrease in production and potential job losses in the Canadian oil and gas industry. Additionally, the Canadian government may retaliate against the U.S. tariffs, further exacerbating the situation and potentially leading to a full-blown trade war.

In summary, the proposed 25% tariffs on Canadian and Mexican oil could have a significant impact on the U.S. gasoline market, particularly in regions heavily reliant on Canadian crude. The tariffs could lead to a substantial increase in gasoline prices, disrupt the flow of crude oil across North America, and potentially cause shortages. The inclusion of crude oil in the tariffs could also have significant global implications, affecting international oil prices, Canadian producers, and potentially leading to a trade war between the United States and its neighbors.