Proposed tariffs on oil and gas could harm Canada’s economy and increase fuel costs for U.S. consumers, experts say.

In Alberta, Canada’s oil-rich province, concern is growing over Donald Trump’s proposed 25% tariff on Canadian imports. Canadian leaders and energy experts warn this move could devastate Canada’s economy and increase U.S. gas prices.

“Canada has no choice but to work with Trump,” said Dennis McConaghy, a former Alberta energy executive. “The country must negotiate effectively.”

Trump announced plans for a blanket tariff on Canadian and Mexican imports starting in January. However, he did not clarify if oil and gas would be exempt.

Lisa Baiton, CEO of the Canadian Association of Petroleum Producers, warned the tariff could reduce Canada’s oil production.

McConaghy noted the tariff could lead to job losses in Alberta and harm Canada’s economy. Provinces relying on financial transfers from Alberta could also suffer.

The Canadian dollar, already under economic pressure, may face further devaluation. “Canada’s economy is deeply tied to the U.S.,” McConaghy said. “About 80% of our trade is with the U.S., much of it involving hydrocarbons.”

Consequences for U.S. Refineries and Consumers

U.S. fuel manufacturers urge Trump to exclude oil and gas from the tariff, citing their reliance on Canadian crude. “Crude oil is to refineries what flour is to bakeries,” said the American Fuel and Petrochemical Manufacturers (AFPM). “Higher crude costs will raise fuel refining expenses in the U.S.”

Despite being the top global producer of crude oil, the U.S. imports significant amounts of oil, particularly for regions like California and the Midwest. About 40% of crude processed in U.S. refineries is imported, with most coming from Canada.

Midwest refineries depend on heavier Canadian crude, and tariffs could raise operating costs, according to the AFPM. These costs would likely pass to consumers, increasing gas prices.

Patrick De Haan, a Chicago-based gas price analyst, estimated states like Minnesota, Wisconsin, and Michigan could see fuel prices rise by up to 75 cents per gallon. Higher costs could also affect airlines and freight carriers.

Trump’s campaign promise to lower gas prices below $2 per gallon may become harder to fulfill. As of late November, regular gas in the U.S. averaged around $3 per gallon.

Trump has emphasized boosting U.S. energy independence by increasing domestic oil production and reducing reliance on foreign imports. However, a tariff on Canadian oil could conflict with his goal to reduce gasoline prices.

Tariffs as Leverage for Border Security

Some analysts speculate Trump’s tariff threat is a negotiating tactic. He may aim to pressure Canada and Mexico to address border security and curb illegal immigration. Trump suggested tariffs would remain until both countries take significant actions.

While the outcome of this proposal is unclear, experts agree the stakes are high for both countries.