New tariffs announced by the U.S. Administration on imports from Canada and Mexico, are expected to have a significant negative impact on the American refining industry. While a 10% tariff on Canadian oil may not be crippling, the 25% tariff on Mexican imports will significantly increase costs for refiners in the U.S. Gulf Coast. This situation is seen as a win for Asian refiners who can now access cheaper Canadian oil, while the U.S. faces higher costs for alternatives. Industry leaders are urging for a swift resolution to the trade dispute to protect consumers and the domestic refining sector.
Tariffs on imports from Canada and Mexico will further weaken the position of U.S. refiners who are already facing headwinds due to declining refining margins, Energy Aspects director of research Amrita Sen told Bloomberg on Monday. On Saturday, the U.S. Administration announced that additional tariffs would be implemented on Canada , Mexico , and China this week. Canada and Mexico face 25% tariffs, with Canadian energy slapped with a lower, 10%, tariff.
The 10% tariff on Canadian oil imports doesn't break U.S. refining, but it will add to the costs of refiners in the Midwest and the West Coast, although a weakened Canadian dollar would absorb some of that tariff, Sen told Bloomberg. Canada could send more of its oil to Asia from its Pacific Coast after the expansion of the Trans Mountain pipeline, while the U.S. has to pay up for alternatives, Sen said. The bigger problem for U.S. refiners would be the 25% tariff on imports from Mexico. Refiners in the U.S. Gulf Coast face much higher costs for 400,000 barrels per day (bpd) of Mexican crude and another 200,000 bpd of fuel oil imports. Essentially, the tariffs 'are a boon to Asian refiners,' Sen told Bloomberg. 'It's a win for a lot of the rest of the world, just a massive loss for US refining,' she added. It will be an unintended consequence 'but that is absolutely how it's going to play out,' Sen said. Commenting on the tariff announcement, American Fuel & Petrochemical Manufacturers (AFPM) President and CEO Chet Thompson said, 'We are hopeful a resolution can be quickly reached with our North American neighbors so that crude oil, refined products and petrochemicals are removed from the tariff schedule before consumers feel the impact.' 'American refiners depend on crude oil from Canada and Mexico to produce the affordable, reliable fuels consumers count on every day,' Thompson added. American Petroleum Institute President and CEO Mike Sommers commented that API would continue to work with the Trump administration 'on full exclusions that protect energy affordability for consumers, expand the nation's energy advantage and support American jobs.
US Tariffs Canada Mexico Oil Refineries Energy Prices Trade Dispute Asian Refineries
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