Trump’s tariff plan threatens to raise gas prices

President-elect Trump’s proposed tariffs on Mexico and Canada are expected to pump prices up.

trumphe said late last monththat on his first day in office, he would impose 25 percent tariffs on all Canadian and Mexican products. The two countries are the main sources of US oil imports, and if it implements the tariffs, analysts say the action could lead to higher gas prices.

Andrew Lipow, president of consulting firm Lipow Oil Associates, said a 25 percent fee is a surcharge of about 40 cents per gallon.

“Prices at the pump are going to go up. Like it or not, the East Coast is an import market and they should be importing oil at a higher price,” Lipow told The Hill.

Tom Kloza, global head of energy analysis at the Oil Price Information Service, had a similar projection. He told The Hill that a 25 percent tariff would raise prices, at least in the short term.

“There will be difficulties adjusting to a Canadian tariff of 25 percent,” he said. “It could produce a temporary but noticeable price shock.”

Even Trump himself has generally said so“I can’t guarantee”import taxes will not increase prices.

The proposed tariffs set up a potential conundrum for Trump and the Republican Party, marking a problem in which Trump’s pledges to put “America first” fly head-on with his promises to lower consumer prices, including the price of fuel

Canada and Mexico are the main sources of US oil imports, with more than half of the country’s oil imports coming from Canada and another 10 percent from Mexico.from 2022.

While Trump has pledged to increase domestic oil production, Lipow said any increased drilling that occurs would not offset higher Canadian oil prices.

He argued that an artificial increase in prices would cause American producers to raise their own prices to match it.

“If prices go up, they’re only going to raise their prices,” he said. “There’s only so much increase in production they can do.”

Unlike countries that have state oil companies, the US Govtcan’t decidewhether to increase oil production or by how much, since decisions are made by private companies.

Both Kloza and Lipow said they expect gasoline prices in the Midwest to be particularly affected by the tariffs, given that refineries that turn oil into gasoline in those areas depend on Canadian oil.

“US refiners in the Midwest are isolated buyers. They need that Canadian crude and they’re going to have to fight,” Kloza said.

“I think everybody would be affected, and especially some of these swing states, Michigan, Wisconsin, Minnesota, which are really right next to the Canadian border, they’re significantly dependent on Canadian energy supply,” Lipow said.

However, Kloza said that in his view, the price increase brought about by the tariffs could be short-lived.

“Longer term, you’re going to see more oil coming from perhaps untargeted areas like Saudi Arabia, Colombia and even Iraq,” he said.

But Lipow said a lack of pipeline infrastructure could still make it difficult to get oil from anywhere but Canada to key U.S. locations.

“Canada is the only country that supplies imported fuel or crude oil to the Rockies and the Midwest,” he said. “The difficulty is getting there. I can’t import crude oil from the Gulf Coast and ship it to Montana and North Dakota.”

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