The Trump administration’s plan to impose a 10 percent tariff on Canadian oil could lead to higher gasoline prices for U.S. consumers, particularly in regions that rely heavily on Canadian crude. The tariff, initially set to take effect immediately, has been delayed by 30 days as negotiations between the U.S. and Canada continue.
Potential impact on gas prices
Analysts expect the tariff to increase fuel costs, though the impact would vary by region. Patrick De Haan, head of petroleum analysis at GasBuddy, indicated that the Midwest, Rocky Mountains, Great Lakes, and New England would be the most affected areas.
- New England could see gasoline prices rise by 15 to 25 cents per gallon and heating oil costs increase by 20 to 30 cents per gallon.
- The Midwest, Rockies, and Great Lakes could experience a 5 to 20 cent per gallon hike in gas prices.
- Clayton Seigle, a senior fellow at the Center for Strategic and International Studies, provided a slightly lower estimate for the Midwest, predicting an increase of 7 to 15 cents per gallon.
The national average gas price currently stands at $3.01 per gallon.
The role of Canadian oil in U.S. supply
Canada is the largest supplier of crude oil to the U.S., accounting for 60 percent of imports in 2023. Many refineries, particularly in the Midwest and Rocky Mountains, are specifically configured to process heavy crude from Canadian oil sands. Analysts argue that alternative sources of oil would be difficult to implement in the short term.
“Canadian crude and the Midwest refinery system were made for each other. Neither one of them really has substitutes or somewhere else to go,” Seigle said.
Switching to a different oil source would require costly modifications to refinery infrastructure, a process that analysts say would be difficult and expensive.
Economic considerations and broader effects
Beyond gas prices, some experts warn that tariffs on Canadian oil and other imports could have wider economic consequences. Trump also announced a 25 percent tariff on additional Canadian goods, which could put pressure on the economies of both countries.
De Haan suggested that such measures could “sink the economy” if they lead to a slowdown in trade and increased costs for businesses. However, he noted that an economic downturn could paradoxically bring fuel prices back down, as lower consumer spending would reduce demand for gasoline.
For now, the 30-day delay allows time for further negotiations between the U.S. and Canada. Trump has tied the pause to border security measures and efforts to curb fentanyl trafficking from Canada into the U.S.
