If US President-elect Donald Trump imposes a 25% import tariff on crude oil from Canada and Mexico, both countries are expected to reduce their oil prices and redirect exports to Asia. Canada and Mexico are major oil suppliers to the US, contributing 52% and 11% of the country’s total crude imports, respectively. With the US relying heavily on these imports—especially heavy, high-sulfur crude—the tariffs could lead to a significant shift in trade flows.
As Canadian oil exports increase due to pipeline expansions, particularly to the US and Asia, a tariff would likely push Canadian producers to offer deeper discounts to attract Asian buyers. Likewise, Mexican crude exports, already down by 21% this year, may further struggle to find a market in the US, but could increase in Asia, especially to China and India, where refineries can process such grades.
Despite the potential for Asian markets to absorb the redirected oil, analysts caution that the tariffs could hurt both producers and refiners. US refiners that rely on heavy crude may face limited options as the tariffs reduce the availability of affordable supplies from Canada and Mexico. Additionally, while Europe might see some benefit from cheaper Mexican crude, the region’s refiners are less inclined to purchase Canadian oil.
Although the tariffs would disrupt existing trade dynamics, some traders and analysts are skeptical that Trump will go through with the plan, given the potential for increased inflation and higher costs for US consumers and refiners.
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