Trump slaps Canadian energy exports with 10% tariffs, leaving oilpatch 'deeply disappointed'

United States President Donald Trump followed through with his tariff threat against Canadian energy on Tuesday, reigniting calls from the sector to overhaul the country's regulatory framework to help move new energy projects forward and reach other export markets.

Oil and gas exports from Canada are being hit with a 10 per cent tariff, while all other Canadian goods are levied at 25 per cent.

"This is something that we were hoping wouldn't happen, that we could avoid," said Mike Holden, vice-president of policy and chief economist with the Business Council of Alberta (BCA).

"On the one hand, we're luckier than other Canadians because 80 per cent of everything that Alberta exports to the U.S. is energy products, and that's only subject to the 10-per cent tariff.

"But, you know, this is going to hurt the provincial economy, it's going to hurt the country. And there's no two ways about it."

The U.S. is — and has been for decades — the primary market for Canadian crude exports.

It received about 97 per cent of Canadian oil exports in 2023, and most of those exports came from Alberta, Canada's largest oil producer, according to data from the Canada Energy Regulator.

Alberta contributed over 87 per cent of the total volume of energy exports to the U.S. that same year.

Richard Masson, executive fellow at the University of Calgary's School of Public Policy and former CEO of the Alberta Petroleum Marketing Commission, said he expects everybody in the oilpatch is "stiffening their spine" as Trump's tariffs come into effect.

"We've been through some tough times before, and we know that the U.S. needs our oil. They don't have alternatives," said Masson.

"It's not like the higher price is going to result in a big cut in demand. They need our oil. We need to sell them our oil. So that's one thing that gives some comfort is we're going to continue to sell oil, just get a little bit lower price."

Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers (CAPP), said in an email statement to CBC News sent Tuesday morning that CAPP and its member companies are "deeply disappointed" with the tariffs.

"We must now recognize the relationship with our closest friend, ally, and trading partner has fundamentally changed…. Without greater global market reach and energy security, Canada has little leverage in our trade relationship with the United States," reads the statement.

"North American and global oil and natural gas markets are complex which make it difficult to predict how the application of a 10 per cent tariff on Canadian oil and natural gas will impact supply, demand and trade patterns."

Baiton added Canada "urgently needs" a policy overhaul to create a streamlined regulatory framework to allow projects "with viable markets and motivated investors to succeed."

Baiton said diversifying exports beyond North America into Asian and European markets will promote long-term stability. She believes Canadian energy producers are innovative and resilient and will find the best ways to mitigate the impact of tariffs.

Canada's energy industry is at a crucial point right now, and Masson says it needs allies. Those allies, he believes, are going to be found in U.S. consumers.

"It's going to be primarily the refiners…. they're going to be saying, 'This tariff is going to hurt us and we're going to pass those things through to our consumers.' That's not anything somebody wants to hear when some of those swing states were so important to the president's election victory," he said.

"Those are the kind of voices that we're going to have to hear to help make sure that the U.S. understands this is not in their interest from an energy point of view."

Alberta exported nearly $12 billion in energy products south of the border in December 2024 alone, according to the most up-to-date provincial government data.

While the U.S. is the world's largest oil producer, it remains highly reliant on Canadian oil.

Canadian crude exports to the U.S. reached a record high last summer — largely thanks to the completion of the expanded Trans Mountain pipeline — climbing to 4.3 million barrels per day according to October 2024 figures from the U.S. Energy Information Administration (EIA).

In 2024, the vast majority of Canadian heavy crude was shipped via pipeline to the U.S. Midwest for refining.

EIA figures also note that the U.S. produces about 13 million barrels per day of crude oil, but the country consumes over 20 million barrels of petroleum per day on average, leaving a need for imported oil.

Polling has found public support in Canada for reviving a pair of shelved pipeline projects that could help the sector diversify its export markets, but environmental groups are urging policymakers to take a different direction.

"Given the rollback of climate and energy policies in the U.S., Canada can compete for billions in capital by bolstering its attractiveness as an investment destination for low-carbon industries," Chris Severson-Baker, executive director of the Pembina Institute, a green energy think tank based in Calgary, said in a statement.

