Trump tariff flip flops put energy industry on edge

President Donald Trump’s tariff policy toward Mexico and Canada and repeated changes in implementation and rates have industry and analysts concerned about higher gasoline and natural gas prices.

Trump flip-flopped on the North American tariffs again Mar. 7, delaying implementation on goods covered in the 2020 US Mexico Canda Agreement (USMCA)—including nearly 40% of US energy imports from North America—by 30 days, until Apr. 2.

Trump also said he would lower the levies on Canadian energy to 10% while retaining the 25% tariff on Mexico.

The White House said 62% of non-USMCA-compliant oil remains subject to tariffs. 

Trump’s tariffs on most goods imported from the US’ closest neighbors were in effect for just 2 days, Mar. 4-5, before an implemented pause on goods covered by the USMC. 

Industry sentiment

Industry expressed relief at the delayed implementation. “We are pleased President Trump delayed the imposition of tariffs on Canadian crude, petrochemicals and refined products, and we are hopeful a permanent agreement can be reached before tariffs ever take effect,” said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, in a statement.

Most analysts and energy representatives say tariffs will raise consumer prices, hurt the stock market and perhaps push the US and other countries into an economic slowdown or recession.

The American Petroleum Institute (API) vowed to work with the administration on “full exclusions that protect energy affordability for consumers, expand the nation’s energy advantage and support American jobs,” president Mike Sommers said Feb. 1, when Trump announced a 25% tariff on the two countries, before two implementation delays and a shrinking of the rate on Canadian energy.

The US is the largest market for Canadian crude oil exports and Mexico is the leading destination for US refined product exports, API said. 

While the US is the world's largest oil producer, US refineries—especially in the Midwest—rely on Canadian crude to produce gasoline, diesel, and jet fuel. 

API’s Sommers also expressed concern about tariffs on China, since US oil and gas exports to China totaled more than $14.4 billion in 2023 “and are critical to reducing our trade deficit.”

Trump’s 10% tariff on China went into effect in early February before Trump doubled the tariff on Chinese imports to 20% Mar. 4. Beijing is retaliating by imposing a 15% tariff for US LNG and coal and 10% for crude oil, farm equipment and some autos beginning Feb. 10, and up to 15% duties on US farm goods like chicken and pork, effective Mar. 10.

Mark Carney, Canada's newly elected prime minister-designate, Mar. 9 vowed that Canada will maintain its retaliatory tariffs on US-made goods if Trump continues his trade war. 

Trump has said he would raise tariffs by the same amount if Canada, or any other country, retaliates. Canada opted to delay a second round of second round of retaliatory tariffs on US goods following Trump’s USMCA decision.