In the lead-up to Donald Trump’s presidential inauguration, Ontario’s Premier Doug Ford proposed an energy alliance between Canada and the United States. Canada is responsible for most U.S. oil imports and has a long-standing relationship with its North American neighbor when it comes to energy.
However, on 1st February, Trump introduced tariffs on Canadian and Mexican goods, including energy, which could hinder this relationship and reduce the import of Canadian energy products. While Trump has agreed to halt the tariffs temporarily, there is growing uncertainty about the U.S. and Canada’s trade relationship.
A U.S.-Canadian Energy Alliance
In January, Ontario Premier Doug Ford proposed the idea of “Fortress Am-Can,” a “renewed strategic alliance between Canada and America” aimed at boosting energy security and economic growth for Canada and the U.S. Ford said it “is a beacon of stability, security and long-term prosperity.”
This announcement was made in response to President Trump’s threat to introduce 25% tariffs on all Canadian products. It also followed Trump’s announcement of his suggestion to make Canada the United States’ 51st state. In addition to suggesting the U.S. might take over Canada, Trump also floated plans to regain control of the Panama Canal and acquire Danish-controlled Greenland.
“Canada and the United States, that would really be something,” Trump stated. “You get rid of that artificially drawn line, and you take a look at what that looks like, and it would also be much better for national security,” he added.
Ford responded, “Our country is not for sale — it will never be for sale… But I think we work together for an incredible trade deal.” He said he wanted to “stop wasting time and ridiculous ideas about merging” and focus efforts on ‘Made in Canada’ and ’Made in USA’.
Ford went on to explain, “With a new administration set to take office in the White House, our government has an ambitious plan to build up Fortress Am-Can to usher in a new American and Canadian century defined by unprecedented growth, job creation and prosperity. We can only do so by working together and respecting each other.”
Alberta to Boost Crude Production to Meet U.S. Demand
The U.S. produces around 13 million bpd of oil, while it consumes an average of 20 million bpd. This has led the country to rely heavily on Canada to meet its oil demand. U.S. crude oil imports from Canada rose to a record of 4.3 million bpd in July 2024 following the expansion of Canada’s Trans Mountain pipeline.
In early 2024, Alberta’s Premier Danielle Smith outlined plans to double Alberta’s oil and gas production. “America has become the largest producer of oil and gas for export…while all the politicians have said they’re going in the opposite direction,” Smith said. “I think we should just double down and decide we’re going to double our oil and gas production because truly, where else does America want to get its oil from?” she added.
Tariffs on Canadian Energy
Despite Canada’s best efforts to forge stronger energy trade ties with the U.S., on 1st February, President Trump announced 25% tariffs on the import of both Canadian and Mexican products. Trump’s tariffs included an exception for Canadian oil, natural gas, electricity, coal, uranium, and critical minerals, which would see a lower 10% tariff imposed. Trump said that the tariffs were needed to address high levels of undocumented immigrants and illegal drugs, such as fentanyl, entering the U.S.
In response, Canadian Prime Minister Justin Trudeau said that Canada would impose 25% tariffs on C$155 billion worth of U.S. goods. “Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities,” Trudeau said, addressing U.S. citizens during a press conference in Ottawa.
“They will raise costs for you, including food at the grocery store and gas at the pump.”
On 3rd February, Trump decided to delay the introduction of tariffs on Canadian goods that were set to commence this week after he and Trudeau agreed on enhanced border security.
Trudeau announced on Monday, “I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl.”
The future of the U.S. and Canada’s trade relationship hangs in the balance, largely dependent on whether Trump views Trudeau’s border control actions as strong enough to scrap the proposed tariffs long-term. However, this threat to Canada’s economy has made many Canadian politicians and businesses concerned about the heavy reliance on U.S. trade.
This has led to calls to strengthen in-country trade and establish new, more reliable relationships with international partners. Even if the tariffs are scrapped, the damage could well be done, as many Canadian energy companies look to diversify their export markets. Nevertheless, the heavy U.S. reliance on Canada for its energy products will likely mean that the trade relationship between the two countries continues even if in a more limited capacity, tariffs or no tariffs.
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