SINGAPORE: Canadian and Mexican oil producers may turn to Asia as a key market if US President-elect Donald Trump follows through on a proposed 25% tariff on crude imports from these countries. This move could force producers to cut prices and redirect supplies, analysts and traders suggest.
Sources familiar with the plan indicate that crude oil would not be exempt from broader tariff hikes, despite warnings from the US oil industry about potential economic and security impacts. The United States currently absorbs 61% of Canadian and 56% of Mexican crude exports, according to Kpler’s ship tracking data.
Canada’s crude exports have surged 65% this year to 530,000 barrels per day (bpd), aided by the expanded Trans-Mountain pipeline. However, these gains could be threatened if Canadian producers are unable to redirect supply previously destined for the US, potentially leading to deeper price discounts and revenue losses, according to Daan Struyven, Co-head of Global Commodities Research at Goldman Sachs.
Both countries primarily export heavy, high-sulphur crude suitable for processing in complex refineries found in the US and Asia. Tariffs could challenge US refiners, who are already limited in their crude sourcing options, and force Canadian producers to offer steeper discounts to attract Asian buyers and offset shipping costs.
Asian refiners, particularly in China and India, are expected to increase imports of Canadian and Mexican crude, given their refinery configurations. Recent months have already seen rising Canadian oil exports to Asia, although Mexican exports have declined by 21% to 860,000 bpd.
While some experts remain sceptical of Trump’s willingness to impose such tariffs—viewing them as a negotiating tactic—they acknowledge that the move could escalate costs for US consumers and refiners, potentially driving inflation. Nevertheless, any tariff implementation could provide Asia with an opportunity to secure discounted crude supplies.