"This means avoiding knee-jerk reactions that would not set us up for success in the 2030s and beyond."

He said while Canada needs to act decisively, it must also be strategic about which projects and industries are developed. He said the country needs to recognize the global shift to low-carbon energy.

"Canada should pursue a coordinated policy of electrification, a true nation-building endeavour that will reap rewards that endure well beyond the current dispute with our southern neighbour," he said.

Alberta's former premier says 'none of this makes sense'

The U.S. tariffs left one former Alberta premier bewildered.

"Frankly, none of this makes sense," Jason Kenney told the CBC's Rosemary Barton on Tuesday morning.

Former Premier of Alberta Jason Kenney, pictured in this file photo from 2022, said he doesn't expect the U.S.-imposed tariffs to be lifted anytime soon. (Jeff McIntosh/The Canadian Press)

He believes there is no doubt the president is aware of the critical role Canadian oil imports play to the U.S.'s energy economy and its consumers, referencing Trump's comments last week about building the Keystone XL pipeline, which is a roughly 1,900-kilometre pipeline project that was designed to take oil from northern Alberta to the U.S. Midwest.

However, Kenney also noted that even then, he doesn't expect this tariff action from the president to end any time soon, with Kenney even describing tariffs on Canadian goods as "bully tactics."

"We better be prepared for this for the long haul," said Kenney, adding that nothing should be taken off the table and Canadian leaders should be using calculated ambiguity.

"All of our economic relations with the United States should be subject to review in this context of a trade war that he launched."

'Fentanyl is absolutely a smokescreen'

Since his re-election in November, Trump has repeatedly said he would hit Canada and other countries with tariffs. While he's shifted back and forth on what's aggravating those measures, one concern Trump has cited is drugs like fentanyl entering the U.S. from Canada and Mexico.

The Canadian government has shown a willingness to engage with Trump on the border issue, announcing a $1.3-billion border package back in January for more policing of the line that divides the two countries.

Referencing Trump's war on fentanyl, one oil market analyst suggests these tariffs are indicative of how major economic policy decisions seem to be made in 2025.

"Everyone at this stage recognizes that fentanyl is absolutely a smokescreen. It's an excuse that the White House is using to impose these tariffs directly," said Rory Johnston, founder of Commodity Context, an oil market research service.

"We're hearing … that these tariffs could be withdrawn depending on if we make progress. So I think that again is a smokescreen that, what they're really saying is, if the economic damage becomes so acute that all of a sudden Trump cares, well then they can they can take the tariffs off and it'll be an ad hoc justification based off of whatever Canada apparently did on fentanyl that week."

In the months leading up to this moment, Trump's moving tariff target has been a source of stress for many Alberta businesses.

Johnston believes that while Trump's talk of tariffs has already impacted the Canadian energy market by fuelling uncertainty, the move to officially levy tariffs against Canadian imports is "very, very bad" and it likely won't get better anytime soon.

"We have not seen the worst of this yet," said Johnston.

Fighting in this trade war will mean the federal government has to consider how Canada is best positioned to push back economically, as well as how the country can limit its dependence on American customers, said Johnston.

He suggested the prospect of an east-west pipeline could come into play.

"Given the fractious internal domestic politics in Canada, I think it would be worthwhile for Ottawa to show Alberta that Ottawa is listening, that Ottawa understands the grievance, and that Ottawa will work to address the grievance and show Alberta the value of Confederation," said Johnston.

"This is, I think, an important moment in order to shore up national unity, particularly as not only the economic aggression against our country increases, but also [as] very concerning threats to our sovereignty mount."

'Nobody wins' in a trade war

Holden, the BCA's chief economist, believes Canada is in a tricky spot right now.

Ottawa has already imposed 25 per cent counter-tariffs on a substantial list of American goods worth around $30 billion as part of Canada's retaliation.

LISTEN | Mike Holden on how tariffs will land in Alberta: 

"A lot of Canadians support this idea and it's not hard to see why. I mean, you want to stand up to the bully and defend yourself, but unfortunately, nobody wins in these kinds of trade wars," said Holden.

"We both get hurt."