Rising prices in oil, gas, diesel and electricity demonstrate once again the heavy reliance of Americans on Canadian resources, particularly for crude oil, natural gas, and refined products. Canada is the largest international supplier of petroleum to the U.S., with 84% of its oil and 76% of its electricity going to U.S.buyers in 2024. Then why the Trump proposal in October to remove the sanctions on Russian oil in order to import diesel with announced volumes exceeding 300,000 tons immediately and potentially totalling up to 4.8 million tons? Remember, the sanctions were originally put in place to prevent Russia from having funds to help finance its war with the Ukraine. However, a group of U.S. lawmakers have charged that any imports of Russian diesel into the U.S. raises significant legal questions and could become the subject of legal action and congressional investigations. They stressed that companies importing goods in violation of U.S. law may face criminal and civil liability. Experts also have noted that imported Russian diesel would have little short-term impact on current high costs. Many Americans are questioning the move prior to the November mid-terms, recognizing that the original high costs of diesel has everything to do with the war with Iran which in itself is not supported by the majority of American voters.
The U.S.also relies heavily on Canada for roughly 85% of its total potash imports used primarily as fertilizer in the agriculture sector. In September, in light of the U.S.-Canada trade war, the Trump administration disclosed that it was looking into purchasing potash from Belarus. However, Belarus’s authoritarian leader Alexander Lukashenko immediately declared that there were no available volumes of fertilizer to send to the U.S. Key buyers of Belarus potash already include China, Brazil and India. Remember that Canadian potash remains exempt from U.S. tariffs on Canada. Canada also has a big geographical advantage to Belarus, with its less costly supplies making the relatively short journey south of the border. Transporting potash from Belarus is a much longer, more complicated and more costly journey. Moreover, shortages of fertilizer and its rising price are mainly attributed to multiple global conflicts, including Russia’s war against Ukraine, the U.S. war with Iran and the shutdown of the Strait of Hormuz.
As for the mid-terms, the high tariffs on many Canadian goods, including those in the aluminum, steel and automotive sectors, have greatly affected producers and consumers in not only the border states, such as Michigan and Maine, but also in some of the southern states. There is a lot on uncertainty about the future in light of Trump’s on and off again tariff moves. Business leaders on both sides of the border are not happy with the unstable situation and the resulting high costs for American and Canadian consumers. If the Democrats take control of Congress, there is little doubt that those representing affected states will push to do away with many tariffs and move to a fair trade agreement for both the U.S. and Canada. In addition, valuable Canadian tourism to the U.S. has steeply declined in numbers in light of the Trump administration’s threats to Canadian sovereignty and the recent increasing new found emphasis in Canada on buy-Canadian policies.
\The current trade war has forced Canada to look to diversifying its trade by becoming less reliant on the U.S. The Canadian government is currently in trade-related consultations with other countries, including the European Union, the U.K., Korea and India. This will surely be one of the major consequences of Trump’s policies and continuing threats against Canada.
As for the results of the mid-terms, there is a lot of speculation with respect to a negative outcome for the Republicans. The Trump administration has already accused Canada of possible election interference, mostly because of attempts by Canadian government officials to push for a fair free trade agreement with the U.S. A number of frankly ridiculous and flimsy charges have been laid by Trump’s ambassador to Canada. Hopefully, in the event of expected heavy Republican mid-term losses, Trump will not blame Canada, resulting in more political and economic attacks on its northern neighbour!
