Canada Turns East In Response To Trump Tariffs
The threat of tariffs has backfired on convicted felon Trump, as he wrecks trade relationships like he wrecks his own businesses
In January 2025, speaking at the World Economic Forum in Davos, Switzerland, Trump said “We don’t need their [Canada’s] oil and gas. We have more than anybody.” He has vowed to drill more oil to compensate for a potential Canadian oil stoppage.
In response, Canada announced a new strategic partnership with China for oil supply, circumventing Trump’s attempt to bully Canada into accepting punitive tariffs. A spectacular own goal by the convicted felon, who has bankrupted most of his own businesses and casinos with failed business acumen and financial management.
What is the context and history around this change of direction from Canada, turning towards China and away from the US, as Trump has alienated almost every ally of the US, ending friendly relationships and trading partnerships that have taken decades to build?
👉 Context:
Canada sends nearly all its crude oil to the United States, and has traditionally had little leverage because the US is the destination for most Canadian exports. Now that is changing, as Canada turns to China - a new and hungry-for-oil customer. This will directly hit russian supplies to China too.
Canada changing it’s oil supply chain; it is now working stop oil flow to the US in response to Trump Tariffs.
A major trade war between the United States and Canada has been temporarily averted after US President Donald Trump agreed to hold off on imposing a 25 percent tariff for 30 days. Anger has erupted in Canada, with people calling for a boycott of US products, and some even calling to stop the export of oil to the country’s southern neighbours.
👉 A potted history of Canada’s oil supply to the US:
In 1994, the US, Canada and Mexico signed the NAFTA deal, which removed most tariffs between the three countries and included provisions on energy cooperation.
“When the agreement was ratified, there was a desire in the US for Canada to export as much energy as possible,” De Silva said. The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA under Trump in 2020, maintains most of NAFTA’s provisions regarding energy.
Most of Canada’s oil is produced in the Western Canada Sedimentary Basin (WCSB), which comprises the provinces of British Columbia, Alberta, Saskatchewan, and Manitoba.
👉 Geography also plays a role in how the pipelines are built.
“The geology and geography to build pipelines from Alberta to Ontario and Quebec is a bit challenging because of the continental shield and the Great Lakes,” De Silva said. The continental shield is a zone of really old and hard Precambrian rock that makes up nearly half of Canada’s land mass.
Canadian oil flows to parts of the US, such as the Midwest, where some of the refineries are located. Some of the refineries in the US are closer to the Canadian oil sites than eastern provinces. For example, the oil region of British Columbia is closer to California in the US than to the Canadian province of Ontario.
Almost all of Canada’s crude oil exports – about 97 percent – were exported to the US in 2023, according to CER. In 2022, 60 percent of US oil imports were from Canada, according to the US Energy Information Administration. In 2024, Canada produced 5.7 million barrels of oil per day, according to the Canadian Association of Petroleum Producers. About 4.3 million barrels of petroleum products were exported to the US per day.
👉 The reality of difficulties:
The federal government does, in theory, have the authority to stop the exports. But De that would be complicated, as Canada is a confederation, which means the federal government and provinces share power. Oil production comes under provincial power.
There are therefore legal questions, because Canada’s never done it before, disagreements could cause a domestic constitutional crisis? According to the 1977 US-Canada transit pipelines agreement, no public authority in the US or Canada shall institute measures “which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit”.
There is also the question of where the oil would be stored after turning off the tap. When pipelines are full, it will be very hard to find space for an additional 4 million barrels a day.
If Canada’s government decided to cut off all the oil supply to the US, there would also be a problem over how the eastern parts of Canada – Ontario, Quebec and New Brunswick – would get their oil. It raises questions about whether the US would in turn prevent the flow of oil, which flows through US territory, to eastern Canada.
It is true to say that it would take some time for Canada to diversify its exports after decades of close trade ties cemented by the North American Free Trade Agreement (NAFTA), which Trump renegotiated during his first term in office from 2017 to 2021.
In theory, Canada could stop the flow of oil into the US as leverage to get Trump to back down on the tariff threats. But doing so would disrupt crude supply to refineries in Canada’s east as the pipelines pass through the US territory. The crude oil is carried through pipelines passing through the US to reach Canada’s east coast provinces, including Ontario and Quebec, where it is refined. So the network of pipelines, some of which were constructed in the 1950s, serve both the refineries in the US and Canada.
AL jazzers reported: “It is time for Canada to review its strategy because we see that now, with the new administration, it can become very dangerous for us to only have one client for our exports,” economist Miguel Ouellette wrote in a report published in 2021 by the Montreal Economic Institute (MEI).
👉 Changing direction away from the US is already happening:
Almost every day since the expansion of Canada’s Trans Mountain pipeline was completed in May 2024, a tanker laden with oils and crude shipped through the line has passed under Vancouver’s Lions Gate Bridge en route to refineries around the Pacific.
Those tankers, bound for China and Japan among other markets, mark a significant shift for Canada, which has long been stuck exporting its vast flows of oil solely to the United States. And with President Donald Trump’s tariff threats highlighting the risk of that dependence, the success of the $34 billion Trans Mountain expansion is stoking Canada’s desire to further decouple from its unpredictable neighbour — and play a larger role in global oil markets.
Two mothballed projects in particular are being discussed as ripe for revival: Energy East, which would carry western Canadian crude east to refineries in Ontario and Quebec; and Northern Gateway, which would haul Alberta oil to a Pacific port in northern British Columbia.
Northern Gateway was halted by a court in 2016 amid objections from environmental groups and First Nations, and it was later rejected by Prime Minister Justin Trudeau in 2016. The roughly 1,178-kilometre line would have run from Alberta to Kitimat, B.C., with a capacity of 525,000 barrels a day, providing oils and producers with a way to send more crude to buyers in Asia.
One of the quickest and easiest solutions for Canadian oil producers may lie in further expanding Trans Mountain. The system is currently only shipping about 720,000 barrels a day, about 80 per cent of its projected capacity, because high tolls to pay for its costly completion are making spot shipments uneconomical. Trans Mountain’s capacity could be expanded by 200,000 to 300,000 barrels a day by boosting pumping power.
Even below its capacity, Trans Mountain is reshaping the global oil market. China is buying increasing amounts of Canadian crude, supplanting purchases from sanctioned countries including Iran and Russia. That’s also pressuring prices of Middle Eastern and Latin American crudes similar to Canada’s heavy oil. Meanwhile, Canadian oil prices had risen and steadied, at least until the tariff threats began.
References and sources:
https://financialpost.com/commodities/energy/oil-gas/canada-ship-oil-china-us-threatens-trade
https://financialpost.com/tag/trans-mountain-pipeline/
Canada Unlocks A Backdoor For China, Establishes New Oil Trade Route to Bypass the U.S
Folks, I self-fund my equipment, research and subscription costs. I would appreciate your coffee support ! If you enjoy my threads, please help me keep the threads free, it takes just a few minutes to support my work on Patreon or BuymeACoffee - in any currency.
👇
Informative, evidence lead research for the price of a monthly subscription on Substack - or a few coffees on BuyMeACoffee.com
Thank You! to those who have supported me on Patreon or buymeacoffee, you are simply awesome.
buymeacoffee.com/beefeaterfella
patreon.com/Beefeater_Fella
One of trump's (many) failings is that he doesn't engage his brain (does he have one?) before opening his mouth. Talk about cutting his nose off to spite his face! Canada exporting oil to China will infuriate trump as in recent weeks, his defence secretary has regularly stated that the US government will now direct all of its attention towards combating threats from Indo-Pacific.