Trump does not plan exemptions for oil imports under the new tariff plan: Sources

US President-elect Donald Trump does not intend to exclude crude oil from his planned 25 percent import tariffs on Canada and Mexico, as the oil industry warns the policy could harm consumers, industry and national security, sources told Reuters on Tuesday. he said.

Canada and Mexico are the top sources of U.S. crude oil imports, accounting for about a quarter of the oil that U.S. refineries convert into fuels such as petroleum and heating oil, according to the U.S. Department of Energy.

The US and Canadian oil industries were optimistic that Trump’s broad plans for protectionist trade measures would reduce oil imports; because many US refineries are connected to these two countries and have equipment designed to process their own types of oil.

Two sources familiar with Trump’s plans said oil would not be exempt from the plan. They asked that their names not be disclosed due to the sensitivity of the issue.

Meanwhile, America’s leading oil trade groups said imposing tariffs would be a mistake, revealing a rare disagreement between the industry and Trump.

“General trade policies that could increase the cost of imports, reduce the supply of accessible petroleum raw materials and products, or provoke retaliatory tariffs have the potential to impact consumers and undermine our advantage as the world’s leading producer of liquid fuels,” he said. He’s a spokesman for the American Fuel and Petrochemical Manufacturers group, which represents oil refiners.

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AFPM said its industries “will continue to urge officials to steer clear of any policies that could undermine America’s energy advantage.”

Meanwhile, the American Petroleum Institute, in response to a question about threatened tariffs, said it was important to maintain cross-border energy trade.

“Canada and Mexico are our largest energy trading partners, and maintaining the free flow of energy products across our borders is critical to North American energy security and U.S. consumers,” said API spokesman Scott Lauermann.

Oil industry analysts and traders also warned that the move would increase oil prices, squeeze margins and increase fuel costs for U.S. refineries.

Data from the U.S. government’s statistical arm showed that the United States is importing about 5.2 million barrels per day (bpd) of crude and petroleum products from Canada and Mexico in 2024, with more than 4 million of that from Canada.

The biggest impact would come from tariffs on Canadian crude oil, a major source of supply for refineries in the U.S. Midwest.

“The Midwest will have to deal with higher gasoline prices because it will be difficult to replace the Canadian crude they currently use,” said Rohit Rathod, an analyst at ship tracking firm Vortexa.

“Imposing tariffs on over 4 million barrels of crude oil per day from your leading supplier seems self-destructive,” said Matt Smith, an analyst with ship tracking service Kpler.

U.S. refineries collectively have the capacity to process more than 18 million barrels of crude oil per day, but they often operate at lower rates because of maintenance and other issues.

Although the United States is the world’s largest oil producer, with record crude oil production of 13.5 million barrels per day, much of this crude oil is of light concentration and incompatible with domestic refineries that are largely configured to refine heavy crude oils such as Canadian and Mexican oils.

Converting units to economically run lighter crude oils will require investment in new equipment.

Asked about the inclusion of oil imports, the Trump transition team noted that tariffs on China create jobs, encourage investment and do not result in inflation.

“President Trump will work quickly to fix and restore an economy that puts American workers first by restoring American jobs, lowering inflation, raising real wages, cutting taxes, cutting regulations, and unlocking American energy,” Trump transition spokeswoman Karoline Leavitt said. . REUTERS