Are U.S. Oil And Gas Companies Prepared To Deal With Trump’s Tariffs? – Forbes
TOPSHOT – US President Donald Trump speaks in the Oval Office of the White House as he announces … [+] reciprocal tariffs, in Washington, DC, on February 13, 2025. Trump announced that he would impose “reciprocal tariffs” on trading partners, opening new fronts in his trade war. The move would match US tariff rates on imports to the levels that other countries impose on US goods. (Photo by ANDREW CABALLERO-REYNOLDS / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)Remember when Donald Trump said he’d put off imposing tariffs on Mexico and Canada last month? He said the two allies agreed to deploy more border guards even though they had committed to that during Joe Biden’s term. But now, he’s going through with the tariffs, and for good measure, he includes the European Union.These tariffs could significantly impact the U.S. economy, especially oil, gas, and renewable energy markets. Increased energy costs might drive inflation, undermining people’s purchasing power and introducing uncertainty into business decisions. Industries dependent on Canadian energy may face higher costs, making them less competitive and potentially resulting in job losses.The levies will exacerbate tensions between the U.S. and Canada and undermine their mutual interests. “If the United States goes ahead and imposes tariffs, we already shared the details of our plan,” said Canadian Prime Minister Justin Trudeau. “We have $30 billion worth of U.S. products that will be subject to tariffs. And $125 billion of tariffs that will be applied three weeks later. But we don’t want to be in that position.”Trump’s plan? A 25% tariff on Canadian and Mexican goods entering the United States, although it would be 10% on Canadian oil and gas. He also blurted out at his first cabinet meeting that he would place a 25% on the EU because it tries to “screw” this country, causing the European Commission to say that it will “firmly react.” The EU’s tariffs would take place on April 2.Before we dive into what all this means, let’s lay out the context:— According to the United States Trade Representative, the total trade between the United States and Canada in 2024 was roughly $763 billion;— This country exported about $350 billion to Canada;– According to the Energy Information Administration, Canada exported about $413 billion to the United States. It is the country’s largest crude oil supplier, accounting for 24% of refined throughput;— According to the Census Bureau, U.S. exports to the EU totaled about $30 billion a month in 2023. The United States supplies nearly half of the continent’s liquefied natural gas, and— The trade representative’s office reports the EU sends $50 billion a month to the United States.Economic questions abound. But so do legal ones.“The legal uncertainty is undoubtedly resulting in a certain level of anxiety, largely because companies don’t have systems set up to collect or pay these tariffs on energy commodities; tariffs have not been in place since the 1970s,” says Jeffrey Jakubiak, an energy regulation partner at Vinson & Elkins in New York City. “They must first figure out who the importer of record is and where the financial responsibilities lie.”EDMONTON, CANADA – FEBRUARY 03: The Suncor Energy Refinery is seen during extreme cold weather, … [+] with temperatures dropping below -32°C, as viewed from Edmonton’s Anthony Henday Drive, in Edmonton, AB, Canada, on February 03, 2025. (Photo by Artur Widak/NurPhoto via Getty Images)I chatted over Zoom with Jakbuiak and his Washington, D.C.-based partner, Jason Fleischer, about the upcoming tariffs. They both stressed that they’re in a legal position to help companies prepare for these tariffs, especially those that could affect Canadian oil and gas imports. Businesses can get a head start by taking stock of their cross-border imports and checking their contracts with Canadian and Mexican counter parties. If tariffs are enacted, energy companies must keep records of their cross-border imports and reserve payments.The lawyers indicated that the U.S. oil and gas economy can withstand the shock when asked whether this will lead to higher pump or home heating prices. Companies have not yet developed a game plan, and according to Fleischer, energy businesses may absorb the added costs and, as a result, insulate consumers.“This is just another compliance issue these companies must deal with,” says Fleischer.Nevertheless, both energy regulatory attorneys said the tariffs would profoundly impact the raw materials used in windmills, solar panels, and battery storage devices. Indeed, tariffs will disrupt supply chains, increase production costs, and hinder clean energy initiatives. The fees also toss a wrench into the renewable energy sector, making companies think twice or even put off investing in wind and solar projects.“If tariffs on steel turbines, transformers, aluminum, and all of those things go into effect at 25%, that will most certainly impact the cost of building solar farms, wind farms, and transmission lines,” says Jakubiak. “You can’t just call Siemens, order a turbine, and have it here in a month.”CLAIRTON, PA – MARCH 02: A man walks into the United States Steel Corporation plant in the town of … [+] Clairton on March 2, 2018 in Clairton, Pennsylvania. In a controversial move that has angered European Union leaders, President Donald Trump has announced a plan to place tariffs on steel and aluminum imports. The European Union head president, Jean-Claude Juncker, has said he will put tariffs on products like Harley-Davidsons, Kentucky bourbon and bluejeans if the steel tariffs go through. (Photo by Spencer Platt/Getty Images)Trump has introduced anxiety into markets, which means companies will delay hiring and investment decisions. Witness the gyrations in financial markets. While the president focuses on the trade imbalance, he neglects to consider other countries and the American debt. According to USAFACTS, China holds $759 billion, the United Kingdom has $690 billion, and Canada has $329 billion–money pumped back into the U.S. financial system.The United States imports crude oil from Canada, specifically the Alberta oil sands. Tariffs could make these imports more expensive, meaning higher gas prices at the pump. The U.S. also gets natural gas from Canada through pipelines to the Northeast and Midwest. If tariffs are enacted, Canadian natural gas could cost more, increasing heating bills, especially in colder areas that rely on imports.U.S. oil and gas producers might increase production to fill the gap left by reduced Canadian imports, which could help keep prices from skyrocketing.Economists almost universally agree that free trade provides the greatest good for the greatest number. It boosts commerce, creates more jobs, and improves goods and services. So, the U.S. has made deals with other countries to settle disputes over labor, the environment, and unfair trade practices.Tariffs might seem like a quick fix to protect domestic industries, but they often don’t solve the real problems. They fail to address the health of the businesses themselves. Even if we impose tariffs, protected industries will remain inefficient and unable to compete. And guess what? Countries will assuredly retaliate, meaning American workers in export countries will suffer. Weak leaders impose tariffs to protect uncompetitive businesses.”The economic damage from these policies is staggering. The expanded steel and aluminum tariffs will raise taxes on Americans by an additional $53.7 billion — not by growing the economy but by squeezing businesses and consumers through higher costs,” writes economist Vance Ginn, for Inside Sources. “Tariffs don’t hurt just businesses; they also hit working-class Americans the hardest.”
Trump could resolve differences and avoid economic harm by being flexible. Tariffs are like blunt instruments; they would hurt American consumers just as much as they might punish Canadians or Europeans. Instead, he could focus on making specific trade practices more equitable. It’s about finding the balance that keeps money flowing and allows everyone, especially Trump, to save face.
