Canada’s offshore oil & LNG with doors to wider markets safe from trade war tentacles, report finds

With the first trade war shots fired, a new analysis has highlighted offshore oil production and liquefied natural gas (LNG), which have dipped their toes into broader market arenas, among products that can reap the benefits from the looming tariff threats, potentially paving the way for Canada to boost its economic might at a time of brewing global instability.

The new analysis, undertaken for the Public Policy Forum by Navius Research, a non-partisan consultancy specializing in quantitative analysis, emphasizes the growth slump across Canadian provinces under tariffs, alongside ways to hit back against the U.S. for imposing tariffs across Canadian business.

The growing tariff threats have put a significant portion of Canada’s energy market in the midst of trade wars that are lurking around the corner, but cutting off the oil juice may not be a feasible business course of action for Canada, despite the growing calls to take such a step as a pre-emptive strike or in retaliation for the tariffs the U.S. seems keen on imposing under President Donald Trump, who previously granted a stay of execution, putting plans on ice for a month and followed it up recently with a 90-day extension.

Based on the report, U.S. tariffs will reduce growth in every single Canadian province, although retaliatory tariffs can inflict significant pain on the U.S. economy in several targeted industries, based on a new analysis, which assesses how damaging the U.S. tariffs will be on both Canada and the United States and also analyzes potential Canada-led strategies to respond to President Trump’s tariffs.

Inez Jabalpurwala, PPF President and CEO, pointed out: “We undertook this study to provide quantitative guidance to policymakers in real-time. The work reveals emergent areas of focus for Canadian leaders, including the urgent development of east-west, and west-east trade in Canada and beyond.”

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Furthermore, the analysis shows that sectors in every province decline or experience price reductions, from “gasoline and diesel refined in New Brunswick, aluminum exported from Quebec, steel and automobiles from Ontario, potash and uranium from Saskatchewan or oil and gas from Alberta.”

The report notes that vehicle manufacturing would endure a hit of $93.8 billion in Ontario over five years, while the aluminum industry in Quebec would lose $12.7 billion over the same time frame. However, some sectors where trade flows east-west rather than north-south, indicating trading patterns between provinces or with Asia and Europe, are insulated from U.S. tariffs and have the potential to experience growth during this period.

Jotham Peters, Managing Partner at Navius Research, highlighted: “Sectors with access to broader markets, such as offshore oil production in Newfoundland and LNG production on the west coast, may actually benefit from tariffs, which might be a guide for how Canada can insulate its economy in the future.”

This analysis of the effect of a 25% retaliatory tariff on imports of 23 classes of U.S. goods into Canada identifies the retaliatory tariffs that can inflict more damage on the U.S. than on Canada, pointing out that U.S. would suffer more harm over five years than Canada if the country enacts retaliatory tariffs on food, pharmaceuticals, fabricated metals, alcohol and tobacco, manufactured goods, steel, plastics, cement, non-ferrous metals, paper, mining products, clothes and wood products.

On the other hand, Canada would do itself more harm than the U.S. if it retaliates with tariffs on oil, electric products, raw wood, natural gas, chemicals, refined petroleum, machinery, biofuels, agriculture, and vehicles. While Canada could still use the black gold card to pile the pressure on Trump to make him give up on imposing tariffs, forcing the U.S. President’s hand may also backfire, as he may decide to call the country’s bluff and not only go ahead with a 25% tariff on Canadian products and a 10% tariff on energy resource products but also increase these.

This would put Canadian businesses under strain, as economic challenges would continue to mount. In acknowledgment of this, Canada and its provinces are contemplating some previously rejected moves, such as building more oil and gas pipelines in Quebec which had not been keen on such proposals before, to diversify its exports. Some believe diversification is long overdue to end the reliance on the U.S. and build closer ties with other nations, like the ones in Asia.

No one knows with certainty what may be in store. However, if tariffs are implemented, they will probably lead to costs of around $86 billion annually, affecting multiple industries, including crude oil and natural gas. The motivation behind Trump’s tariff threat was to bring Canada under the control of the U.S. and integrate it into ‘the land of the free and the home of the brave.’

