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Donald Trump’s plan to slap punitive tariffs on Canadian imports will drive up prices for American motorists, oil producers warned, as the US president-elect’s threats hit global markets.
Trump late on Monday proposed a 25 per cent tariff on all imports from Mexico and Canada, accusing the US’s closest neighbours of failing to tackle illegal migration and drug trafficking.
Canada’s oil industry — which supplies more than half of US crude imports — would be among the industries hit hardest. Producers warned US consumers would feel the repercussions should imports slide and prices rise.
Lisa Baiton, head of the Canadian Association of Petroleum Producers, said: “A 25 per cent tariff on oil and natural gas would likely result in lower production in Canada and higher gasoline and energy costs to American consumers while threatening North American energy security.”
The levies could be imposed using executive powers that would override the USMCA, the free trade agreement Trump signed with Canada and Mexico during his first term as president.
The supply chains and economies of the three countries have become deeply integrated in the 30 years since they first set up a trilateral trade agreement, ties that could be disrupted by tariffs or a trade war.
Canada’s Prime Minister Justin Trudeau called Trump on Monday night as Ottawa scrambled to respond to the announcement. Mexico’s President Claudia Sheinbaum suggested the president-elect’s plan could escalate into a tit-for-tat trade war.
The Mexican peso on Tuesday morning shed 2.3 per cent against the US dollar, adding to a sharp depreciation this year, while the Canadian dollar fell to a four-year low.
Trump also threatened this week to impose an extra 10 per cent tariff on Chinese goods, a move that Beijing’s state television CCTV labelled “irresponsible”.
China has sought to present itself as a guardian of open trade, despite accusations of heavily subsidising its manufacturers and maintaining tight barriers on international companies’ access to parts of its domestic market. “Economic globalisation is an irreversible historical trend,” said vice-president Han Zheng.
Brent crude, the international oil benchmark, rose almost 1 per cent on Tuesday morning, while shares in the biggest Canadian oil producers — Cenovus, Suncor and Imperial Oil — slid as much as 2 per cent.
Danielle Smith, premier of Alberta, where the bulk of Canadian oil is produced, said Trump had “valid concerns related to illegal activities at our shared border” as she urged the federal government to “work with the incoming administration to resolve these issues immediately”.
Despite being the largest oil producer in the world, the US imports large amounts of crude which is converted in its refineries into petrol and other petroleum products.
About 40 per cent of the crude refined in the US is imported, with 60 per cent of that coming from Canada and 11 per cent from Mexico.
The American Fuel and Petrochemical Manufacturers, the main industry group representing US refiners, urged politicians “to veer clear of any policies that could disrupt America’s energy advantage”.
The AFPM said: “Across-the-board trade policies that could inflate the cost of imports, reduce accessible supplies of oil feedstocks and products, or provoke retaliatory tariffs have potential to impact consumers and undercut our advantage as the world’s leading maker of liquid fuels.”
US refiners, especially in the north of the country, rely on imports of Canadian crude, which is much heavier than the type of oil produced in the Texas oilfields that drives US output. Analysts say local producers would struggle to plug the gap if Canadian oil was restricted.
Rory Johnston at Commodity Context, a Toronto-based energy consultancy, said: “If tariffs are applied to oil imports the first and primary direct effect will be higher US pump prices and weaker US refining margins given a higher cost of crude feedstock — much of which still needs to be imported and more than half of which comes from Canada.”
US imports of crude oil from Canada hit a record high of 4.3mn barrels a day in July following the expansion of Canada’s Trans Mountain pipeline, which funnels crude from the oilfields of Alberta to Canada’s west coast.
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Since the pipeline expansion came online in May refiners on the US west coast have become big buyers of Canadian oil.
Analysts said US west coast refineries were adapted to process heavy sour crude imported from Canada, which made it difficult to rapidly switch to US shale oil that is lower density so-called sweet grade should Canadian supply be interrupted because of tariffs.
Some Canadian industry participants hoped the dispute might shine a light on the US’s continued reliance on Canadian crude imports.
“The silver lining in all this is that the American and Canadian public has never known more about the importance of Canadian oil to the American economy than they do today,” said Heather Exner-Pirot, a policy director at Ottawa think-tank Macdonald-Laurier Institute.
Additional reporting by Aime Williams in Washington
Source link : https://www.ft.com/content/920fb296-3ffe-4793-a0c6-669da6f1a66e
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Publish date : 2024-11-26 03:56:00
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Author : theamericannews
Publish date : 2024-11-28 08:10:41
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