ES #123: Assessing Regional Impacts of U.S. Tariffs on Canada & Mexico

A look at the energy market impacts of the Trump administration's tariffs on Canada and Mexico

February 02, 2025 • Est. Reading Time: 7 minutes

Energy Shots #123:

President Trump announced additional tariffs on imports from China, Canada, and Mexico on Saturday to combat cross-border drug trafficking and illegal immigration.

The following tariff rates will apply to goods entering the US on or after 12:01 a.m. eastern time on February 4 (Tuesday).

  • 25% ad valorem rate of duty on all imports from Mexico

  • 25% ad valorem rate of duty on non-energy imports from Canada

  • 10% ad valorem rate of duty on energy imports from Canada 

  • Additional 10% ad valorem rate of duty on all imports from China

According to White House documents, the additional tariffs will apply until “the crisis is alleviated” and are subject to increase if countries respond with retaliatory measures, which Canada and Mexico have already suggested are forthcoming.

Summary of Takeaways

  • Canadian crude represents approximately 70% of total US crude imports. The Midwest secures approximately 64% of US crude imports from Canada.

  • Limited alternatives to Canadian medium and heavy sour crude will pressure PADD 2 refinery margins. Nine Midwest refiners account for over 57% of all US crude imports from Canada.

  • Canadian producers have limited crude export infrastructure to the Pacific Coast beyond the expanded 890 kb/d TMX pipeline completed in May 2024. As a result, the feedback loop from refined product demand destruction in the US will be short — bearish effects will quickly pass through to Canadian stakeholders.

  • US crude imports from Mexico represent approximately 10% of total US crude imports. The Gulf Coast accounts for ~88% of these imports. Five Gulf Coast refiners account for over 59% of all US crude imports from Mexico.

  • Tariffs on Canadian natural gas and electricity will have a concentrated regional effect on border states in the Northeast, Midwest, and Pacific Northwest. Approximately 8.5 Bcf/d of pipeline natural gas imports from Canada will be impacted.

  • While the US imported approximately 11.5 billion kWh of electricity from Canada last year (0.3% of total electricity demand), the US was a net electricity exporter to Canada from February through April. Seasonal effects on Canadian hydro should be considered.

We have limited the scope of Energy Shots #123 to a high-level overview of regional energy market impacts for brevity’s sake. Documents are still emerging and we expect several new announcements before Tuesday. Please reach out to the Mobius team to explore downstream scenarios, regional impacts, and portfolio-specific opportunities in greater detail.

Assessing Regional Impacts: Crude

The U.S. imported an average of 4.6 MMb/d from Canada in the first eleven months of 2024, representing approximately 70% of all US crude imports.

As shown above, Midwest (PADD 2) accounts for approximately 64% of total U.S. imports from Canada.

Likewise, Canadian crude constitutes approximately 74% of Midwest refiners’ crude inputs, according to the trailing six months of DOE data. As shown below, just nine Midwest refineries accounted for over 57% of all U.S. crude imports from Canada during the first eleven months of 2024.

Meanwhile, the U.S. imported an average of 632 kb/d of crude from Mexico in the first eleven months of 2024, down from a 2021-2023 average of 810 kb/d. Imports from Mexico represent approximately 10% of total U.S. crude imports.

U.S. imports from Mexico have a similarly strong regional concentration.

  • PADD 3 accounted for an average of 88% of these imports in the first eleven months of 2024. According to the DOE’s latest data, just five Gulf Coast refineries accounted for 59% of all U.S. crude imports from Mexico in the first eleven months of last year.

Assessing Regional Impacts: Natural Gas

Tariffs will apply to approximately 8.5 Bcf/d of pipeline natural gas imports from Canada. As with crude, these imports are regionally concentrated — just five border states account for over 80% of pipeline gas imports from Canada.

  • Top Five by Share of November Imports: Idaho (28%), Minnesota (19%), Washington (16%), North Dakota (15%), New York (8%).

Assessing Regional Impacts: Electricity

Daily electricity interchange data shows import tariffs will have no direct effect on US electricity imports from Mexico — net US electricity exports to Mexico totaled 1.6 billion kWh in 2024.

Meanwhile, 2024 interchange data shows the US imported a net 11.5 billion kWh from Canada in 2024 — approximately 0.3% of total US electricity consumed last year. Border regions like the Northeast and Pacific Northwest will see the majority of tariff-related price effects. However, the timing of President Trump’s tariffs should be considered — the US was a net exporter to Canada between February and early May of last year as Canadian hydro was capped by low snow melt. This effect could limit the impact to border states’ electricity imports.

See you next Sunday.

ES.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation concerning the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is intended for Mobius clients only and is not considered promotional material.