There has been a surge of Canadian oil heading down to the US in advance of potential tariffs. US purchasers are looking to get ahead of a potential 25% tariff on goods coming from Canada, including oil. President Donald Trump noted that tariffs could begin as soon as February 1. The widespread tariffs are expected to have a negative impact on Canada’s economic activity.

• Oil suppliers are trying to push as much oil as possible out of Canada and into the US before tariffs come into effect. Enbridge’s Mainline, which is the largest pipeline for exporting oil to the US, has had to cut the amount of light oil shippers can send to the US by 12%, in response to the increased demand.
• Canadian suppliers are trying to send as much oil as possible to the US before tariffs as it is deemed to be more valuable. After tariffs, the selling price could be lowered to keep volumes up amid a 25% tax.
• The surge in oil to the US might help refill reserves in key hubs such as Cushing, Oklahoma, where reserves have been depleted to their lowest level in a decade.
• Canadian Prime Minister Justin Trudeau says the government is ready with a response if tariffs are imposed on Canadian exports to the US. However, he would prefer to avoid tariffs altogether, considering the impact they could have on Canada’s economy.

Tariffs appear to be a certainty at this point. While President Trump has ordered a study on trade relationships by April 1, he could still seek a February 1 date to impose tariffs on Canada and Mexico. Other countries and regions, such as China and Europe, are also preparing for potential tariffs. As the US is Canada’s largest trade partner, tariffs could weigh on Canada’s overall economic health. Many US purchasers of a variety of Canadian goods are trying to get ahead by front-loading orders.

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