President-elect Donald Trump’s threat that he would slap 25% tariffs on all products from Canada and Mexico was met with concern by oil and gas groups and had analysts dissecting the repercussions for crude and refined products.
Trump, posting on his Truth Social account Nov. 25, cited immigration, drugs and crime as justification for imposing “one of my many first executive orders” to charge Mexico and Canada a 25% tariff on “ALL products” coming into the U.S.
Trump wrote that the tariff will remain in effect until drugs, particularly fentanyl, and “illegal Aliens stop this Invasion of our Country!”
Mizuho Securities USA LLC analysts noted that Trump has promised tariffs on Chinese goods by an additional 10% to 70%, thereby affecting the U.S.’ three largest trading partners.
TPH&Co. analyst Matthew Blair said the posting didn’t mention crude specifically, but “all products.”
“While the resulting pricing action on crude is uncertain, such tariffs could very well raise costs for U.S. refiners,” Blair wrote in a Nov. 26 commentary. “Over the past 12 months, U.S. refiners have run 4.03 [MMbbl/d] of crude from Canada, which represents 21.7% of total U.S. throughputs.”
The split on these barrels is 74% heavy crude, 20% medium and 6% light, with most landing in PADD 2 (71%) and PADD 3 (11%).
In TPH&Co.’s coverage, most imports of Canadian crude include Phillips 66 (540,000 bbl/d); Marathon Petroleum Corp. (460,000 bbl/d); HF Sinclair Corp. (176,000 bbl/d); among others.
Top Mexican crude importers include Valero Energy, Phillips 66 and PBF Energy, which combine for about 299,000 bbl/d.
“Over the past 12 months, U.S. refiners have run 587 [MMbbl/d] of crude from Mexico, which represents 3.2% of total U.S. throughputs. The split on these barrels is 61/27/12% heavy/medium/light, and the vast majority (87%) of these barrels end up in PADD 3,” Blair wrote.
Blair deemed the tariff threat “negative” and said, “we’ll continue to monitor the situation.”
Oil and gas advocacy groups expressed unease.
"Canada and Mexico are our top energy trading partners, and maintaining the free flow of energy products across our borders is critical for North American energy security and U.S. consumers," API spokesperson Scott Lauermann told Reuters.
Reuters reported that oil prices increased as investors weighed the tariffs and upcoming OPEC+ discussions on oil quotas.
Brent crude futures were up $0.42, or 0.58%, at $73.43/bbl as of 11:39 a.m. ET. WTI futures also climbed by about $0.45 to $69.39/bbl.
Both benchmarks briefly jumped more than $1/bbl during the session.
"We popped and dropped around the time news came out of the resumption of OPEC talks," said Phil Flynn, senior analyst at Price Futures Group.
OPEC+ nations are discussing a further delay to a planned oil output hike that was due to start in January, two sources from the producer group told Reuters, ahead of a weekend meeting to decide policy for the early months of 2025.
Trump’s proposed 25% tariff was also a factor as the vast majority of Canada's 4 MMbbl/d of crude exports go to the U.S.
Analysts had said it would be unlikely Trump would impose tariffs on Canadian oil, which cannot be easily replaced since it differs from grades that the U.S. produces, Reuters reported.
Drilling and refining industry lobbying groups warned there could be big impacts.
"Across-the-board trade policies that could inflate the cost of imports, reduce accessible supplies of oil feedstocks and products, or provoke retaliatory tariffs have potential to impact consumers and undercut our advantage as the world’s leading maker of liquid fuels," said a spokesperson for the American Fuel and Petrochemical Manufacturers (AFPM) group.
The AFPM said its industries would "continue urging officials to veer clear of any policies that could disrupt America's energy advantage."
Ed Hirs, University of Houston lecturer and energy economist, call the potential tariffs “scary.”
“Trump’s proposed 25% tariffs on goods from Mexico and Canada will cause an inflation “like you’ve never seen” to use his terminology,” Hir said.
The U.S. imports about 4 MMbbl/d from Canada and a smaller amount from Mexico. While a 25% tariff on Canadian and Mexican oil would unlikely be directly mirrored in gasoline and diesel prices, it would have a huge impact.
“Our domestic oil price will increase too,” he said.
“The sister plants that automakers have in Canada and Mexico will be severely disrupted. Expect this to be reflected in higher prices for cars, trucks, computers, pharmaceuticals and clothing,” he said.
Hirs warned that were Canada and Mexico to retaliate, the U.S. could fall into recession.
“The Trump inflation will be a hallmark of his term,” he said.
“Conceivably, Mexico and Canada could commit to tightening their sides of our borders and that would placate Trump,” he said. “Launching a trade war will have a devastating impact on our economy, and the Republicans in Congress will pay the price in the 2026 elections.”
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