- Tariffs could harm American consumers, industry warns.
- Canadian and Mexican producers would turn to Asia.
- Analysts doubt Trump’s tariffs will pass.
Oil producers in Canada and Mexico will likely be forced to cut prices and divert supplies to Asia if US President-elect Donald Trump imposes 25% tariffs on crude imports from the two countries , traders and analysts said.
Two sources close to Trump’s plan said Reuters that oil would not be exempt from possible tariff hikes on imports from Canada and Mexico, despite warnings from the U.S. oil industry that the policy could harm consumers, the industry and national security.
Canada and Mexico are the two largest oil exporters to the United States, contributing 52% and 11% of its gross imports, respectively, according to data from the U.S. Energy Information Administration.
The United States accounts for 61% of navigable flows from Canada and 56% from Mexico, according to Kpler ship tracking data.
Canadian exports of waterborne crude jumped 65% to about 530,000 barrels per day (bpd) in 2024, data shows, after the opening of the expanded Trans-Mountain pipeline, shipments to the states -United and Asia increased.
“Canadian producers, if they face export constraints, if they are not able to reroute their barrels that were previously exported to the United States to other markets, could face rebates larger and could also suffer revenue losses,” said Daan Struyven, co-manager. – said the head of global commodities research at Goldman Sachs.
Canada and Mexico primarily export heavy, high-sulfur crude that is processed by complex refineries in the United States and most of Asia.
“The impact is only on heavy grades. What will US refiners do? Even Saudi heavy crude is limited,” said a Singapore-based trader, adding that some US refiners can only receive crude through pipelines, which limits their options. for imports.
“Either the producer or the refiner will have to absorb the tariffs,” he said, adding that Canadian producers will have to cut their oil further to attract demand from Asian refiners and cover long-distance shipping costs.
Asian refining sources and analysts said they expected to see more Canadian and Mexican oil heading to Asia if Trump imposed tariffs.
“It is likely that significant volumes will be directed to China and India, where refiner setups are capable of refining crude,” said Anh Pham, an analyst at LSEG.
TMX exports to Asia have increased in recent months as Asian refiners, led by Chinese processors, test the new grades. However, Mexican exports are down 21%, to around 860,000 b/d this year.
European refiners are less likely to jump into cheaper Mexican and Canadian cargoes, said Christopher Haines, an analyst at Energy Aspects. Reuters.
Tariffs on Mexico would “potentially free up some crude for Spanish refiners who take Maya, but Asia could easily absorb the volumes not sold in the US Gulf, so there will be competition,” he said. -he declared, adding that European refiners generally do not import. a lot of Canadian crude.
Mexican crude exports to Europe have averaged about 191,000 b/d so far this year, 81% of which has been delivered to Spain, according to Kpler. Canadian throughputs are less than 85,000 b/d.
Still, some traders and analysts at Goldman Sachs remain skeptical that Trump would actually impose the tariffs, which he has previously used as a negotiating tool, because it would lead to inflation for U.S. consumers and refiners.