Why Trump and Carney Haven’t Touched Energy in Their Tariff War

An exemption means these energy products do not face the tariffs imposed on many other imports. Canada and the United States can therefore continue trading oil, gas, electricity, and some petroleum products under the existing arrangements. This matters because their energy systems are tightly connected and difficult to separate quickly.

In July, Donald Trump imposed 50 percent tariffs on many Canadian imports, and Canada responded with tariffs on American goods. Energy was notably excluded. Canada supplies half of the United States’ foreign petroleum imports, while Canadian hydropower supports major parts of the northeastern U.S. electricity grid.

The exemption reflects practical dependence, not the end of political conflict. The article describes pipelines, refineries, gas systems, power grids, and fuel networks as one integrated continental system. Removing tariffs from energy helps preserve supply, but the underlying relationship remains vulnerable to future political pressure.

Canada is the United States’ largest international petroleum supplier. It provides half of all U.S. foreign petroleum imports. Canada also directly supplies electricity through more than 30 major transmission points, making it the only foreign country connected directly to the U.S. electricity system in the article’s account.

The dependence is even more striking from Canada’s side. In 2024, 84 percent of Canada’s oil was sent directly to U.S. consumers. The article also states that 76 percent of Canada’s electricity went to the United States. These figures show how strongly Canadian production is aimed at American demand.

The relationship is therefore much larger than a normal buyer-seller arrangement. The United States relies on Canadian oil, gas, and hydropower, while Canada relies heavily on American customers. Replacing that trade would require new buyers, infrastructure, and time.

The United States and Canada depend on each other because their energy industries were developed as one continental network. Canada expanded production with a specific goal: serving U.S. consumption. The United States, meanwhile, built energy links and markets that depend heavily on Canadian oil, gas, and hydropower.

The connection is physical as well as economic. Pipelines move fuels across the border, refineries process imported crude, natural-gas systems serve connected markets, and electricity transmission points link both grids. More than 30 major electricity transmission points connect the countries. Canadian hydropower supplies large parts of the northeastern U.S. grid.

This arrangement reflects proximity and decades of investment. In 2024, 84 percent of Canadian oil and 76 percent of Canadian electricity went to U.S. consumers. Because both sides have built around this trade, political efforts to achieve energy independence would be costly and slow.

The article describes the connection by infrastructure type rather than by naming specific facilities. It identifies cross-border pipelines, refineries, natural-gas systems, electricity grids, and fuel-distribution networks. These systems operate together, allowing energy to move from Canadian producers to American consumers and electricity users.

Electricity links are the clearest concrete example. The countries have more than 30 major electricity transmission points. The longest transmission line, completed in June, carries electricity generated from Canadian hydropower directly to New York City. Canadian hydro also supports large parts of the northeastern U.S. grid.

The article does not provide names, capacities, or routes for the individual pipelines, refineries, or gas networks. Its main point is that these systems form one integrated continental network. They do not stop working simply because political leaders announce that the countries should separate.

A sudden cutoff would interrupt energy flows that both countries currently treat as routine. Canadian oil and gas producers would lose their main market, while American refineries, fuel networks, and electricity systems would lose an important nearby source. The result would likely be supply disruption and higher prices, although the article does not quantify them.

The mechanism is the countries’ physical integration. Pipelines, refineries, natural-gas systems, transmission lines, and distribution networks were built to work across the border. Northeastern U.S. electricity users depend heavily on Canadian hydropower, while Canadian producers depend on American buyers for their market.

The article says separation would be difficult and costly and could take decades to reengineer. Canadian producers already face rising costs as U.S. refineries import more Venezuelan crude. A complete cutoff would therefore pressure producers, utilities, refineries, and consumers on both sides.

Canada is trying to reduce its dependence on the United States by developing other customers, including Turkey. Prime Minister Mark Carney is pursuing energy and defense deals in Ankara, including plans to increase Canadian liquefied natural gas exports. However, Turkey is not the United States, and the article says these deals cannot make a noticeable dent in the existing trade.

The United States is increasing crude imports from Venezuela, but that supply has limits. Venezuelan crude is more expensive than Canadian crude, and Venezuela’s oil infrastructure remains in disarray. The article says the increased flow is already contributing to rising costs for Canadian oil producers, because American refineries have another source of crude.

Neither alternative can quickly replace the established relationship. Canada still depends on U.S. buyers, while American energy systems remain built around Canadian supplies. New trade may diversify markets, but it does not recreate decades of infrastructure and demand.

Energy relationships are difficult to change because infrastructure is fixed in place and designed around geography. Pipelines, refineries, transmission lines, gas systems, and fuel networks connect specific producers with specific markets. Once those systems operate as one network, changing direction requires more than signing a new trade agreement.

Canada illustrates the problem. It expanded energy production to serve U.S. consumption, and 84 percent of its oil went to U.S. consumers in 2024. The United States also relies on Canadian hydropower and fossil fuels. Alternative buyers such as Turkey cannot instantly absorb the same volume or use the same routes.

Reengineering would require new facilities, altered supply chains, and replacement markets. The article concludes that this process would be very difficult and costly, taking decades. Political declarations may change policy quickly, but the physical energy system changes much more slowly.