The integrated North American energy industry is not a direct target of renewed trade escalation between Washington and Ottawa. But US pressure tactics are likely to lend momentum to Canada's ongoing efforts to diversify oil and gas exports away from its largest market south of the border.
Trade talks between the US and Canada ended abruptly in August, and President Donald Trump's administration on 22 August enacted a 50pc tariff on cement, plywood and other imports from Canada. Ottawa plans to retaliate with a 50pc tariff on US steel and aluminium from 8 September as part of a package targeting $28bn of imports from its southern neighbour. The latest retaliatory tariffs do not apply to energy, potash fertiliser or critical minerals. But they will further disrupt the North American auto and steel industries.
US and Canadian government officials have accused each other of making last-minute demands that helped derail the talks. "We offered them the best access to the US of any country in the world," US trade representative Jamieson Greer says. Canadian prime minister Mark Carney says Ottawa engaged in talks with Washington in good faith, despite realising that any agreement involving the Trump administration "is written in pencil".
Greer blamed Ottawa's lack of willingness to work with the US to blunt China's competitive edge in steel, auto manufacturing and advanced technologies. Carney dismisses the US accusation as an attempt to dictate Ottawa's foreign trade policy at the same time as imposing tariffs on Canadian imports, despite the US-Mexico-Canada free-trade agreement. Ottawa's allegedly lenient treatment of imports from China is part of a continually changing rationale for the US protectionist actions, Carney says. The US demands "revealed the limits of their commitment to a true economic partnership", he says.
Northern exposure
Canada has created a "60 Billion Dollar Deficit between our two Countries" and it is "not sustainable", Trump said in a social media post after the talks collapsed. The US ran a trade deficit of $48bn with Canada in 2025, according to the US Trade Representative's office. The deficit is almost entirely the result of US imports of Canadian crude, natural gas and electricity. Canada accounts for 99pc of the US' gas imports and 60pc of the US' crude imports and "I don't think they want us to stop sending it", Carney says.
Ontario premier Doug Ford, who briefly placed a tariff on his province's electricity exports to the US during the early rounds of the trade dispute in March 2025, is again calling for restrictions on electricity exports to the US. But there appears to be little appetite in Ottawa to use Canadian energy exports to the US for political leverage in trade talks. The Liberal party government under Carney has revitalised relations with the energy industry to promote infrastructure projects targeting markets outside the US.
Alberta province — Canada's oil and gas heartland — is scheduled to hold a referendum on 19 October on whether to remain part of the country. Polls indicate the vote is likely to result in a ‘remain' win, but any effort to restrict or tax oil and gas exports would strengthen the arguments of pro-independence voters, who feel a lack of perceived respect from the rest of the country.
Alberta premier Danielle Smith has pushed against using oil and gas exports as leverage in the trade dispute with the US, countering calls from Naheed Nenshi, leader of the province's official opposition party, for the federal government to tax energy exports to the US. Smith argues that the US could impose reciprocal restrictions on refined products exported to Canada's eastern provinces.
