This story was originally published by the Canada’s National Observer and is reproduced here as part of the Climate Desk collaboration.
US tariffs on Canada are on hold for at least 30 days, but the threat of economic war is a Damoclean sword that continues to dangle over Canadians.
Canadian officials are attempting to convince the White House to abandon its tariff threat, but a bruising trade war is still on the table and experts say Ottawa must thoughtfully consider its options. Restricting or taxing oil and gas exports into the United States is a major point of leverage Canada could use that its federal officials have not ruled out, despite calls to do so from the oilpatch and Alberta government.
Using fossil fuels as leverage could inflict pressure on the American economy, though it’s controversial—and some say could backfire.
The US needs Canada’s oil because their refineries aren’t tooled to refine anything else, said Stuart Trew, trade researcher with the Canadian Centre for Policy Alternatives in an interview with Canada’s National Observer. “It’s an absolute dependency at this point, and we should be leveraging that.”
“The goal, first and foremost, is financial pressure on these importing companies, which will put financial pressure on the entire economy and Trump administration.”
Unlike tariffs, which tax imports, an export tax is paid to the government by the company that wants to export its goods. By putting export taxes on oil exports, the Canadian government could increase its revenue and make it more expensive for US refineries to purchase Canadian crude.
The argument for an export tax is that US refineries, particularly in the Midwest, have few other options. If refineries could purchase heavy crude from elsewhere, an export tax would only incentivize them to do so—but most can’t. Canadian crude makes up virtually 100 percent of Midwest oil imports, according to the US Energy Information Administration (EIA).
