President Donald Trump’s decision to impose tariffs on Canadian and Mexican oil is expected to result in higher gas prices for U.S. consumers, reflecting the double-edged nature of his trade policies. The tariffs are aimed at boosting domestic business and pressuring neighboring countries on issues like illegal immigration and drug smuggling, but they may also lead to inflation. The U.S. imports millions of barrels of oil from Canada and Mexico daily, which are essential for making finished fuels like gasoline. Analysts predict that if oil and refined products are not exempt from the tariffs, fuel prices will rise noticeably for consumers.
The American Fuel and Petrochemical Manufacturers Association hopes that the tariffs will be lifted before consumers start feeling the impact. The move is part of Trump’s efforts to address a national emergency over fentanyl and illegal immigration, with tariffs on Canadian and Mexican imports set at 25% and 10% on goods from China. The disruptions in the oil trade between these countries are expected to have a significant impact on fuel prices in the U.S.
Companies involved in the wholesale fuel market have little choice but to pass on the added cost to consumers, as post-COVID surge in fuel margins fades away amid oversupply and weakening demand growth. The East Coast, in particular, may face challenges as its refining capacity meets only about half the daily fuel demand, requiring additional imports from Canada or Europe to make up for shortfalls. Despite potential delays in the Midwest, where refiners have been stockpiling Canadian oil, higher prices are inevitable due to the tariffs.
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