Gas Prices Set to Rise as Trump's Tariffs Take Effect

President Donald Trump's tariffs on Canada and Mexico, which went into effect on Tuesday, are expected to drive up gas prices in the United States, particularly in regions heavily reliant on Canadian energy supplies. The 10% tariff on Canadian energy imports, including oil, natural gas, and electricity, will increase the cost of these energy imports, which will likely be passed on to consumers in the form of higher prices at the pump.



According to the U.S. Energy Information Administration, Canada accounted for more than 60% of total U.S. crude oil imports in December 2024, with about 4.2 million barrels imported daily. Additionally, Mexico supplied an average of 451,000 barrels per day. These imports account for about a quarter of the oil U.S. refiners process into fuels like gasoline and heating oil. The tariffs will increase the cost of these energy imports, and importers typically pass on at least a portion of these costs to consumers.

The Yale Budget Lab estimates that Trump's tariffs could drive natural gas prices up by 5% and gasoline prices up by 1.6% on average in the long run. However, shorter-run effects on oil and gas prices may be larger. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, predicts that tariffs could add 20 to 30 cents per gallon on average in the near term.

GasBuddy energy analyst Patrick de Haan expects gas prices to increase by 20 to 40 cents per gallon in the northeast within days, with Midwest drivers seeing an increase of 5 to 20 cents per gallon. This is because the Northeast and Midwest regions depend heavily on refined products from Canada. The tariffs will make these products more expensive, leading to higher prices at the pump.



In the short term, certain regions are expected to be most affected:

1. Northeast: Gas prices in the Northeast could spike by 20-40 cents per gallon by mid-March, according to GasBuddy energy analyst Patrick De Haan. For a typical 15-gallon fill-up, that's an additional $3-$6 every time you visit the pump.
2. Midwest: Drivers in the Midwest could see an increase of 5-20 cents per gallon in the coming weeks.
3. Great Lakes: Gas prices in the Great Lakes region could also increase by 5-25 cents per gallon in the coming weeks.
4. Rockies: Drivers in the Rockies could see hikes of 10-20 cents per gallon.

These regional differences are due to the dependence of these areas on Canadian energy imports and the specific refinery configurations that process heavier-grade Canadian crude.

The tariffs on Mexican and Chinese auto parts and vehicles could also influence the cost of gasoline, given the interconnected supply chains and potential disruptions. The tariffs could lead to disruptions in the production of vehicles and auto parts, which could result in higher production costs, which could be passed on to consumers in the form of higher gasoline prices. Additionally, if the tariffs lead to a decrease in the import of vehicles and auto parts, there could be an increased demand for domestic oil to meet the energy needs of the auto industry, driving up oil prices and ultimately gasoline prices.

In conclusion, President Trump's tariffs on Canada and Mexico are expected to drive up gas prices in the United States, particularly in regions heavily reliant on Canadian energy supplies. The 10% tariff on Canadian energy imports will increase the cost of these energy imports, which will likely be passed on to consumers in the form of higher prices at the pump. The tariffs on Mexican and Chinese auto parts and vehicles could also influence the cost of gasoline through various interconnected supply chains and potential disruptions. However, the exact impact on gasoline prices is uncertain and depends on several factors, including the extent of the tariffs, the response from Mexico and China, and the overall demand for gasoline in the U.S.