The U.S. may be on track to negotiate a deal that could remove tariffs on imports of oil and gas from Canada, as suggested by Energy Secretary Chris Wright during a press briefing at CERAWeek by S&P Global. He stated that achieving such an agreement is “certainly possible” but cautioned that “it’s too early to say.”
Wright’s comments came as President Biden has deferred until April 2 tariffs on imports from Mexico and Canada that comply with the United States-Mexico-Canada Agreement (USMCA). Initially, broad tariffs of 25% were placed on goods from these neighboring countries, with a specific 10% tariff applied to energy commodities coming from Canada.
As the U.S. recently observed crude oil and Brent prices decreasing by over 1% on Monday, concerns linger regarding the feasibility of maintaining a balanced energy trade with Canada. Although the U.S. has substantially ramped up its oil production, Canadian heavy crude remains critical for U.S. refiners. In December, American imports averaged 6.6 million barrels of crude oil per day, with over 60% sourced from Canada, according to the Energy Information Administration.
Wright refrained from detailing how much of the energy imported from Canada adheres to the USMCA, stating, “I’m going to avoid the details for now.” He highlighted that while eliminating or significantly reducing tariffs is a goal, it must involve reciprocity.
Echoing similar sentiments, Canada’s energy minister, Jonathan Wilkinson, cautioned that if these tariffs are implemented, Americans can expect surging energy prices. He emphasized, “We will see higher gasoline prices, higher electricity costs from hydroelectricity sourced from Canada, increased home heating prices tied to natural gas, and higher automobile prices.”
With ongoing negotiations, Wright acknowledged the current turbulence in energy markets due to tariff considerations, reassuring that these conditions are temporary. He stated, “Deals will be made, we’ll gain certainty, and a positive economic environment for Americans will ensue.”
On Monday, U.S. crude closed at $66.03 a barrel, while Brent settled at $69.28. The fluctuation in crude futures stems from uncertainties surrounding Trump’s trade policy and OPEC+ plans to gradually resume 2.2 million barrels per day of production starting next month.
