Canada Threatens Oil Export Tax

As tensions rise between the U.S. and Canada over newly imposed tariffs, Ottawa is considering a retaliatory export tax on oil, a move that could drive up gas prices for American consumers and disrupt the North American energy trade.

Background on the Trade Dispute

President Trump recently announced a 10% tariff on Canadian energy imports, part of a broader 25% tariff on all Canadian goods aimed at pressuring Canada, Mexico, and China on trade, border security, and drug trafficking. In response, Canada unveiled a two-phase retaliatory tariff package totaling CAD $155 billion, which includes a potential tax on oil exports to the U.S.

Why This Matters

Despite being a net oil exporter, the U.S. imports 52% of its foreign petroleum from Canada—mainly heavy crude essential for U.S. refineries. A Canadian export tax would increase the cost of these imports, forcing refiners to either absorb the higher costs or pass them on to consumers.

Projected Impact on Gas Prices

Energy analysts predict that if Canada moves forward with an export tax:

• Gas prices could rise 15-30 cents per gallon in regions heavily reliant on Canadian crude, such as the Midwest and Northeast.
• Diesel and jet fuel prices may also increase, impacting transportation and air travel costs.
• Supply chain disruptions could create further price volatility.

What's Next?

Canadian officials have not confirmed the final structure of the export tax but warn that all options are on the table. U.S. lawmakers—especially from energy-producing states—are urging the administration to reconsider the tariffs to avoid economic fallout.

For now, U.S. drivers should prepare for the possibility of higher fuel costs in the coming weeks, as North America's biggest energy partners head toward a full-scale trade showdown.