How Canada's oil and auto exports are threatened by Trump tariffs

Donald Trump's threat to impose tariffs on Canada and Mexico made the headlines beyond North America; manufacturing imports from Mexico had long been in Trump's crosshairs, but in Canada, the president-elect is now calling out a major energy exporter whose free-trade deal with the US predated NAFTA.

We've created an overview of Canada's trade relationship with the US. Our first visualization covers Canada's major goods exports. Oil and gas are included in the biggest category – "mineral fuels," which accounted for USD 95 billion of exports in the first nine months of 2024. (Even as his tariffs would hit this sector, Trump has supported the revival of a pipeline project that would send Canadian oil to US refineries.)

Next, at about USD 76 billion of exports year-to-date, comes "machinery and transport equipment," which includes eastern Canada's key automotive sector. Plants in Ontario are integrated with counterparts south of the border; tariffs could, in theory, repeatedly apply to car parts that can sometimes cross the border eight times before ending up in a finished vehicle.

These two categories have jointly accounted for more than 50% of Canada's exports to the US for most of the last 30 years, as our second visualization shows. In the 1990s, the automotive sector accounted for more than 40% of exports on its own; energy exports have steadily gained share since then. Petroleum imports have increased especially dramatically since the pandemic – from roughly USD 3 billion per month on average in 2020 to USD 15 billion on that basis in 2022; that figure has stood at about USD 10 billion per month since 2023.

Our third chart examines Canada's share of total US imports. Canada's relative importance as a US trade partner gradually declined as China and Mexico gained share: from 18% of US imports at the beginning of the century, Canada's share had declined to 11.5% as of mid-2024. (China has dropped below Canada's share again in the wake of the trade tensions in the Biden and Trump eras.)

We've also overlaid the Canadian dollar's exchange rate with its US counterpart. A cheap CAD made Canadian exports very competitive under NAFTA in the 1990s; its appreciation during the long oil boom coincided with Canada's shrinking share of the US market. However, it's notable that the USD/CAD trend reversed itself after oil slumped from 2014, with no obvious benefit to Canadian exports in absolute value or share terms.

Finally, we consider the US trade deficit with Canada. This widened dramatically in the aftermath of the pandemic, driven by the goods balance. The services trade balance is positive, but not enough to offset America's increasing goods imports from its northern neighbor.

Trump's rhetoric could soften once he takes office, and his tariff threat appears to be more linked to border-security issues than protecting US jobs. But, in summary, Canada is very vulnerable to Trump's threat to impose a 25% tariff on imports.

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