Canada, Mexico Discuss Trade Options

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--With U.S. tariffs on North American imported goods in effect, the leaders of Canada and Mexico discussed ways to stay competitive amid calls for more of a domestic energy focus in the provinces.

Canadian Prime Minister Mark Carney spoke with Mexican President Claudia Sheinbaum as U.S. President Donald Trump made good on sweeping tariff threats.

"With challenging times ahead, Prime Minister Carney and President Sheinbaum emphasized the importance of safeguarding North American competitiveness while respecting the sovereignty of each nation," Carney's office said Tuesday.

Trump backed a 25% tariff, a tax on imports, for goods imported from Canada and Mexico, despite brokering a free-trade deal with both countries during a first term in office that ended in 2021. A 10% tariff applies to energy imported from Canada.

Both countries represent the top two crude oil exporters to the United States. Combined, both countries deliver around 4.4 million barrels per day to the U.S. economy on average, representing 70% of the total imports.

Canada is by far the leader, however, accounting for 60% of the total crude oil imported by the United States. U.S. refineries are tailored to run heavier types of crude oil, not the light, sweet variety found in domestic shale basins. Almost all of the top 10 exporters produce heavy crude.

Sheinbaum said late last week that her government was seeking a relationship of respect with the United States, adding that so far that's been the case.

"We will continue working to ensure that this relationship of friendship and coordination always prevails between the United States and Mexico," she added.

Tariffs on steel and aluminum, as well as automobiles, will complicate trade patterns in North America as supply chains are highly integrated. A vehicle, for example, crosses the borders several times before it rolls off the assembly line.

While Sheinbaum's government has taken a measured approach to the Trump administration, Canada's government was roiled, with the deputy prime minister and Prime Minister Justin Trudeau of the Labor Party stepping down amid the internal political row.

Carney, a Labor Party leader, has since called for snap elections, which would happen later this month. Conservative Leader Pierre Poilievre, a candidate for prime minister, said that he would tap more domestic resources if he were nominated.

Poilievre said Tuesday he supports doubling the amount of oil and gas production from Newfoundland and Labrador, and backing a proposed liquefied natural gas facility in the eastern province that would draw on reserves offshore.

A provincial study from 2022 found Newfoundland and Labrador has a potential reserve estimate of 50.3 billion barrels of oil equivalent. In January, Norwegian energy company Equinor (NYSE:EQNR) (Stavanger, Norway) announced plans to develop the Bay du Nord field using a floating production unit for storage and offshore offloading (FPSO), tapping a prospect that's estimated to hold about 300 million barrels of oil equivalent reserves.

Most of the oil in Canada is found in Alberta, though leaders have pressed for an emphasis on east-west trade corridors.

Poilievre earlier this week, mirroring Trump's campaign slogan, proposed a "Canada First" energy corridor that would help expand trade arteries outside North America. Carney, for his part, proposed the creation of a "First Mile Fund," which would support rail and roadways between energy extraction sites.

Federal elections in Canada are set for April 28.

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