Tariff Tango Between U.S. and Canada

Well, here we go again. Just when it looked like the U.S. and Canada might sidestep a full-blown trade war over energy, things took another turn. President Trump’s erratic tariff threats—on one day, off the next—have left the industry on edge, with oil and gas markets on both sides of the border wondering what’s coming next. Canada’s Energy Minister Jonathan Wilkinson said this week that his country isn’t interested in piecemeal tariff rollbacks—he wants them all gone. Meanwhile, U.S. refiners, particularly those in PADD 2 (Midwest), have been sounding the alarm that a tariff on Canadian crude would hit their bottom lines, given that many of their plants are specifically configured to process heavy oil from the north. And while Trump backed off doubling tariffs on Canadian steel and aluminum (for now), Canada fired back with $21 billion in retaliatory tariffs of its own. So, what happens next? Well, if the past few months have been any indication, don’t get too comfortable—this rollercoaster isn’t over yet.

We first covered the potential impact of tariffs on Canadian crude in our January 30 blog, Everybody Hurts, where we laid out just how much of the burden would fall on Canadian producers versus U.S. refiners. The short version? Canadian producers would take the brunt of it, likely absorbing around 75% of the tariff costs, while refiners would scramble to replace lost volumes with less-than-ideal alternatives like light sweet crude from the Bakken or DJ Basin. But switching crude slates isn’t easy, and in some cases, it just wouldn’t be possible—Midwest refineries designed for heavy crude would take a hit. The bigger question is whether these tariffs will actually stick. So far, they’ve been more of a negotiating tool than a reality, with Trump using them as leverage to extract concessions from Canada. But with Canada now digging in and slapping its own tariffs on U.S. goods, we could be in for a prolonged standoff.

Of course, energy isn’t the only battlefield in Trump’s trade war. The latest drama? A potential 200% tariff on European wine and spirits in response to EU tariffs on American whiskey. While that might sound like a sidebar to the oil-and-gas-heavy dispute with Canada, it highlights the broader uncertainty hanging over global trade. Markets hate uncertainty, and so do businesses — especially those that depend on cross-border flows of energy, steel, and manufactured goods. As Canada’s Wilkinson put it, “This is a lose-lose proposition,” and it’s getting harder to see a clean way out. The most likely scenario? More back-and-forth, more last-minute reversals, and — if we’re lucky — a negotiated settlement that lets both sides claim victory. Until then, buckle up.