The looming implementation of new U.S. tariffs under the Trump administration has Canadian industries bracing for potential disruption. For businesses—particularly those in the oil and gas sector—these proposed tariffs could have far-reaching effects on operations, exports, and profitability. With 97% of Canada’s crude oil exports heading to the U.S. in 2023, the stakes are immense.
How Tariffs Work
Tariffs are taxes levied by one country on goods imported from another. President Trump is threatening to impose 25% tariffs on Canadian and Mexican goods by February 1, 2025. If applied to Canadian oil, these tariffs would force US Refiners to pay additional costs for Canadian crude, making Canadian oil less competitive against international suppliers. Reduced competitiveness could lead to diminished demand from U.S. buyers, cutting into revenue and market share.
For American consumers, the effects would be felt in higher prices for imported goods as businesses pass on the added costs. Oil demand, being relatively inelastic, makes such tariffs an undesirable proposition for both nations. As some analysts have pointed out, “Trump’s promised ‘golden age’ is at odds with imposing tariffs on Canada.”
Navigating Uncertainty
The oil and gas industry is no stranger to volatility, but these proposed tariffs add a new layer of complexity. According to ATB’s “Follow the Barrels” blog, several scenarios could unfold, including exemptions for oil and gas or broader tariffs on all exports. Much will depend on Canada’s response, the threat of counter tariffs and the impact on the overall economy.
The potential outcomes would ripple across the Canadian economy. Heavily reliant on the U.S. as a primary export destination, Canada’s crude oil industry could face significant revenue losses if tariffs are enacted. This would likely impact production levels, workforce stability, and the broader supply chain. How businesses respond to these challenges may vary. Some may absorb the increased costs, while others could pass them on to consumers. Either way, prices are likely to rise, affecting both Canadian producers and American buyers.
How Essex Supports Businesses
At Essex Lease Financial Corporation, we understand the challenges Canadian businesses face during times of economic uncertainty. Whether you need to upgrade equipment, manage cash flow, or explore new opportunities, our tailored financial solutions are designed to help you navigate these obstacles.
With over 38 years of experience, Essex is committed to providing flexible and strategic support to businesses across sectors. As industries prepare for the potential impacts of U.S. tariffs, having a trusted financial partner who can flex with your business needs. Let us help you remain resilient and seize opportunities, even in uncertain times. Together, we can build a strategy that keeps your business moving forward.
Contact us today to learn how Essex can support your business.