President Donald Trump has promised, among other things, two big ideas: 25 percent tariffs on imports from Mexico and Canada, and lower gas prices. Unfortunately, it seems like those two may be at odds — new reports say that Trump’s tariffs on crude oil from those two countries could make American gas prices surge by up to 70 cents per gallon in some states.
Trump has promised tariffs could start as early as tomorrow, February 1, which has caught corporations with their pants down. Many are unprepared for this kind of sudden cost increase — importers pay tariffs, not exporters — and are expected to just pass the additional costs on to consumers. ABC News has the expert takes:
Tariffs of this magnitude would likely increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers, experts said. The policy could raise prices for an array of products ranging from tomatoes to tequila to auto parts.
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Mexico and Canada account for 70% of U.S. crude oil imports, which make up a key input for the nation’s gasoline supply, according to the U.S. Energy Information Administration, a government agency.
Those imports come primarily from Canada, which sends crude oil to U.S. refineries built specifically to process the crude and redistribute it as car-ready gasoline, Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry, told ABC News.
Gasoline that originates as Canadian crude reaches customers in the upper Midwest as well as some along the East and West coasts, Fitzgerald said. For those drivers, he added, prices could rise between 40 and 70 cents per gallon of gasoline.
An increase of 70 cents per gallon is absolutely massive, but the tariff won’t be the only stressors on American’s fuel budget. The annual switch in blends for warmer weather combine with extra demand could add an additional 30 cent per gallon increase. The national average fuel price right now is $3.11 per gallon, and under this policy it could easily hit $4.11 once the weather warms up.
Of course, some are holding out hope that the tariffs aren’t real — just a threat to be used in negotiations, without any real plans of implementation. This raises questions about the tactic, namely how effective it’ll be on countries who know how much tariffs would cost the U.S., but analysts are theorizing all the same. From the New York Times:
Mr. Trump, in his first two weeks in office, has repeatedly invoked the threat of tariffs. Some policy analysts say that he is using the threats as a negotiating tool to spur countries to do what he wants. Last weekend, he announced 25 percent tariffs against another U.S. ally, Colombia, after its president balked at accepting U.S. military planes carrying deported immigrants. Within hours, Colombia acceded and Mr. Trump reversed course.
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U.S. fuel makers did not appear to be stocking up on Canadian oil, [Tom] Kloza [global head of energy analysis at Oil Price Information Service] said.
Right now, it’s anyone’s guess whether gas prices will skyrocket. It seems like things are lining up that way, but it’s tough to ever know what’s going in Trump’s mind. Rest assured that, if he does implement his tariffs, you’ll notice.