By Jarrett Renshaw
(Reuters) – Newly elected U.S. President Donald Trump has no plans to spare crude from his planned 25% tariffs on Canada and Mexico, sources told Reuters on Tuesday, as the oil industry warned the policy would hurt consumers, industry and could harm national security. .
Canada and Mexico are the top sources of oil imports, accounting for about a quarter of the oil that U.S. refineries process into fuels like gasoline and oil, according to the U.S. Department of Energy.
The U.S. and Canadian oil industries were optimistic that Trump’s broad plans for protectionist trade measures would spare oil imports because many U.S. refineries depend on the two countries and have equipment designed to process their oil types.
Two sources familiar with Trump’s plans said oil would not be exempt from the plan. Due to the sensitivity of the issue, they do not wish to be named.
Major U.S. oil trade groups, meanwhile, said imposing the tariffs would be a mistake, exposing a rare moment of disagreement between the industry and Trump.
“A blanket trade policy that could increase import costs, reduce accessible supplies of oil raw materials and products, or trigger retaliatory tariffs has the potential to impact consumers and undermine our lead as the world’s largest producer of liquid fuels” , said a spokesperson. spokesman for the American Fuel and Petrochemical Manufacturers group, which represents oil refineries.
The AFPM said its industries would “continue to urge officials to refrain from any policies that could disrupt America’s energy advantage.”
The American Petroleum Institute, meanwhile, in response to a question about the looming tariffs, said it is important to maintain energy trade across borders.
“Canada and Mexico are our most important energy trading partners, and maintaining the free flow of energy products across our borders is critical to North American energy security and American consumers,” said API spokesman Scott Lauermann.
Oil industry analysts and traders also warned that this measure would likely increase oil prices for U.S. refineries, squeezing margins and raising fuel costs.
The U.S. imported about 5.2 million barrels of crude oil and petroleum products per day from Canada and Mexico in 2024, including more than 4 million from Canada, according to data from the U.S. government’s statistical arm.
The biggest impact would come from tariffs on Canadian crude, which is a key source of supply for U.S. Midwestern refineries.
“The Midwest will see higher gasoline prices as it will be difficult to replace the Canadian crude they currently use,” said ship tracking firm Vortexa analyst Rohit Rathod.
“Applying tariffs on more than 4 million barrels of crude per day from your main supplier seems self-defeating,” said Matt Smith, an analyst at ship tracking service Kpler.
U.S. refineries have the capacity to process a total of more than 18 million barrels of crude oil per day, but often operate at lower rates due to maintenance and other issues.
Although the US is the world’s largest oil producer, producing a record 13.5 million barrels of crude oil per day, much of it is light-weight and incompatible with domestic refineries largely designed to produce heavy crude, such as Canadian and Mexican oil.
Converting units to use lighter crude oil economically would require investing in new equipment.
Asked about the inclusion of oil imports, Trump’s transition team noted that tariffs on China created jobs, stimulated investment and did not lead to inflation.
“President Trump will work quickly to repair and restore an economy that puts American workers first by redistributing American jobs, lowering inflation, raising real wages, lowering taxes, reducing regulations and to unleash American energy,” said Trump transition spokeswoman Karoline Leavitt.
