Crude oil (tracked broadly by USO) has become the exception that proves the rule in the latest round of trade hostilities between Washington and Ottawa.…
Crude oil (tracked broadly by USO) has become the exception that proves the rule in the latest round of trade hostilities between Washington and Ottawa. After talks broke down over the weekend, the United States slapped a 50% tariff on a wide swath of Canadian goods, including furniture, dairy, electrical products and plywood. Oil, the single largest item in canadian trade by country with the United States, was left off the list entirely, and that omission says a lot about how boxed in both governments are.
The numbers explain why. The US buys about 90% of Canada's crude exports, worth roughly 126 billion Canadian dollars out of CA$140 billion total in 2025. Flip the relationship around and Canada supplied about 63% of all US crude imports last year. Few trading relationships anywhere are this lopsided and this mutually necessary at the same time.
Why Alberta's Heavy Oil Needs American Refiners
Decades of investment built this arrangement, barrel by barrel. Alberta sits on enormous deposits of bitumen, a thick, sandy form of petroleum that requires specialized processing. US refiners, especially across the Midwest, spent billions retrofitting plants to handle that heavy crude as pipeline capacity from Alberta grew. Gulf Coast refineries, originally upgraded in the 1980s and 1990s to run heavy Venezuelan and Mexican barrels, turned out to be just as well suited to Canadian oil sands output as that supply expanded.
That history created a strange imbalance. The US shale boom turned the country into the world's top oil producer, but most of that output is light, sweet crude. American refineries, built for heavier feedstock, cannot easily switch. So the US ships out large volumes of its own light oil while pulling in millions of barrels a day of heavier Canadian crude to keep refineries running the way they were engineered to.
Roughly 3.9 million barrels of Canadian crude crossed into the US every day last year. Canada's options for redirecting that flow are limited. The expanded Trans Mountain pipeline gives Alberta producers a route to overseas buyers through the Pacific coast, but its capacity, about 890,000 barrels per day, is a fraction of what currently moves south. There is simply no quick substitute for the American buyer, just as there is no quick substitute for the Canadian barrel on the US side.
Tariffs Already on the Books, and the Leverage Question
Energy trade has not been entirely untouched by tariffs. A 10% levy on Canadian energy exports has applied since March 2025, though some crude can dodge it if it qualifies for preferential treatment under the US Mexico Canada Agreement. Every tariff action since then, including the new 50% tariffs, has carved out an exemption for energy.
Should Washington ever add a tariff specifically on Canadian crude, US refiners, as the importers, would technically owe the payment, though the cost would likely end up shared across the supply chain. Refiners could push back by demanding steeper discounts from Canadian producers, and higher feedstock costs could squeeze refining margins, a squeeze that tends to show up at the gas pump.
Infrastructure adds another layer of leverage. Some Canadian crude moves from western Canada through the US, via Enbridge's Line 5 across Wisconsin and Michigan, before crossing back into Canada to reach refineries in Ontario and eventually Quebec. President Trump referenced this dependence directly in a Truth Social post Monday, writing that Canada relies on US infrastructure to move its own electricity, oil and gas, and warning of
