Trump's Trade War Will Make Energy More Expensive

After announcing steep tariffs on Mexico and Canada, President Donald Trump has put them on pause for one month after reaching agreements on border security measures. A 10 percent across-the-board tariff on China remains, and the Chinese government has returned the favor by imposing retaliatory tariffs on certain American goods, including a 15 percent levy on liquified natural gas.

Pausing these tariffs is good news for consumers and businesses alike. Although it’s uncertain what will happen after the 30-day mark, one thing is clear: A trade war will increase the costs of all goods, especially energy.

Before the tariffs were paused, Trump threatened to implement a 10 percent fee on Canadian energy imports including oil and gas, critical minerals, and uranium. The U.S. is the largest producer of oil and natural gas in the world and continues to reach new heights of production. After averaging a record 12.9 million barrels of crude oil per day in 2023, American oil production topped 13.4 million barrels per day in August 2024, according to the Energy Information Administration.

Despite this production, the U.S. is heavily reliant on Canadian crude oil to make liquid fuels and other petroleum products. Most U.S. refineries were built in the 1970s to accommodate heavy oil from the Middle East and Canada. This was well before the American shale boom, which brought lighter-grade oil to the market. In 2023, nearly 60 percent of crude imports came from Canada and July 2024 saw a record 4.3 million barrels of oil per day imported from the country.

“Canada is by far our largest supplier, and we build refineries specifically to refine heavier Canadian crude,” explains Nick Loris, the executive vice president of policy at C3 Solutions, a free market energy think tank. “Depending on the tariff rate and how long they’re in place, gas prices could rise anywhere from 10-30 cents per gallon, with the Midwest and the Rocky Mountain Region getting hit the hardest,” Loris tells Reason.

Trump-imposed tariffs could also harm American nuclear power. Despite generating the most nuclear energy in the world, the U.S. relies on other nations for uranium to fuel its fleet. Canada is the largest supplier of raw uranium (27 percent of imports in 2022), followed by Kazakhstan (25 percent) and Russia (12 percent), the latter of which the U.S. depends on for roughly a quarter of its uranium enrichment needs.

With last year’s passage of a bill to ban imports of Russian uranium signed into law, Canada is primed to play an increasingly important role in America’s uranium supply. Tariffs would threaten this and could increase fuel costs for American nuclear power producers, according to a report from the Center for Strategic and International Studies (CSIS).

The impact of tariffs would extend beyond uranium and hit other minerals, including copper and aluminum, both of which are necessary components for wind turbines and solar panels. “A 25 percent tariff on Canadian mineral imports could cost U.S. off-takers an additional $11.75 billion—a figure that would increase as base metal and uranium prices recover,” per the CSIS report.

Energy markets are global by nature. Shunning international collaboration and increasing fees for trading partners will raise the cost of energy for Americans and hurt all countries involved. Trump’s trade war is mostly paused—at least for now—which is a good thing. Now the president should end the tariff battle for good.

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