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In response to Trump’s tariff threats, Premier David Eby revealed counter-measures to stand up for British Colombia’s workers and businesses, directing the BC Liquor Distribution Branch to stop buying American liquor from red states, and remove the top-selling ‘red-state’ brands from the shelves of public liquor stores; and the B.C. government and Crown corporations to buy Canadian goods and services first.

To mitigate the impact on B.C., Premier Eby confirmed that private-sector projects worth $20 billion were being assessed to get them approved as quickly as possible, by issuing their permits faster to create 6,000 jobs in remote and rural communities. The list of projects to be fast-tracked is said to entail the Haisla Nation’s Cedar LNG, Enbridge’s T-North gas pipelines, and NEBC Connector pipelines for condensate and natural gas liquids.

B.C.’s preliminary assessment of 25% tariffs showed that the province could see a cumulative loss of $69 billion in economic activity between 2025 and 2028, alongside more than 120,000 jobs. In addition, 25% tariffs on Canadian mineral exports are estimated to have the potential to cost American companies over $11 billion with “a profound effect” on the U.S. defense industry, energy production, and manufacturing.

“The U.S. administration’s decision to impose tariffs will have devastating consequences for the American economy and people. Tariffs will upend production at U.S. auto assembly plants and oil refineries, raise costs for American consumers—at gas pumps and grocery stores—and put American prosperity at risk,” underscored the Canadian government.

The B.C. government has come up with a three-point approach to fight back against the tariffs with tough counter-actions and outreach to American decision-makers; strengthen the economy by expediting projects and supporting industry and workers; and diversify trade markets for products to make British Columbia less reliant on U.S. markets and customers.

According to Wood Mackenzie’s ‘How would Trump tariffs affect North American oil markets?’ report, the U.S. tariffs of 10% and 25% on Canadian and Mexican oil products, respectively, would set in motion a significant shift in crude flows in North America as higher prices would push a portion of U.S. imports into overseas markets, with higher ensuing prices ultimately affecting demand in the U.S. with a softer impact than a more disruptive 25% tariff on Canadian oil.

Dylan White, Principal Analyst for North American Crude Markets at Wood Mackenzie, elaborated: “A wide range of scenarios are still at play, as the implementation of tariffs has been delayed by a month. The uncertainty surrounding US policy is likely to continue; ongoing talks could lead to a lifting of tariffs or could spiral into steeper penalties on oil imports. As the tariffs currently stand, the North American market will see several impacts.”

Should a 25% tariff scenario on Mexican oil be put into play, Wood Mackenzie expects Mexico exports to largely shift away from America to other outlets in Europe and Asia, potentially impacting around 600 kb/d of imports from Mexico into the U.S. Such a blow could be softened by the shutdown of the Lyondell Houston refinery and the start-up of Pemex’s Dos Bocas refinery.

White noted: “Backfill options for heavy barrels in the US crude slate, especially in the US West Coast and US Gulf Coast, would need to come from waterborne imports via Latin American and Middle East countries. Iraq, in particular, flexes the largest alternate pool of heavy crude exports. However, these imports are generally cost disadvantaged compared to nearby Canadian and Mexican heavy supply.

“Steeper tariffs on Mexico would likely shift Mayan imports away from the US, with subsequently tighter heavy balances leading to slightly higher relative heavy prices in the US Gulf Coast. Beyond that, we expect the higher tariff costs will get backed into wider crude differentials in Mexico and Canada.”

Moreover, Wood Mackenzie expects Canadian crude would continue largely being consumed in the U.S. mid-continent and Gulf Coast even if a 10% tariff scenario on Canadian oil comes to pass; thus, the firm does not expect such a tariff would be substantial enough to shift Canadian barrels away from the U.S. Gulf Coast and into Asia.

White pointed out: “Refineries in the Midcon are landlocked and have limited access to alternate sources of heavy crude and are therefore dependent on Canadian supply. However, Canadian outlets to non-US destinations become advantaged. The Trans Mountain Pipeline (including TMX) provides access to the Pacific Basin and would likely facilitate increased shipments of Canadian crude to Asia, and away from the US West Coast, in a tariff scenario.”

