Ever since President-elect Donald Trump started talking about tariffs, Canada’s government has gone through a transformation. Overtly not huge fans of oil and gas, the ministers in Ottawa suddenly turned defensive. The latest to do that was resource minister Jonathan Wilkinson, who this week threatened in-kind retaliation against Trump’s tariffs.
Earlier this week, the U.S. president-elect stepped up an argument for making Canada the 51st state of the country. Trump said he would use “economic force” to make that happen, including those 25% tariffs he first floated as a remedy for the U.S. trade deficit last year. “We don’t need anything they have,” the president-elect told media, according to Bloomberg.
The publication then reached out to Wilkinson for a response to these remarks, which also included a claim that the United States was apparently subsidizing Canada at a rate of some $200 billion annually. According to Bloomberg, the reference is actually to the U.S. trade deficit with Canada, which, although much smaller, at some $40 billion for 2023, is likely a thorn in Trump’s side like the deficit with the EU.
Canadian politicians have not responded well to Trump’s annexation ideas, with the Premier of Ontario in December threatening to cut off electricity exports to the northern states in case the President-elect went through with his threat of imposing tariffs on Canadian imports. Now, Wilkinson has pretty much done the same, but on a broader scale. The official also made a point of mentioning that, for the most part, Canada’s exports to the U.S. have no viable alternative.
“If you look at oil, we provide heavy crude,” Wilkinson told Bloomberg. “Most of the crudes that are produced in the United States are light sweet crudes. The refineries in the Midwest are set up for heavy crude, and they have no alternative to the use of Canadian resources — not that’s economic,” the minister explained. “Even the alternative that exists for some of the Gulf refineries for heavy crude, it’s Venezuela. Are you really telling me the Americans are more interested in buying crude oil from Venezuela than from Canada?”
Wilkinson last year declared Canada’s government was not interested in LNG and who has supported a massive emissions cap for the oil and gas industry that the industry has warned would mean a production cap. Now, in the face of a potential threat to the Canadian oil industry he has changed tack, defending the crucial industry.
His point about alternative suppliers is accurate, too. The United States has sanctions on Venezuelan oil, and Venezuela is the other big producer of heavy crude besides Canada. However, Wilkinson did not stop there, going on to point out that Canada is also the chief supplier of uranium and potassium fertilizer to the United States.
“The same thing is true with uranium. The same thing is true with potash, where yes, they do have an alternative: it’s called Russia, which is not the most stable nor dependable source either,” Wilkinson told Bloomberg. In fact, Canada is not among the top suppliers of uranium to U.S. nuclear power generators. It is Russia that is the biggest external supplier of that. Canada, for its part, exports most of its uranium to Europe.
The idea of imposing tariffs on Canadian imports has met with strong criticism both from Canada and the United States. The strongest argument against tariffs is that this would fuel inflation at home, which would go against Trump’s campaign promise of more affordable energy for Americans and lower inflation. The talk about annexing the country has rattled Canadians, who no longer see it as a joke. As signaled by Wilkinson, however, they are ready to negotiate a peaceful resolution to trade balance concerns the U.S. president-elect might be having.
By Irina Slav for Oilprice.com
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