President Donald Trump's escalating trade war with Canada has raised the possibility of a nuclear option, with Canadian officials considering weaponized oil and gas levies, though it is highly unlikely. This comes after Trump imposed new duties on cars, steel, and other imported goods last month, prompting Canada to retaliate with targeted counter-tariffs to level the playing field.
The U.S. is the largest buyer of Canadian crude oil, accounting for 90 percent of Canada's crude exports last year. Canada exports roughly 4 million barrels per day to the U.S., which represents about 20 percent of America's daily consumption. In contrast, the U.S. only exports about 400,000 barrels of crude to Canada per day, or roughly 10 percent of what Canada sends.
Alberta Premier Danielle Smith has warned against any proposals to impose levies on oil and gas, while former Alberta premier Jason Kenney has argued that Canada could put the squeeze on the U.S. by raising the prospect of oil and gas tariffs. Oil and gas royalties account for roughly 20 to 25 percent of Alberta’s government revenues, so an export tax or restriction on crude oil could cause significant economic repercussions.
Any loss in oil and gas trade would be enough to see gas prices spike during politically volatile midterm elections, with the cost of living at the center of nationwide campaigns. Canada is the leading crude oil supplier to the midwest and Rocky Mountains, making the potential imposition of tariffs a critical issue for both countries.