Two sources familiar with Trump’s plans revealed to Reuters that potential tariff increases on imports from Canada and Mexico would likely include oil, despite warnings from the U.S. oil industry about potential harm to consumers, the energy sector, and national security.
Canada and Mexico are the top petroleum suppliers to the U.S., accounting for 52% and 11% of gross imports, respectively, according to the U.S. Energy Information Administration. Additionally, ship-tracking data from Kpler shows that 61% of Canadian oil and 56% of Mexican oil exports are shipped to the U.S.
In 2024, Canadian waterborne crude exports surged by 65% to approximately 530,000 barrels per day (bpd) due to the expanded Trans-Mountain pipeline, which has increased shipments to both the U.S. and Asia.
“If Canadian producers face export constraints and are unable to redirect barrels from the U.S. to other markets, they may see deeper discounts and revenue losses,” explained Daan Struyven, co-head of global commodities research at Goldman Sachs.
Both Canada and Mexico export primarily heavy, high-sulphur crude, which is processed in complex refineries in the U.S. and much of Asia.
A Singapore-based trader noted, “The impact will primarily be on heavy grades. U.S. refiners dependent on pipelines will face limited import options, and either the producers or refiners will have to absorb the tariffs.” To remain competitive in Asian markets and offset shipping costs, Canadian producers may need to further discount their oil.
Asian refiners, especially in China and India, are well-equipped to handle these crude grades and are expected to import more Canadian and Mexican oil if tariffs are imposed, according to analysts and refining sources. Exports to Asia via the Trans-Mountain pipeline have already risen as refiners test new crude blends.
Conversely, Mexican oil exports have dropped by 21% this year, averaging about 860,000 bpd, while European interest in Canadian and Mexican crude remains limited. Canadian oil exports to Europe average only 85,000 bpd, and Mexican crude exports are primarily sent to Spain, accounting for 81% of their European deliveries, as per Kpler data.
Energy Aspects analyst Christopher Haines suggested that while Spanish refiners might increase imports of Mexican crude, Asian buyers are more likely to absorb any surplus volumes redirected from the U.S.
Despite these developments, some analysts, including those from Goldman Sachs, remain skeptical that Trump will follow through with imposing the tariffs, noting that such a move could increase inflation for U.S. consumers and refiners and may primarily serve as a negotiating tactic.
