Canadian oil and gas industry troubled by Trump’s 25% tariff on steel…wake up call for rest of country?

Foreign Affairs Minister points out that US actually has $2 billion surplus in steel trade with Canada

The Canadian oil and gas industry is not pleased with Donald Trump at the moment. The American president’s new 25 per cent steel tariff stands to add significant costs for an industry that is just recovering from three years of punishing downturn that forced it to become more efficient and significantly lower production costs.

Canada supplies more steel and aluminum (subject of a 10% tariff) than any other country. In return, the Canadian oil and gas sector buys American equipment.

The Canadian Energy Research Institute estimates the economic impact of those purchases on the US economy will be $45.6 billion over the next decade, supporting 400,000 full-time jobs.

Nick Schultz, Canadian Assoc. of Petroleum Producers.

“This is a troubling development that the Canadian Association of Petroleum Products is continuing to assess,” Nick Schultz, VP of pipeline regulation and general counsel, said in an email to Energi News.

“Steel is important in every part of the oil and gas industry from drilling, production, processing, storage and transportation utilizing pipelines.”

Schultz says that if Canada is not exempt, Trump’s proposed tariffs on steel imports will add a significant burden to the industry on both sides of the border – and there could be unintended consequences if retaliatory measures are taken.

“In a recent US Department of Commerce investigation into the effect of imports of steel on the national security, Canada was found to be an unquestionably reliable supplier that shares a border and has synergistic strategic, economic, and national security interests with the United States,” he said.

While the Canadian energy industry wrings its hands at the thought of unnecessary higher input costs, Trump’s endgame is still not clear.

“We are on the losing side of almost all trade deals. Our friends and enemies have taken advantage of the U.S. for many years. Our Steel and Aluminum industries are dead. Sorry, it’s time for a change!” he tweeted Monday.

But in his very next tweet, Trump suggests the tariffs are just a poker chip in the NAFTA negotiations: “We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”

Canadian Foreign Affairs Minister Chrystia Freeland begged to differ.

“The United States has a $2-billion surplus in steel trade with Canada. Canada buys more American steel than any other country in the world, accounting for 50% of U.S. exports,” she said in a March 1 press release.

The former journalist also said that it is inappropriate to view any trade with Canada as a national security threat to the United States: “We will always stand up for Canadian workers and Canadian businesses.  Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

Ed Hirs, an energy economist with the University of Houston, says Trump’s tariffs will be bad for both countries.

“The proposed tariffs will require Canadian producers to lower prices further or find new markets,” he wrote in an email.

“The US consumers will not enjoy this unilateral corporate welfare for the US steel and aluminum industries. Prices of everything from Secretary Ross’ beer cans to automobiles to pipelines to Trump’s Wall will increase. The inflation alone will diminish US consumers’ purchasing power and this will be recognized in the Nov. elections.”

As if all of those consequences of the Trump tariff aren’t bad enough, Hirs reminds Energi News readers that “the impact on Canada could well be a recession.”

For years the Canadian energy sector has argued that sending 99 per cent of Canadian oil and gas exports to the US, in effect becoming a captured supplier, is a bad idea and that rapidly growing markets in Asia should be Canada’s goal.

Maybe now that the economic effects of a capricious American White House will drive that lesson home to Canadian consumers who may soon be paying more for consumer goods, gasoline, and a myriad of other products and services.

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