Canadian Energy Sector Responds to US Tariff Threats Amid Integrated Trade Relations
While United States President Donald Trump continues to speak about tariffs on Canadian exports, industry groups in both countries criticize these plans for potentially harming both economies.
Mark Scholz, the president and CEO of the Canadian Association of Energy Contractors (CAOEC), stated that "both of our economies, particularly in energy, are highly integrated and highly efficient." He emphasised that trade over the last 50 years has produced wealth and prosperity for both nations, warning that any export tariffs, taxes, or bans would be detrimental.
This week, Trump reaffirmed his commitment to applying a 25 percent tariff on Canadian goods, which may start as early as February 1. He has expressed that the U.S. does not require Canadian oil, lumber, or vehicle manufacturing.
However, the American Petroleum Institute, a U.S. oil group, is arguing against tariffs, stating that they would hurt the industry. They wrote to the Office of the U.S. Trade Representative (USTR), urging for exemptions on crude oil and natural gas.
The letter highlighted the global nature of oil and natural gas markets, warning that tariffs could harm energy affordability and the competitiveness of the U.S. oil and natural gas sectors.
Conversely, the U.S. lumber coalition supports Trump's position, arguing that current agreements with Canada are unfair and assert that U.S. mills can compensate for any decline in Canadian lumber imports.
Scholz remarked that it's premature to predict the full impact of tariffs on Canada’s economy but noted Canada’s heavy reliance on U.S. markets for oil could put the country at a disadvantage. "If we don't take this as a wake-up call, Canada is in big trouble," he asserted.
Approximately 95 to 97 percent of Canada’s oil is exported to the U.S., constituting around 60 percent of U.S. crude oil imports, meaning nearly a quarter of the oil consumed daily in America originates from Canada.
Experts have indicated that Canada's trade imbalance with the U.S. primarily results from its energy exports and advised focusing on market diversification to mitigate risks associated with tariffs.
Scholz identified three significant barriers hindering Canadian energy sector expansion, including the Impact Assessment Act, the emission cap, and anti-greenwashing legislation.
He argued for the removal of these obstacles to avoid future tariff problems, pointing to changing economics and regulatory challenges that deter major energy firms from constructing new pipeline infrastructure.
In a remarks on Friday in North Carolina, Trump reiterated his position that Canada could benefit from integrating more closely with the United States, stating, "It's sort of crazy" to suggest that the U.S. needs Canadian imports and repeated claims regarding financial dependencies.
