Crude Consequences: U.S. Tariffs and the Tug-of-War in North American Oil

Canada and the U.S. share the world’s longest undefended border, proof that good neighbours don’t always need fences. Yet President Trump’s actions have stirred tensions that might come back to haunt him. On February 1st, 2025, President Trump confronted America’s three largest trading partners and accused them of endangering U.S. interests. His problem with Canada is the lack of protection at the border. With deep ties to one another, there is more at stake than President Trump realises.

Trump imposed a 10% tariff on Canadian oil exports and 25% on other Canadian exports to the U.S. As expected, Canada responded with a reciprocal 25% tariff on American exports to Canada, which account for about one-third of all goods between the two countries each year. Nevertheless, Canada has refrained from using its silver bullet: an oil embargo. Canada exports 4 million barrels of oil to the U.S. every day. This is vital to the economies of America’s Midwestern states, where refineries, a source of thousands of jobs, are purpose-built to process Canadian oil. In 2024, Canadian oil accounted for 55% of U.S. oil imports. This accounted for 23% of U.S. oil consumption. However, an embargo is a double-edged sword and would devastate Canadian producers in Alberta, which accounts for 87% of all Canadian oil exports to America and roughly 12% of voters.

In the case of the U.S. and Canada, there is a lot of infrastructure to accommodate their oil trade, including thousands of miles of pipelines and refineries. U.S. refineries are tuned for Canadian “heavy” crude, as opposed to American “light” crude. Light crude oil is a type of petroleum with a low viscosity and a high proportion of hydrocarbons, making it easier to refine gasoline and other products. Heavy crude oil, conversely, is thicker and denser, requiring more energy and advanced technology to extract and refine. Canadian oil is landlocked; there is insufficient pipeline capacity to take it to ports, so the US refineries who are buying it (primarily in the US Midwest) and because Canada’s oil sands are conveniently located near the U.S border, make transportation of heavy crude to the U.S. for processing more cost-effective.

The situation remains tense, and sadly, the biggest victims of this issue will be everyday Americans and Canadians, whose inflationary pressures are expected to worsen.

---

To receive more stories like this right in your inbox every week, subscribe below:

Subscribe