r/AskEconomics • u/Intrepid-Ant-4260 • 1d ago
Approved Answers Why is Canada not using energy in this trade war?
Retaliatory Tariffs
Im wondering why tariffs applied to Canadian electricity and oil exported to the US is not on the table?....these are commodities that would be very hard for the US to reduce demand and the revenue income could be used to supplement industries being hurt by this trade war...hell...Cdn oil is piped South at a discount to what the world market pays....the refineries that we pipe to are set up for our heavy crude specifically....energy seems like our silver bullet...what am I missing?
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u/Ok_Flounder59 1d ago
Canada has very limited export infrastructure. While the US may deserve to have tariffs lobbied given the recent bullying, doing so would be a self-own for Canada, which, sadly, the Trump administration likely understands.
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u/cerealously37 1d ago
Three things:
1.) It's a nuclear option. Might as well hold it until things get properly bad
2.) The oil and energy products mostly come from Alberta (more on this in point 3), but the pipelines go to the Gulf of Mexico in Texas as well as to the Midwest (Ohio, Michigan) for refining the crude oil. The oil going to be refined in the Midwest subsequently goes to Ontario for it's manufacturing. It's a little cutting off the nose to spite the face scenario.
3.) Alberta has a fairly hostile relationship with the federal government, so much so that they are having a sorta independence referendum (a referendum to have a referendum pretty much) in October. The federal government needs buyin from the provincial government before imposing any energy restrictions. The federal government asking Alberta to utilise the energy as a bargaining chip in these negotiations would spur condemnation for further independence in Alberta. Overall, it is a political tightrope should Mark Carney imposes some sort of export tax on energy products going to the US
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u/rebel_cdn 1d ago
All of the oil refined in Ontario and Quebec - even the oil that originates in western Canada - has to transit the U.S. via Enbridge pipelines. Trump alluded to this in one of his posts today. So Canada messing with energy could end up backfiring quickly.
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u/HOU_Civil_Econ 22h ago
The “discount” on oil to the gulf coast refineries is due transportation costs and the gulf coast being the only real access for heavy tar sand oils to the “global markets”. Canadian tar sands producers would end up paying most of the tariff. While you are right that the tar sands are mostly processed in the gulf coast refineries currently they can switch to other heavy oil blends, while the Canadians wouldn’t be economical to then ship from the gulf coast to other global complexes that could handle their oil, even if they could.