Gas Prices to Rise as Trump Imposes Tariffs on Canadian and Mexican Oil Imports
U.S. Reliance on Canadian and Mexican Oil Likely to Drive Up Costs at the Pump
WASHINGTON — U.S. consumers are expected to see a rise in gas prices following President Donald Trump’s decision on Saturday to impose tariffs on Canadian and Mexican oil imports. The move, designed to strengthen domestic business and pressure neighboring countries on illegal immigration and drug smuggling, could have the unintended consequence of pushing fuel prices higher, undermining efforts to tackle inflation.
The U.S. imports about 4 million barrels of Canadian oil daily, with 70% of it processed by refineries in the Midwest. Additionally, over 450,000 barrels per day of Mexican oil are imported, primarily to refineries along the U.S. Gulf Coast. Tariffs on these imports are set to increase the cost of refining finished products like gasoline, which is expected to result in higher prices at the gas pump.
GasBuddy analyst Patrick De Haan warned on social media that consumers would likely face noticeable price hikes if oil and refined products are not exempt from the tariffs. Speaking with Reuters, De Haan explained that the longer the tariffs persist, the greater the burden on U.S. consumers will become.
The American Fuel and Petrochemical Manufacturers Association, which represents U.S. refining companies, has expressed hope that the tariffs will be lifted before significant price impacts are felt by consumers.
As part of a broader strategy to address a national emergency over fentanyl and illegal immigration, President Trump authorized 25% tariffs on imports from Canada and Mexico and 10% tariffs on goods from China, effective Tuesday. Canadian energy products will incur a 10% tariff, while Mexican energy imports will face the full 25% duty.
Initially, Trump had planned a 25% tariff on all imports from both Canada and Mexico but scaled back the Canadian oil tariff to mitigate the impact on energy prices.
The tariffs are set to disrupt the well-established oil trade between the U.S. and its neighbors, with U.S. refineries heavily dependent on Canadian heavy and medium crude oil. John LaForge from Wells Fargo Investment Institute noted that Canadian oil has limited options for export, and Midwestern refineries rely on this supply. "Someone is going to get kind of hurt here," LaForge said.
Gulf Coast refineries, however, may have an easier time finding alternative sources for Mexican crude due to their access to seaborne oil.
Wholesale fuel market companies are already anticipating price increases, with many passing the added costs onto consumers. Alex Ryan, energy director at Oasis Energy in Kansas, stated that “whatever the cost is, ultimately it ends up in the consumer’s lap,” highlighting the lack of options for absorbing the added costs.
East Coast drivers may also face higher prices. The region’s refining capacity meets only about half of its daily fuel demand, with the remainder supplied through the Colonial Pipeline, which often operates at full capacity. The 10% tariff on Canadian imports could force the East Coast to absorb higher costs or rely on European fuel imports, according to De Haan.
In the Midwest, the tariff impact may be delayed due to increased production rates and recent stockpiling of Canadian oil, but the effect is expected to be felt eventually.
Experts agree that, regardless of the region, the tariff-driven rise in oil prices will ultimately lead to higher costs for consumers across the nation. “Any way you cut it, you’re looking at higher prices,” LaForge concluded.