Analysis by Energy Workforce President Tim Tarpley
The US-Canada trade war continues to heat up this week, with impacts reaching into the OFS. On Tuesday, Canada said it will double its tariffs on American steel and aluminum from 25% to 50% and impose tariffs ranging from 15% to 50% on about 700 other products. These new tariffs will go into effect September 8and match prior US steel and aluminum tariffs imposed under Section 338 against Canada. The US tariffs do not have a USMCA exemption for steel and aluminum products produced in Canada.
So far, energy and liquid energy products have been excluded from this round of the trade war; however, it is not inconceivable to see additional counterattacks that include energy. In 2025, during a prior volley in the ongoing war, Canada imposed a 25% tariff on electricity generated by Canadian hydropower destined for the United States. Parts of New York, Michigan and Maine receive large amounts of power from this route. Should Canada choose to either add a surcharge or shut off the trade completely, that would put significant pressure on electricity production, primarily natural gas-fired power generation, to make up the difference to keep the power on in these regions. While such an action remains remote, it is important to monitor it, as it could cause a spike in natural gas prices on the US side. Such an action would have significant political ramifications and could put pressure on Congress to push for permitting reform to allow additional energy infrastructure to limit our reliance on Canadian hydropower.
Additional escalation on the US side may also be possible. President Trump has threatened additional countermeasures, including renaming Lake Ontario Lake America. The US side has not publicly called for duties or blocking of Canadian cross-border crude shipments, as that would impact gas prices on the US side; however, should the Canadians resort to electricity tariffs, that option would certainly have to be considered by the American side.
How will all this end, and how long will it last? Trade wars like this happen from time to time during negotiations, so it is certainly possible that much of this is bluster and could wind down later this summer before impacts become too widespread. Given the size of US-Canada trade and its impact on the overall economy, that is certainly the hope of many. However, there are seemingly quite strong positions on both sides, and the parties still appear to be fairly far apart, with the rhetoric increasingly combative. There are also midterm elections in November on the US side, so there could be reluctance to reach a deal before those elections, which could impact the results. The situation will need to be watched closely by us, as it is possible energy and OFS interests could get drawn in even more should it drag on or expand in the coming days and weeks.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
