Trump's Tariffs: A Looming Threat to U.S. Gas Prices and Oil Imports

The prospect of a 25% tariff on all goods from Canada and Mexico, as threatened by President Trump, has raised concerns about the potential impact on U.S. gas prices and oil imports. With Canada and Mexico being two of the largest trading partners of the United States, the imposition of such tariffs could have significant consequences for the energy market.

According to experts, a 25% tariff on Canadian and Mexican goods, including crude oil, could significantly increase the cost of gasoline for U.S. consumers. Timothy Fitzgerald, a professor of business economics at the University of Tennessee, estimates that gasoline prices could rise between 40 and 70 cents per gallon in certain regions, particularly in the upper Midwest and along the East and West coasts. Jason Miller, a professor of supply-chain management at Michigan State University, adds that the effects would be limited to regions that rely on imported crude.

The potential impact of tariffs on U.S. refineries' reliance on Canadian crude oil is also a concern. About 52 percent of all petroleum imported to the U.S. last year came from Canada, with Canada sending an average of 4.42 million barrels a day to the United States. U.S. refiners' reliance on Canadian oil isn't likely to change, even if tariffs make it more expensive. If U.S. refiners have to pay a 25 percent tariff on Canadian oil, they may pass that cost on to consumers, causing gasoline prices to rise by between 35 cents and 75 cents per gallon in some parts of the country. The increases might be the largest in the Midwest and Rocky Mountain regions, where refineries rely on Canadian oil imports to create gasoline.

A trade war between the U.S. and its North American trading partners could have significant implications for the global oil market and U.S. energy security. Disruption of crude oil imports, increased gasoline prices, reduced U.S. refining capacity, global oil market instability, national security implications, and potential retaliation from Canada and Mexico are all potential consequences of such a trade war.

In conclusion, the threat of a 25% tariff on Canadian and Mexican goods, including crude oil, poses a significant risk to U.S. gas prices and oil imports. The potential impact on consumers, refineries, and the global oil market underscores the need for a careful consideration of the potential consequences before implementing such tariffs.