Trump says Canada facing 25 per cent tariff but oil might get a 10 per cent levy

U.S. President Donald Trump said Friday he is considering a lower tariff on Canadian oil as the White House confirmed he is going forward with 25 per cent levies on imports from Canada on Saturday.

Trump had been threatening the tariffs to ensure greater cooperation from the countries on stopping illegal immigration and the smuggling of chemicals used for fentanyl, but he has also pledged to use tariffs to boost domestic manufacturing and raise revenues for the federal government.

As he signed executive actions in the Oval Office on Friday, Trump was asked directly if he intends to hit Canadian crude with tariffs.

“I’m probably going to reduce the tariff a little bit on that,” Trump said. “I think we’re going to bring it down to 10 per cent on the oil.”

The prospect of a lower levy on oil likely offers little relief to Canadian officials in Washington, D.C. making a final diplomatic push to convince Republican lawmakers and Trump’s team to sway the president.

The president said there is nothing that Canada, Mexico or China can do to prevent the tariffs from being implemented.

“We have big deficits and it’s something we are doing. We’ll, we’ll possibly very substantially increase it or not, we’ll see how it is,” Trump said.

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According to the Energy Information Administration, the United States imported almost 4.6 million barrels of oil daily from Canada in October and 563,000 barrels from Mexico. U.S. daily production during that month averaged nearly 13.5 million barrels a day.

Shortly after Leavitt spoke, the S&P 500 stock index sold off and largely erased its gains on the day.

While the president wasn’t clear on the details of his tariff plan, he repeated his complaints about trade deficits and again linked the duties to fentanyl entering the United States.

The volume of drugs entering the United States from Canada is minuscule compared to the amounts coming from Mexico and China.

U.S. Customs and Border Protection figures show that officials seized 9,930 kilograms of fentanyl at American borders between October 2023 and September 2024. Only 20 kilograms of that amount came from Canada.

The tariffs carry both political and economic risks for Trump, who is just two weeks into his second term. Many voters backed the Republican on the promise that he could tamp down inflation, but the possibility of tariffs could trigger higher prices and potentially disrupt the energy, auto, lumber and agricultural sectors.

The potential impact on Canadian business

“We should expect all three countries to retaliate,’’ said Wendy Cutler, a former U.S. trade negotiator, now vice president at the Asia Society Policy Institute. She said the extent of the economic damage will depend on how long the tariffs are in effect.

“If it’s just a few days, that’s one thing. If they are in place for weeks onto months, we’re going to see supply chain disruptions, higher costs for U.S. manufacturers, leading to higher prices for U.S. consumers,’’ she said. “It could have macroeconomic impacts. It could affect the stock market. Then internationally it could lead to more tension with our trading partners and make it harder for us to work with them.”

Both Canada and Mexico have said they’ve prepared the option of retaliatory tariffs to be used if necessary, which in turn could trigger a wider trade conflict that economic analyses say could hurt growth and further accelerate inflation.

Canadian Prime Minister Justin Trudeau said Friday that Canada is ready to respond if Trump goes ahead with the tariffs, adding Canada “could be facing difficult times in the coming days and weeks.”

“We’re ready with a response, a purposeful, forceful but reasonable, immediate response,” he said. “It’s not what we want, but if he moves forward, we will also act.”

Trudeau said tariffs would have “disastrous consequences” for the U.S., putting American jobs at risk and causing prices to rise. Trudeau reiterated that less than 1 per cent of the fentanyl and illegal crossings into the U.S. come from Canada.

Ontario Premier Doug Ford has already vowed to counterpunch by pulling American alcohol off store shelves. Canada is the world’s No. 2 market for America’s distilled spirits (behind the 27-nation European Union).

Trump’s tariffs threaten to blow up the trade agreement he negotiated with America’s neighbours in his first term. His U.S.-Mexico-Canada Agreement – “the fairest, most balanced, and beneficial trade agreement we have ever signed into law,” Trump once declared — was supposed to bring predictability to North American trade, giving businesses the confidence to make investments.

A study this month by Warwick McKibbin and Marcus Noland of the Peterson Institute for International Economics concluded that the 25 per cent tariffs on Canada and Mexico and 10 per cent tariffs on China “would damage all the economies involved, including the U.S.’’

With files from Charlie Carey and Lucas Casaletto