Canada Risks Using Energy as Weapon in Trade Dispute, Experts Warn
Canada is facing a significant challenge as the incoming Trump administration threatens tariffs on Canadian imports, prompting debate about the nation’s response. Experts overwhelmingly caution against using energy as a leverage tool in a trade dispute, arguing it would be a deeply flawed strategy. The disagreement centers on whether Canada should implement measures like restricting energy exports to the United States or adding export tariffs on oil, gas, and electricity.
The core of the issue stems from the potential economic repercussions of such a move. Several premiers have agreed to consider utilizing “any and all tools” to respond to the anticipated tariffs, a strategy backed by Prime Minister Justin Trudeau who stated Canada will “use any and all tools to see potential tariffs lifted.” However, influential voices, including international trade analysts and energy experts, strongly advise against this approach.
“It is, quite frankly, the dumbest thing I’ve ever heard,” commented Fen Hampson, co-chair of the Expert Group on Canada-U.S. Relations, emphasizing the risks associated with a tit-for-tat escalation. “If Trump puts the tariff on it, American refiners and consumers are going to scream because they’re going to see it in the pocketbook.” He advocated for retaliatory tariffs targeting discretionary consumer goods purchased in the U.S., such as digital streaming services, as a more effective response.
The argument against using energy as a weapon centers on Canada’s limited energy independence. The nation relies heavily on the United States for energy supplies, with much of western Canadian oil flowing through the U.S. and returning to Ontario via pipelines. Disrupting these established energy flows—particularly through Enbridge’s Line 5—would negatively impact Canadian consumers. “We don’t have an east-west pipeline of any consequence, so the oil that we send to Central Canada transits through the United States,” explained Peter Tertzakian, a leading energy economist. “We don’t want to get into an energy tit-for-tat, because they have a lot more levers to pull than we do.”
Furthermore, the magnitude of the potential disruption underscores the complexity. Canadian oil exports to the U.S. reached a record 4.42 million barrels per day in 2023, accounting for approximately 69% of all imports to the U.S., according to the U.S. Energy Information Administration. Gary Mar, former representative to the U.S., noted, “We can’t just shut down the oilsands, because we don’t have any place to store it.”
The discussion highlights the precarious position Canada finds itself in. While Trudeau insists on utilizing “any and all tools,” many believe the optimal approach involves strategic diplomacy and targeted retaliation rather than a confrontational gamble with energy supplies. The stakes are high, with the potential for significant economic disruption on both sides of the border. Ultimately, experts believe that a measured response focused on other trade levers is a more prudent and effective strategy than resorting to a risky energy-based trade war.
The debate underscores a fundamental truth: in a trade dispute, Canada’s leverage is limited, and a poorly executed response could have far-reaching and damaging consequences.
