One of President-elect Donald Trump’s pronouncements post-election is imposing more tariffs on large U.S. trading partners. He said that after his inauguration on January 20, 2025, he will sign an Executive Order raising tariffs by 10% on China and 25% on Canada and Mexico.
Trump will bring back the America First trade agenda from his first presidency. He will use these tariffs as leverage in trade negotiations. The countries on his radar said they would retaliate with tariffs on U.S. products. On January 15, 2025, Canadian Prime Minister Justin Trudeau met with provincial leaders to discuss Trump’s threat.
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Strong response
“None of us wants to see tariffs erode a successful partnership between Canada and the United States. But we will be ready with a strong, national response if we need one,” Trudeau said in a social media post. The outgoing prime minister did not give details but said the Canadian government will respond to unfair tariffs in several ways.
Through National President Lana Payne, Unifor, Canada’s largest private sector labour union, wrote Trudeau suggesting among others, the imposition of retaliatory tariffs immediately if Trump makes good on his plan.
Besides disrupting cross-border trade between the allies, Unifor said Trump’s tariffs would jeopardize millions of Canadian jobs. Affected sectors are automotive, energy, forestry, and metals, not to mention broader manufacturing and processing.
The labour union fears a potential rise in unemployment. It added that Canada must prepare to provide additional income support to workers in trade-exposed industries and communities.
Negative impact on the oil patch
Canada’s oil and gas industry is the top source of U.S. imports. The total value in 2023 reached $103.2 billion in 2023, representing nearly half of U.S. crude imports for the year. The U.S. Energy Information Administration (EIA) reported 4.4 million barrels per day of crude oil imports from Canada in the week ending January 3, 2025. It was the highest volume on record dating back to June 2010.
Under pressure
Cenovus Energy (TSX:CVE) has refineries in Ohio and Wisconsin and directly ships to them. A company spokesman said, “Any trade barriers that might be imposed on this free flow of trade could have a serious negative impact on the economies and consumers on both sides of the border.”
In Q3 2024, revenues and net earnings declined 4.3% and 56% to $16.6 billion and $820 million compared to Q3 2023. However, its President and CEO, Jon McKenzie, said Cenovus is well-positioned to deliver strong operational performance for the balance of the year and into 2025.
He added that major projects are progressing. Moreover, management’s growth plan is on track to deliver increased production and enhance shareholder returns for the long term.
The $39.5 billion integrated oil and gas company hopes to improve its stock’s 2.2%-plus overall return in 2024. As of this writing, Cenovus trades at $21.36 per share and pays a decent 3.3% dividend yield.
Looming danger
Cenovus Energy believes that reduced exports to the U.S. will lead to reduced revenues for the industry. The large-cap energy player could take a huge hit this year from Trump’s tariffs.
