Trump’s Tariffs On Canada Put US Energy Security At Risk

In a far-reaching move set to take effect on March 4th, President Donald J. Trump imposed a 25% tariff on all foreign imports from Canada, a close ally and the US’ largest energy trading partner, as well as on Mexico.

Additionally, a 25% tariff was announced on imported steel and aluminum. Canada is the largest supplier to the U.S. for both. Aluminum and steel are vital for many products, including energy infrastructure components. Canada, understandably, is not pleased. Ottawa signaled that “everything is on the table” in response, potentially including cutting off energy supplies. Given Canada’s central role in U.S. energy security, imposing further tariffs could lead to volatility in American energy markets, price increases, and a broader reshaping of geopolitical alliances.

Obstacles to the U.S.-Canada Energy Relationship

This is not the first time that U.S. trade tactics have insulted America’s peaceful neighbor and trade partner. These steel and aluminum tariffs echo those from 2018, which placed a 25% tariff on all steel imports and 10% on all aluminum imports. These measures prompted retaliatory tariffs from Canada. Both sets of tariffs were lifted in 2019. American actions that damage trade relations with Canada are not unique to this administration either. For example, the delayed permitting of the Keystone XL Pipeline under Obama and subsequent cancellation of the permit by Biden stymied a project key to Canada’s energy development.

However, Canada is the United States’ largest energy trading partner, with deeply integrated supply chains and critical resources that fuel the American economy. It supplies 60% of U.S. oil imports, 4 million barrels a day, making it the largest crude oil supplier to the U.S. It is also responsible for nearly all U.S. natural gas imports (9 percent of the country’s total consumption), and its largest supplier of minerals, almost double the amount that China provides to the United States. Beyond raw materials, Canada and the U.S. share an integrated electricity grid, which significantly bolsters grid resilience and economic efficiency.

How do Tariffs Against Canada Affect the U.S.?

Leveraging trade against such an integrated neighbor raises serious concerns about energy stability and inflation in the U.S. Canada has stated that retaliatory measures could include cutting energy supplies. This could create supply shortages, particularly in the Midwest, which has no immediate viable alternative to Canadian imports. Reduced energy imports from Canada would likely lead to price spikes in the U.S. energy market, contributing to inflation and running counter to Trump’s goal of reining in costs.

The coming steel and aluminum tariffs are even steeper than those declared in 2018, which caused disruptions in the energy and manufacturing sectors at that time. Additionally, exemptions to the 2018 act have been terminated by the new proclamation. This means that new tariffs will be added to the country-wide 25% tariff on Canadian goods, raising tariffs on Canadian steel to 50% if both go into effect. Unfortunately, while these tariffs will disrupt trade with Canada, they these will have minimal impact on China. Though Chinese over-production of metals distorts the global market, Beijing exports under 2% of its steel and less than 1% of its aluminum to the U.S.

Steel and aluminum are also crucial for energy infrastructure, including oil and gas pipelines, LNG trains, solar panels, wind turbines, and transmission lines. Rising costs for these materials could hinder energy projects and drive up consumer energy prices. These tariffs threaten to disrupt global supply chains by introducing uncertainty and volatility in energy and trade markets, further fueling inflation and harming Americans.

The economic reasoning behind the tariffs is to protect American steel and aluminum manufacturing and counter cheap Chinese steel “dumping.” However, while this will likely create jobs in the metals manufacturing sector, these gains will be offset by job losses in industries that depend on these materials, such as auto manufacturing, construction, and industrial tools, due to higher input costs, as well as in unrelated industries affected by retaliatory tariffs from other countries.

The Geopolitical Implications of Tariffs

Beyond the domestic economic implications, these tariffs send a troubling signal about America’s reliability as a trade partner. This approach to trade seems to have already damaged US-Canada relations. If Canada and other allies perceive the U.S. as willing to use energy trade as a tool for political coercion, they may begin looking for alternative partners to reduce their reliance on the U.S. Competitors could take advantage of this volatility to increase their market share, particularly in the energy sector where American export competitiveness will decline due to increased costs. Instead of establishing U.S. energy dominance, imposing tariffs may drive countries to increase their energy partnerships with Saudi Arabia in oil, Qatar in LNG, and China in the renewables sectors

While the U.S. is a major energy producer, its energy system remains highly interconnected with Canada. The integration of energy infrastructure, from power grids to fuel supplies, plays a direct role in keeping energy costs manageable for American consumers. If a trade war escalates, Americans could bear the brunt of the consequences—higher energy prices, inflation, and increased instability in supply chains. Trump’s tariffs may be framed as a means of protecting the border, fighting illegal migration and drug smuggling, as well as defending domestic industries, but they risk undermining the administration’s goal of American energy dominance. In an era where geopolitical stability and energy security are paramount, the U.S. cannot afford to damage its relationship with its most reliable ally and energy partner.

Asya Ikizler contributed to the production of this article