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After U.S. President Trump’s threatened imposition of tariffs, Climate Action Network Canada outlined: “Oil interests and their political mouthpieces have been quick to capitalize on this crisis with calls to fast-track BC’s Liquified Natural Gas (LNG) exports to Asia and even resurrect long-dead pipelines like Energy East or Northern Gateway. While this industry plays the ‘Made in Canada’ patriotism card when it benefits them, the reality is that Canada’s oil and gas industry is largely US-owned.

“These projects are backed by billionaires and Wall Street investment firms who are close allies of and donors to Trump, eager to embrace Canada as the 51st state and prioritize the interests of their majority-US financiers and shareholders. We call on our leaders not to fall into the trap of obeying tyranny in advance or to let U.S.-owned fossil fuel corporations exploit this crisis. Canadian governments must respond in a way that upholds our values, protects workers and those most at risk, and makes our country more resilient for years to come.”

Based on Wood Mackenzie’s analysis, tariffs would drive oil demand 50,000 b/d lower in the U.S. by 2026, partially due to modestly higher refined product prices, but the relief from domestic producers is unlikely, as the firm forecasts measured U.S. Lower 48 production growth in the years to come, driven by oil majors in the Permian, as producers remain cash disciplined. In line with this, the company emphasizes that drilling investment in recent years has shown little reactivity to changes in crude prices.

Aside from Canada and Mexico, the U.S. President also disclosed additional 10% tariffs on Chinese goods, which served to add fuel to the America-China trade war fire, as the Asian country took swift action, announcing an additional 15% tariff on U.S. coal and LNG, alongside 10% more on American crude imports.

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The tariff one-upmanship between the duo recently led average U.S. tariffs on Chinese exports to stand at 124.1%, more than 40 times higher than before the U.S.-China tariff war began in 2018 and already 6 times higher than the average U.S. tariff on China of 20.8% when the second Trump administration began on January 20, 2025. According to Peterson Institute for International Economics (PIIE), two Trump administrations together have now imposed special tariffs of 103.3% on China, covering all U.S. goods imports from the Asian country.

The rest of the world is said to have been impacted by the U.S. tariff actions of April 5, 9, 10, and 11. In respose to these, China has retaliated in three tranches in early 2025, lifting its average tariff on U.S. exports to 147.6%, while increasing the scope of covered U.S. exports initially from 58.3% to 63%, and then to 100% on April 10, when its retaliatory tariff of 84% affecting all imports from the United States went into effect.

Thanks to the Trump administration’s actions, the average U.S. tariff on all goods imports from the rest of the world rose from 3% to 10.3% between January 20, 2025 and April 11. The U.S. tariff on all goods imports from the rest of the world temporarily reached 15.7% before President Trump reversed some of his earlier tariffs and paused their increase for 90 days.

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Meanwhile, after Trump set his ‘drill, baby, drill‘ agenda in motion and put a freeze on offshore wind leasing, many renewable energy developers expressed dissatisfaction with such a move. One of the more recent calls to begin with offshore wind leasing area awards in Norway as soon as possible, which came from Hans Petter Ovrevik, Deep Wind Offshore’s CCO, modifies Trump’s rallying cry for oil and gas boom to adopt it for offshore wind leasing purposes, changing the chant to ‘lease, baby, lease!’

Canada is perceived to be America’s key supplier, providing 60% of crude oil imports, 85% of electricity imports, and more than 99% of natural gas imports contributing to energy security and affordability for U.S. consumers and businesses. While Canada’s electricity exports power nearly 6 million U.S. homes, Canadian uranium imported into the United States to be used for nuclear power generates enough electricity to power 18 million American homes.

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An all-of-the-above energy strategy seems to be the prevailing trend in many corners of the world, as trade wars threaten to blast the economy to kingdom come and tectonic shifts in the global landscape continue to unravel the previous default settings across many aspects from politics to energy, driven by policy changes and rising geopolitical tensions. Analysts are convinced that a silver lining on the tariff war front came with the plot twist in the form of a delay for previously green-lighted tariffs’ execution.

