Canada Is Considering Restricting Oil Exports To The United States As Trump Escalates Trade War

Energy Minister Jonathan Wilkinson Signals Potential Retaliatory Measures

Canada is considering restricting oil exports to the United States or imposing export duties in response to escalating trade tensions with the U.S., Energy Minister Jonathan Wilkinson announced on Tuesday. This move comes as U.S. President Donald Trump threatened to double tariffs on Canadian steel and aluminum imports, increasing them to 50%.

Canada’s Potential Retaliatory Actions

Wilkinson stated that “everything is on the table” when it comes to countermeasures against U.S. tariffs. Canada could leverage its energy and mineral resources to apply economic pressure, possibly affecting the supply of critical materials essential to U.S. industries.

“When we are talking about non-tariff retaliation, it could be about restricting supply, it could be putting our own export duties on products,” Wilkinson said in an interview with Reuters. “It could be energy and minerals, it could be broader than that.”

One of the most significant non-tariff measures Canada could implement would be limiting oil exports. Canada is the largest supplier of imported oil to the U.S., delivering approximately 4 million barrels per day, primarily to refineries in the Midwest.

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Impact of U.S. Tariffs and Canada’s Response

Trump’s latest trade action follows Ontario Premier Doug Ford’s announcement that his province would impose a 25% surcharge on electricity supplied to more than one million U.S. homes unless the White House retracts its tariff threats. Ford has since agreed to suspend the surcharge and meet with U.S. Commerce Secretary Howard Lutnick to discuss a resolution.

Meanwhile, Alberta’s Energy Minister Brian Jean emphasized a desire to de-escalate the dispute while exploring options to protect Canadian interests.

Oil Market Ramifications

Any restriction on Canadian oil exports to the U.S. could have significant implications for both countries. Wilkinson acknowledged that while Canada could explore alternatives like the Trans Mountain pipeline and rail transport to ship oil to other markets, fully redirecting the 4 million barrels sent to the U.S. daily would be challenging.

“I actually think the oil coming down here [to the U.S.] is pretty sticky, and I don’t think it’s displaceable,” Wilkinson said, adding that the impact on Canadian producers might be less severe than on other sectors.

Ethanol Tariffs Under Consideration

In addition to potential oil export restrictions, Canada is considering imposing tariffs on U.S. ethanol as part of a second wave of trade penalties should the U.S. continue its aggressive stance. Wilkinson confirmed that ethanol is “absolutely on the list” of products targeted for retaliatory measures.

U.S. ethanol exports to Canada have surged in recent years, reaching record highs as Canada relies on American ethanol to meet its clean fuel program requirements. The U.S. Renewable Fuel Standard provides subsidies that make U.S. ethanol more affordable than Canadian-produced alternatives.

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Broader Trade Implications

Canada has already threatened tariffs on $155 billion worth of U.S. imports. While an initial list of $30 billion in goods has been identified, officials are still evaluating further potential trade restrictions.

Despite the ongoing tension, Wilkinson remains hopeful for a diplomatic resolution. “We started the day in one place. Things kind of went sideways in a number of directions, and we ended up back at the same place that we were yesterday,” he remarked, emphasizing the need for a swift resolution to remove tariffs.

With negotiations still unfolding, Canada’s next steps will depend on the U.S.’s willingness to de-escalate the trade war. However, Wilkinson’s comments indicate that Canada is prepared to leverage its economic strengths if necessary.