Canada is bracing for a tough situation as Donald Trump gets ready to take office next week. Alberta Premier Danielle Smith recently warned that US tariffs are likely on the horizon, with no exceptions for oil, after meeting with Trump in Florida.
Smith, who represents Canada’s top oil-producing province, met the president-elect at his Mar-a-Lago resort over the weekend. This comes after Prime Minister Justin Trudeau stated in an MSNBC interview that Canada would respond with counter-tariffs if Trump follows through with his threat to impose a 25% tax on Canadian goods.
Smith made it clear that Canada should be ready for the tariffs to hit by January 20th, when Trump officially takes office. “I haven’t seen anything suggesting he’s changing course,” she said during a Monday press conference.
Meanwhile, Canada’s heavy crude prices took a dip, with the discount to US oil widening to about $14.50 per barrel, up from $13.60 last Friday.
Trump’s reasons for the tariff threat have shifted over time. Initially, he said the tariffs would only be avoided if Canada tightened its border security. In response, Canada rolled out a C$1.3 billion plan to address those concerns. More recently, Trump has argued that Canada benefits unfairly from trade with the US, claiming that the trade deficit makes Canada “subsidized” by the US. He even suggested that Canada might become the 51st US state through “economic force.”
For context, more than half of the US’s crude imports come from Canada, mostly from Alberta. Canada sells this oil at a discount to the US benchmark, West Texas Intermediate. The country’s oil exports, which total about 4 million barrels per day, are largely headed to the US. Canada does have one pipeline system in Western Canada that sends oil to a Canadian port, but it only accounts for a fraction of the exports.
On Monday, five major Canadian energy trade associations, including the Canadian Association of Petroleum Producers and the Pathways Alliance, came together to form a working group. Their goal is to push back against the tariff threat and prepare for the possible fallout if the tariffs become a reality.
In response to the idea of Canada cutting energy supplies to the US in retaliation, Foreign Affairs Minister Mélanie Joly told CTV News, “Everything is on the table.” However, Premier Smith dismissed the threat of cutting off oil as an empty gesture, warning that such actions could create a national unity crisis. “We won’t stand for that,” she said, emphasizing the importance of keeping pipelines like Enbridge Inc.’s Line 5 running. This key pipeline supplies refineries in Ontario and Quebec with western Canadian crude.
Smith also cautioned against Canada responding with blanket 25% tariffs on US goods, saying, “That would harm Canadian citizens at a time when we have an affordability crisis.”
As the situation unfolds, it’s clear that Canada’s response to the looming tariffs will be a critical one, not only for the economy but for national unity as well.