Unifor, said to be Canada’s largest union in the private sector, representing 320,000 workers in every major area of the economy, sees a 25% tariff on Canadian goods and a 10% tariff on energy imported to the U.S. as “an economic call-to-arms for Canada,” deeming such a move as an “unjust imposition” on Canadian goods by the Trump administration.

Lana Payne, Unifor National President, underlined: “After months of taunts and threats that have already hurt investment decisions and jobs in Canada, Trump has fired the first shot in a full-on trade war and now every Canadian politician, business leader, worker and resident must fight back. Trump has seriously misjudged the resolve and unity of Canadians, and he has misjudged how damaging this trade war will be for American workers.

“These tariffs will hurt working people with higher prices for everyday goods, destroy jobs on both sides of the border and have devastating consequences for highly integrated manufacturing sectors, including auto, across Canada and the U.S. Today our trade relationship forever changed with the U.S. and now we must invest in ourselves, redefine international trade relationships, and build a new, more resilient economy.”

Unifor did not stop there as it also urged all levels of government and industry to step up and coordinate a response to the continued tariff threats on targeted Canadian industries, including auto, steel and aluminum, wood products, copper, and others.

Conor Curtis, Head of Communications at Sierra Club Canada, stated: “The Premier of Alberta yesterday made a point of going on American news and saying Canada should not limit or cut off oil and gas exports to the U.S. Let’s be clear, oil and gas corporations are not on Canada’s side and more oil and gas development won’t solve anything economically. We need renewable solutions that are controlled right here in Canada otherwise we risk giving more power to U.S. interests who will use every means in their power to force us to give up resources for their profit.

“For example: When Canadians and Canada said no to oil and gas interests Ruby River Capital, an American company, sued to grab up to $20 Billion from Canadian taxpayers. All because local people successfully protected the Saguenay River of Quebec and said NO to a proposed LNG project. We need made in Canada renewable energy solutions that help us protect nature, and defend all that we love, from climate change and U.S. – corporate driven – aggression.”

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Just as economic doomsday predictions reached their zenith, President Trump changed course, deciding to make concessions on tariffs, granting a three-month reprieve, but once the grace period expires, the Republican leader’s threats indicate his willingness to introduce and set in motion a global regime of reciprocal tariffs on all of America’s trading partners.

Ernie Megginson, President and Founder at Megginson & Associates, outlined: “Presidential actions can have significant impacts, yet they also may carry unintended consequences. Discussions with legal experts specializing in LNG projects in the USA reveal a mix of support and concerns surrounding recent Executive Orders favoring the industry and LNG facilities.”

Megginson spotlights three key concerns related to whether staffing levels at FERC and the DOE post-layoffs impede application processing, agency personnel relocations hinder internal coordination for application reviews, and how changes to NEPA regulations might impact project timelines amid potential legal hurdles.

“While regulatory stability is paramount for the industry, lingering uncertainties loom. Project developments may outlast the current administration, facing supply negotiation complexities, equipment cost fluctuations, trade tariffs, and global market oversupply risks, notably with Qatar’s capacity expansion,” added President and Founder of Megginson & Associates.

While Shell is perceived to remain optimistic, projecting a substantial 60% surge in LNG demand by 2040, fueled by Asian markets, Megginson emphasizes that challenges persist when it comes to concerns over China’s willingness to commit to long-term U.S. LNG deals amid escalating tariffs, the U.S. LNG sector’s ability to establish trustworthiness with European partners amid shifting alliances, and America’s EPC capacity to manage the anticipated project influx.

“The LNG sector’s journey unfolds with promising growth prospects but also potential for impending hurdles,” noted Megginson.

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According to Public Policy Forum, the analysis has valuable lessons for Canadians as they navigate this unprecedented moment, showing that the pain of U.S. tariffs is a shared one, and that “we can’t afford to be split along regional lines, as Canada and Canadians are prone to do.”

In addition, it emphasizes the need for more east-west/west-east trade and illuminates the most impactful sectors to hit back with retaliatory tariffs.

The analysis hammers this home by pointing out: “Greater trade networks to either the east or west coast will help insulate Canada from trade shocks with the U.S. and can act as leverage for the next tariff threat.”