President Trump’s tariffs on Mexico and Canada could raise energy prices for U.S. consumers.
On Tuesday, tariffs against both of America’s neighbors took effect. The broader tariffs included a 10 percent levy on Canadian energy and a 25 percent levy on Mexican energy.
The U.S. imports more oil from Canada than any other country, with some U.S. regions being particularly reliant on Canadian oil. Analysts say that consumers in these regions— which include the Midwest, the Rocky Mountains and New England — could soon see price hikes.
Andrew Lipow, of consulting firm Lipow Oil Associates, told The Hill that in the short-term, gasoline prices in New England could jump by between 15 and 25 cents per gallon.
He noted that this region imports significant quantities of Canadian gasoline.
The last time tariffs were set to take effect, before Trump granted a last-minute delay, GasBuddy’s Patrick De Haan warned that the New England region could also face spikes in the price of heating oil used in homes.
Refineries in the Midwest and the Rocky Mountains, meanwhile, import significant amounts of Canadian crude that they turn into gasoline.
Lipow said it’s not entirely clear how much of the tariff will fall on consumers in those regions and how much of the costs will be absorbed by Canadian oil companies.
“What is unclear right at the moment is will the tariffs force the Canadian producer to simply reduce the price of their oil to offset the tariff charge,” Lipow said.
“Or will the Canadian oil producers say ‘we’re not going to reduce our price and you, the United States, need to come up with that 10 percent tariff,’” he added.
Will Hares, senior analyst for European oil and gas at Bloomberg Intelligence, said in a written statement that he expects prices in the Midwest to be affected.
“American consumers can expect to begin to see higher gasoline prices in the coming weeks likely in mid-single digit percentage particularly in the Midwest given the region’s 100% reliance on Canadian crude,” he said.
Tom Kloza, global head of energy analysis at the Oil Price Information Service, also said he expects the Midwest to see impacts, but noted that they may not be “huge.”
“Let’s say half of the tariff was absorbed by Canadian oil producers and half is absorbed by U.S. refiners, you’re talking about … increases in the raw cost of gasoline about … 10 cents or so,” he said.
The tariffs come as Trump has taken an aggressive stance on foreign policy, including toward U.S. allies, whom he has accused of not doing their part on issues like border security.
However, the president has also vowed to lower energy costs — and the potential rise in such prices highlights apparent tensions between those “America First” foreign policy moves and his promises to cut inflation.
Trump has also pledged to “drill baby drill” and produce more oil at home, which Lipow said could alleviate some — but not all — of the anticipated price increase if it happens.
“The refineries in many parts of the Midwest and Rockies are tooled to process the very heavy Canadian crude and replacing it with domestically produced light sweet crude may not result in a one-for-one exchange,” Lipow said.
He added that in that case some refineries may actually have to reduce the amount of gasoline they produce, tightening supply and “raising prices for the consumer.”
However, the tariffs are not the only factor that determines gasoline prices.
Global events can also have a notable impact. The U.S. saw high gasoline prices in the wake of Russia’s invasion of Ukraine, for instance — costs Trump repeatedly attacked the Biden administration for while on the campaign trail. While the tariffs are expected to raise prices, they are not expected to rise to the levels reached in 2022, when the national average was as high as $5 per gallon.
The tariffs are also taking effect as the group of oil-producing nations OPEC+ announced, surprising many analysts, that it would increase its production starting in April.
Lipow said that the OPEC news may lower gasoline prices by 2 or 3 cents per gallon.
Meanwhile, gasoline prices tend to rise in the summer with more demand, as more people travel and take vacations.
Kloza said that combined with the tariffs, this could mean relatively high prices in the months ahead — but lower prices in the fall.
“It’ll be difficult to ascertain exactly what is tied to tariffs, and what’s tied to the normal sort of Sturm and Drang of … second quarter prices,” he said, while also noting that prices are not expected to reach the highs of 2022.
