Pump prices set to rise as Trump tariffs hit Canadian, Mexican oil
By Shariq Khan
NEW YORK (Reuters) -U.S. consumers will see higher prices at the gas pump from President Donald Trump’s decision on Saturday to apply tariffs on Canadian and Mexican oil, according to analysts and fuel traders.
The likely hike in fuel prices reflects the double-edged nature of Trump’s trade protections which are designed to bolster domestic business and pressure U.S. neighbors to curb illegal immigration and drug smuggling, but which will also run counter to his promises to tackle inflation.
The U.S. imports some 4 million barrels per day of Canadian oil, 70% of which is processed by refiners in the Midwest. It also imports over 450,000 bpd of Mexican oil, mainly for refiners concentrated around the U.S. Gulf Coast.
Tariffs on those imports mean higher costs for making finished fuels like gasoline, much of which is likely to be passed along to U.S. consumers.
“Expect fuel prices will rise noticeably if oil and refined products are not exempt,” GasBuddy analyst Patrick De Haan said in a post on social media. He told Reuters in a telephone interview the hit to consumers will get worse the longer the tariffs drag on.
The American Fuel and Petrochemical Manufacturers Association, which represents U.S. refining companies, said on Saturday it hopes the tariffs are lifted before consumers start to feel the impact.
Trump on Saturday ordered 25% tariffs on Canadian and Mexican imports and 10% on goods from China starting on Tuesday to address a national emergency over fentanyl and illegal aliens entering the U.S., White House officials said.
Energy products from Canada will have only a 10% duty, but Mexican energy imports will be charged the full 25%, the officials told reporters.
Trump had initially planned a 25% tariff on all goods from Canada and Mexico but cut the Canadian oil tariff in an effort to ease the impact on energy prices, the officials said.
The developments are set to upend a symbiotic oil trade between the U.S. and its neighbors: Many U.S. refineries are geared to churn the type of heavy and medium crude oil grades Canada produces, for example, and Canada’s oil output exceeds its current demand.
“Someone is going to get kind of hurt here,” Wells Fargo Investment Institute’s John LaForge told Reuters.
“The oil in Alberta doesn’t have much of an option where it goes, and the refiners in the Midwest don’t have much of an option on where they get the feedstock,” he said.
Gulf Coast refiners, who unlike Midwest refiners have access to seaborne cargoes, were likely to have an easier time finding replacements for the Mexican crude oil grades.
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