President Donald Trump’s tariffs on Canada will raise energy prices for U.S. consumers if the levies go into effect on Tuesday as expected, the country’s energy minister said Monday.
Jonathan Wilkinson, Canada’s minister of energy and natural resources, said the tariffs will cause economic pain in the U.S. and Canada, calling the situation a “lose, lose proposition for both countries.”
“We will see higher gasoline prices as a function of energy, higher electricity prices from hydroelectricity from Canada, higher home heating prices associated with natural gas that comes from Canada and higher automobile prices,” Wilkinson told CNBC’s Megan Cassella in an interview.
Trump is threatening sweeping 25% tariffs on goods imported from Canada and Mexico, as well as 10% levies on energy resources imported from Canada. The president had originally threatened to impose the tariffs on Feb. 3, but put them on pause for one month after reaching last-minute agreement with the country’s two largest trading partners.
CNBC has reached out to the White House for comment. A White House official told reporters on Feb. 1 that Trump decided on a lower 10% tariff on Canadian energy rather than 25% to minimize the impact on gasoline and home heating prices.
Wilkinson said car prices would rise by at least $2,000 due to the tariffs.
Commerce Secretary Howard Lutnick indicated Sunday that the levies could be lower depending on how negotiations proceed. Wilkinson said the U.S. and Canada were making progress in negotiations, but it was unclear whether Trump was satisfied.
“Whether the president agrees and whether he moves to put tariffs in place, ultimately it’s going to be the president’s decision, and I’m not sure anybody knows what the answer to that’s going to be,” Wilkinson said.
Trump dashed hopes of a last minute deal during a press conference held Monday afternoon to announce an investment from Taiwan Semiconductor. The president told reporters that there was “no room” left to negotiate with Canada and Mexico.
“They’re all set. They go into effect tomorrow,” the president said.
U.S. refiners like Marathon Petroleum have warned that consumers will bear at least some of the burden from tariffs on Canadian crude oil.
“We believe that the majority of that would be borne by the producer and then frankly to a lesser extent the consumer,” CEO Maryann Mannen said on the company’s Feb. 4 earnings call.
The U.S. is the largest producer of crude oil and natural gas in the world, but many refiners in the U.S. are dependent on heavy crude imported from Canada because it is lower quality and cheaper to purchase than the light crude produced domestically, according to Wells Fargo. Refiners in the U.S. Midwest are particularly dependent on Canadian crude.
The U.S. imported 6.6 million barrels of crude oil per day on average in December, more than 60% of which came from Canada, according to the Energy Information Administration.
Canada will retaliate if the tariffs go into effect with the focus on products sold in large volumes like orange juice and Kentucky bourbon, Wilkinson said. The first round of retaliation would not focus on energy or critical minerals, he said.
“Nothing is off the table, but I doubt that’s where we would start,” Wilkinson said.
U.S. crude oil has gained more than 1% and gasoline futures are about 14% higher since Trump said Thursday that the tariffs would go into effect on March 4.
