- The US may struggle to replace Canadian and Mexican oil shipments as there are limited options available.
- US Midwest is particularly more dependent on Canadian crude oil as it lacks sufficient access to seaborne oil.
- Commerzbank believes that imposing tariffs on Canada and Mexico could jeopardies Trump’s cheap energy plan.
The US may find it difficult to replace crude oil shipments from Canada and Mexico if President-elect Donald Trump imposes hefty tariffs on both countries. In a much worse scenario, refineries in the US may have to borne heavy losses to import oil from the two countries. A lot has been speculated after reports claimed that Trump will likely impose a 25% tariff on goods imported from Canada and Mexico. What makes things interesting is that these reports have claimed the tariffs will also be applicable on crude oil imported from these two countries.
Shipments from Canada and Mexico can’t be replaced
Oil imports from these two countries, especially Canada cannot be replaced in terms of quality or quantity, according to experts. According to data from the US Energy Information Administration, the country imported 6.64 million barrels per day of crude oil in the first eight months of 2024. Canada accounted for 4.08 million barrels a day and Mexico for 478,000 barrels per day of the total barrels imported in the first eight months this year, the data showed. “Canada is therefore by far the US’s most important oil supplier, Mexico ranks second,” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
President-elect Trump is in favour of more production of oil and gas in the US. However, “It is impossible to replace these volumes in the short term by increasing domestic production, especially as the light, low-sulphur US shale oil is not an adequate substitute for the heavy, sulphur-rich types of oil from Canada and Mexico anyway, Fritsch said.”
Trump tariffs could cripple US access to Canadian oil | Invezz