The United States and Canada are engaged in an energy trade war. U.S. President Donald Trump and Canadian Prime Minister Mark Carney have faced a number of high tariffs and reciprocal threats during their terms, but they have yet to touch one of the main platforms: oil and gas.
Mutual Energy Dependency
This dependency arises from the fact that Canada is the largest international oil supplier to the United States, accounting for 50 percent of the country's foreign oil imports. Additionally, there are over 30 major electricity transfer points between the United States and Canada, making Canada the only foreign country that directly supplies electricity to the U.S.
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The longest transmission line directly transfers electricity generated from Canadian hydroelectric plants to New York City and was completed this June. Vast areas of the northeastern United States are heavily reliant on Canadian hydroelectric energy, and the entire energy sector of the country is largely dependent on Canadian fossil fuels.
The Tariff War and Its Impact on the Energy Industry
In July, Trump imposed 50 percent tariffs on a wide range of Canadian imports to the United States, to which Canada reciprocated with tariffs on American imports. However, oil, gas, electricity, and some petroleum products were significantly exempt from these tariffs.
Despite Trump's talk of cutting dependency on Canada, existing realities show that the energy systems of Canada and the United States have been integrally built over decades. These complex structures, including pipelines, refineries, natural gas systems, and electricity networks, do not simply cease to function with the announcement of a new policy.
On the other hand, Canada is also trying to reduce its dependency on the United States. Mark Carney is currently in Ankara, Turkey, seeking to establish energy and defense agreements with President Recep Tayyip Erdoğan. The goal of these agreements is to increase liquefied natural gas exports to Turkey, which is recognized as an attractive trading partner and a major global economy.
However, the reality is that Canada's energy market is heavily dependent on American buyers. In 2024, 84 percent of Canada's oil and 76 percent of its electricity will be sent to American consumers. Without American buyers, there would be no real energy market in Canada.
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