News
03/12/24
Industry wary of Trump tariffs on Canada, Mexico
Washington, 3 December (Argus) — US president-elect Donald Trump's plan to
impose 25pc tariffs on all imports from Canada and Mexico could have a profound
impact on the US oil and gas industry and the US' diplomatic efforts, energy
industry representatives said at an industry conference on Tuesday. Cenovus
Energy, the second-largest oil and gas producer in Canada, is paying close
attention to Trump's rhetoric on trade, and trying to "educate" policymakers in
the incoming Trump administration on how tariffs on Canada could impact North
America's deeply integrated energy system, Cenovus director of US government
affairs Steve Higley said at the North American Gas Forum in Washington, DC. The
US in 2023 imported 3.9mn b/d of crude oil from Canada and 730,000 b/d from
Mexico, accounting for 60pc and 11pc of US crude imports, respectively,
according to US Energy Information Administration (EIA) data. Refineries in the
US Midwest's PADD 2 region also process about 2.5mn b/d of Canadian crude,
Higley said. The US also exports a significant amount of natural gas to Mexico —
6.2 Bcf/d (176mn m³/d) in 2023, according to the EIA — which is another
"reminder of how integrated the North American energy system is," said Dustin
Meyer, senior vice president of policy at the influential trade group American
Petroleum Institute (API). Retaliatory tariffs by Mexico, threatened by Mexican
president Claudia Sheinbaum last week in response to Trump's initial threat of
tariffs, would likely impact that gas trade. Sheinbaum and Trump have since
taken on a more conciliatory tone toward the subject after the two had what
Trump called a "wonderful" conversation. API repeatedly called on Trump in his
first administration to de-escalate his trade dispute with China, which it said
threatened investment in US LNG. A section of API's website on trade titled "The
Truth about Tariffs" reads: "Tariffs are taxes on imported goods that increase
costs for consumers." Aside from the threat of tariffs causing "alarm" in
Canada, it is not clear how US consumers would benefit from a tariff on all
Canadian products, including oil and gas, said Robert Johnston, senior director
of research at Columbia University's think tank Center on Global Energy Policy.
On the diplomatic front, there is a "tension" between the incoming Trump
administration's argument that US oil and gas production must be increased to
support American allies, when it is also threatening tariffs to support American
industry over that of its trade partners, Johnston said. The initiation of new
trade disputes could also erode the US' ability to compete with China, said
Jason Grumet, chief executive of trade group American Clean Power Association.
"Are we trying to take China on alone, or are we trying to build a global
economy of the democratic nations who have been our allies for 50 years?" Grumet
asked. Whether the incoming Trump administration will actually go ahead with
tariffs on Canada and Mexico is far from certain. From its rhetoric, the
administration appears to care deeply about narrowing the US' trade deficit,
leveraging its massive energy production on the global stage, and keeping energy
prices low for US consumers, Meyer said. But "if that's the vision, what is the
form that specific policies take?" he asked. By Julian Hast Send comments and
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