A wave of apprehension has gripped Alberta as US President-elect Donald Trump’s proposal to impose a 25% tariff on Canadian goods threatens to shake the province’s oil-dependent economy. Experts and political leaders are warning of severe consequences for Canada and potential ripple effects on US consumers.
Dennis McConaghy, a former energy executive based in Alberta, called the situation unavoidable. “Canada has no choice in this. It has to find an accommodation with Trump,” he told the BBC, emphasizing the interconnected nature of the Canadian and US economies. With approximately 80% of Canada’s trade tied to the United States, much of it in hydrocarbons, McConaghy noted that Canada is heavily reliant on its southern neighbor.
Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, warned that such a tariff could force Canada to scale back oil production, potentially leading to significant job losses in Alberta. As a province whose revenue supports poorer regions through federal cash transfers, Alberta’s economic struggles could have nationwide implications.
The proposed tariff could also devalue the Canadian dollar further, adding to existing domestic economic pressures. “Canadians can’t escape how integrated they are with the US,” McConaghy said.
US fuel producers and analysts have expressed concern about the ramifications of tariffs on Canadian oil. The American Fuel and Petrochemical Manufacturers (AFPM) industry group has urged Trump to exempt oil and gas, highlighting that Canadian crude is vital to US refineries, particularly in the Midwest. Approximately 40% of the crude processed in US refineries is imported, with the majority sourced from Canada.
“Crude oil is to refineries what flour is to bakeries,” the AFPM stated, warning that increased costs would translate to higher prices for fuel and other products. Gas prices in states like Minnesota, Wisconsin, and Michigan could surge by as much as 75 cents per gallon, according to Chicago-based gas prices analyst Patrick De Haan.
Higher fuel costs would also affect airlines and freight haulers, running counter to Trump’s campaign promise to reduce energy costs. Trump’s goal of achieving energy independence through domestic drilling may clash with the immediate need for Canadian imports to maintain supply.
Canadian Prime Minister Justin Trudeau has pledged to present a unified “Team Canada” approach to negotiate with the incoming US administration. Trudeau recently convened an emergency meeting with provincial and territorial leaders to formulate a response to the tariff threat.
Alberta Premier Danielle Smith stressed the importance of proactive measures, stating that her province will “work aggressively” to communicate the mutual benefits of a strong Canada-US energy partnership. Smith also acknowledged the validity of Trump’s border security concerns and urged Trudeau to develop a comprehensive plan addressing these issues.
Smith revealed Alberta is exploring creating specialised sheriff units to patrol its shared border with Montana, signaling the province’s commitment to addressing US demands.
Analysts believe Trump’s tariff threats may be part of a broader negotiation tactic aimed at securing cooperation on border security from Canada and Mexico. However, the risks remain high for both economies.
“There needs to be urgency among Canadian officials to get the risk of tariffs off the table as soon as possible,” McConaghy said, underlining the potential consequences of inaction.
As Canada braces for a potentially turbulent start to Trump’s presidency, Alberta and the nation at large must prepare to navigate a delicate economic and political landscape.