The US would be forced to buy oil from geopolitical rivals like Venezuela if they were to cut off trade with Canada, warned Ottawa’s Foreign Minister.
Mélanie Joly told the Financial Times that the threat of a 25% tariff on Canadian imports by the US President would ultimately harm citizens if the relationship between the two countries were to escalate into a trade war.
“We ship oil with a discount that, in the end, is refined in Texas. If not us, then Venezuela” Joly said, looking at the heavy oil produced in Venezuela and Canada, on which many US refineries rely.
“There is no other option and this government will not work with Venezuela” Joly said.
US President Donald Trump imposed far-reaching sanctions on Caracas during his first term in the White House.
Joly was in Washington to urge Canada’s last-minute efforts to avert the first full-blown trade war from Trump’s new government. Trump reaffirmed on Thursday that the United States would impose a 25% tariff on imports from Mexico and Canada. He repeated his announcement to the two countries, which are the US’s most important trading partners.
The President stated that he was considering exempting oil imports from the tariffs, which reflects the US’s dependence on its neighbor for energy supplies.
Despite the increasing shale oil production in states like Texas, about every fifth barrel of oil consumed in the US comes from Canada and around 60% of the imported crude oil is sourced from there.
Many US refineries rely on the type of heavy oil produced in Canada or Venezuela, not on the lighter oil produced by the US shale industry.
Ottawa and Mexico City have both prepared lists of retaliatory tariffs they would impose on the US if Trump were to impose tariffs on them, as persons familiar with the matter told the FT.