US president Donald Trump has given little indication on whether he will delay or implement his plan to impose stiff import duties on Canadian and Mexican energy commodities and other products on 4 March.
Some market participants are hopeful for another extension or cancellation of Trump's executive order that would impose a 10pc tax on Canadian energy imports, a 25pc tariff on non-energy imports from Canada and a 25pc tariff on all imports from Mexico.
The uncertainty over the implementation has had vast segments of the energy industry — oil and gas producers, refiners, pipeline operators, traders — bracing for potentially disruptive outcomes.
The three governments are negotiating to avert a full-blown trade war, addressing Trump's pretext for imposing the tariffs — Mexico's and Canada's alleged unwillingness to cut flows of fentanyl and immigrants into the US.
Trump and Canadian prime minister Justin Trudeau last spoke on 23 February, with the two leaders noting that the flow of fentanyl across the shared border had fallen in the preceding month.
But Trump, speaking the following day, said that "the tariffs are going forward on time, on schedule". And on Tuesday, Trump repeated to reporters at the White House his previous off-the-cuff remarks about Canada becoming "the 51st US state".
"We don't need their oil," Trump said. "We don't need their lumber."
Even without the broad tariffs in place, trade disputes will pick up pace next month when Trump's 25pc tariff on all imported steel and aluminum goes into effect on 12 March.
The imposition of tariffs after decades of free trade in energy across North America is expected to create legal uncertainty in contractual obligations related to the payment of tariffs and reporting requirements. The current US import duties on crude are set at 5.25¢/bl and 10.5¢/bl, depending on crude quality. The new tariff would be based on the value of the commodity — without specifying how that will be calculated and at what specific point during the transportation process.
US government agencies are not expected to clarify the implementation details until Trump's executive order on tariffs goes into effect.
US oil industry groups have lobbied the Trump administration to exempt energy imports from tariffs. Trump instead lowered the planned tariff on Canadian energy imports to 10pc, from the originally proposed 25pc.
US lawmakers, including close Trump allies, have expressed concern about the potential impact of tariffs. But the Republican lawmakers have shied away from confronting Trump over the issue.
"Texas' number one trading partner is Mexico, number two is Canada, so what happens will have an impact on us," US representative Randy Weber (R-Texas) said today at an event hosted by Politico.
But Weber added that Texas governor Greg Abbott (R) is "on top of this stuff" and that "if it was going to be a problem for Texas, I think [Abbott] would have been either singing out loud, or he would have gone to talk to the president directly".
Nearly all of Mexico's roughly 500,000 b/d of crude shipments to the US last year were waterborne cargoes sent to US Gulf coast refiners. Those shipments in the future could be diverted to Asia or Europe. Canadian producers have much less flexibility, as more than 4mn b/d of Canada's exports are wholly dependent on pipeline routes to and through the US.
Canadian producers also have expressed concern about the uncertain impact of tariffs on crude volumes trans-shipped through the US, either for exports to third country destinations from Gulf coast ports or transported on US pipelines to destinations in eastern Canada.
India is a key destination for trans-shipped Canadian crude. Buyers in India loaded 150,000 b/d from the US ports last year, including around 40,000 b/d of trans-shipped Canadian heavy sour crude, data from oil analytics firms Vortexa and Kpler show.
