Alberta oil industry braces for U.S. tariff shock: Experts warn of economic fallout

The Alberta oil industry is bracing for potential economic turbulence following U.S. President Donald Trump’s announcement of a 10% tariff on Canadian crude imports. While the levy is significantly lower than the 25% tariffs imposed on other Canadian goods, industry experts warn that the move could disrupt North America’s integrated energy market and drive up fuel costs for American consumers.

Canada is the largest supplier of crude oil to the United States, accounting for approximately 60% of U.S. imports in 2022. By comparison, Mexico, the second-largest supplier, provided just 10% of U.S. crude imports. With such a heavy reliance on Canadian oil, the prospect of tariffs has raised concerns about economic repercussions on both sides of the border.

Alberta Premier Danielle Smith acknowledged the uncertainty surrounding the situation, stating that her office is awaiting further details on the tariff implementation. “The premier has been clear from the start that any tariffs imposed by the U.S. on Canadian goods will hurt American and Canadian consumers, workers, and businesses,” a statement from her office read.

Could Trump’s Oil Tariffs Backfire on American Consumers?

Industry analysts caution that a 10% tariff on Canadian crude could inadvertently increase gasoline prices in the United States. Refineries in the Midwest and Gulf Coast are designed to process heavy crude from Alberta, meaning a sudden price shift could disrupt refining economics and force operators to seek alternative, potentially more expensive, sources of oil.

Richard Masson, executive fellow at the University of Calgary’s School of Public Policy and former CEO of the Alberta Petroleum Marketing Commission, believes the tariff could create unintended consequences. “We have an integrated energy system, and the U.S. relies on us,” Masson stated. “Putting a tariff on the oil that they’re going to be importing isn’t going to be good for them, and it probably won’t be good for us either.”

He added that the burden of the tariff will likely fall on American refiners rather than Canadian producers. “If it was 25%, I think there might be a big drop in demand for our oil over the course of two or three months, which would push it back on us more. But if there isn’t much of a drop, then U.S. refiners will bear the cost,” he explained.

Deborah Yedlin, president and CEO of the Calgary Chamber of Commerce, also expressed concern about the economic uncertainty the tariffs could create. “The level of anxiety we’re hearing from people is not unlike what was felt during the 2008 financial crisis,” she said. “Nobody knows exactly what’s going to happen because we don’t have all the information yet.”

Could Retaliatory Measures from Canada Escalate a Trade War?

If the U.S. proceeds with the tariff, Canada may implement retaliatory trade measures, potentially targeting politically sensitive American industries. Former Finance Minister Chrystia Freeland has proposed a countermeasure list that could include tariffs on Florida orange juice, Wisconsin dairy products, and Michigan-manufactured appliances—sectors that hold significant political influence in key U.S. swing states.

Freeland emphasized that Canada’s response must be strategic to minimize harm to its own economy while exerting pressure on the U.S. administration. “We need to ensure our actions send a clear message while safeguarding Canadian consumers and businesses,” she stated.

Meanwhile, Adam Legge, president of the Business Council of Alberta, expressed disappointment over the proposed tariff, arguing that it undermines the long-standing trade relationship between Canada and the U.S. “The fact that he’s penalizing Canada and Mexico more than he is China is offensive to the relationship,” Legge said, noting that Alberta’s energy sector has historically been a reliable supplier of oil to the U.S. market.

How Are Canadian Oil Producers Responding to the Tariff Threat?

Some Canadian oil producers have already taken measures to mitigate the potential financial impact of tariffs. Companies such as Surge Energy have engaged in hedging strategies to lock in oil prices and protect against market volatility.

“In our case, it’s business as usual for Surge because we hedged it, and whatever chunk we didn’t hedge is going to get 10% higher,” said Paul Colborne, president and CEO of Surge Energy. He also credited Alberta Premier Danielle Smith’s diplomatic efforts in Washington, stating that her engagement with the Trump administration helped prevent a more severe tariff rate.

However, Masson believes the next few weeks will be critical in determining whether the U.S. ultimately moves forward with the tariff. “I think people are going to be pressing the case hard over the next 18 days to tell the president, ‘This is still going to hurt your consumers by increasing the price of gasoline. Do you really want that?’” he said.

Will Canada Seek Alternative Markets for Its Oil Exports?

With increasing uncertainty surrounding U.S. trade policy, many experts argue that Canada must diversify its oil export markets. The Trans Mountain pipeline expansion, which will increase capacity for crude shipments to Asia, is seen as a critical step in reducing dependence on the U.S.

Colborne emphasized the need for Canada to expand its global reach. “I think finishing some of the projects that were on the books when [former Prime Minister] Stephen Harper left office would have been a good thing. Hopefully, more people in Canada now recognize how important it is to open up markets beyond the U.S.,” he said.

What’s Next for Canada’s Energy Sector?

As Canada awaits further details on the tariff, industry leaders, economists, and policymakers continue to assess potential outcomes. The coming weeks will likely see intensified diplomatic efforts to persuade the U.S. administration to reconsider its position.

While a 10% tariff is less severe than initially feared, experts agree that it could still create economic strain for both Canadian producers and American consumers. Whether the tariff will take effect—and if Canada will impose retaliatory measures—remains to be seen.