The wallets of Californians will feel lighter after paying their energy bills when new tariffs imposed by the Trump administration take effect.
The 10% energy tariffs, which took effect March 4 and were delayed the next day to April 2, target Canada, a huge exporter to the U.S. of natural gas, oil and electricity.
The administration separately imposed a 25% tariff on a garden variety of commodities, ranging from agricultural products and electronic components to aluminum and steel coming from Canada and Mexico. President Donald Trump is demanding neighboring countries curb the flow of immigrants and drugs into the U.S. by putting troops on the borders.
Economists believe the energy tariffs could unsettle Canada’s economy, given that a quarter of its exports are energy-related.
In the U.S., consumers can expect to see higher electricity bills, as power is moved over the transmission grid that crisscrosses the U.S. and Canadian border. Canada sent $3.2 billion worth of electricity south in 2023 — nearly triple what the U.S. sent, according to the latest figures provided by the U.S. Energy Information Administration.
Additionally, electric utilities in the U.S. rely on natural gas as a fuel to produce electricity at power plants – many of which have converted from coal to gas in recent years. The U.S. is Canada’s largest trading partner, which sent more than $112 billion in oil, natural gas and refined petroleum products such as gasoline, according to the Canadian Association of Petroleum Producers.
Here’s what Southern California business leaders and economists had to say about the Trump administration’s energy tariffs.
Q: Are tariffs needed for the U.S. to reinvigorate the economy, and what are your views on what they might do to the cost of energy?
Mira Farka
Farka is co-director of the Woods Center for Economic Analysis and Forecasting at California State University, Fullerton, and professor of economics …
If you look at our imports from Canada, about a quarter are from Canada are energy, oil and natural gas. If I do a quick calculation, the tariffs would increase the price of gas at the pump by 10 to 15 cents, but it’s not a huge shock to the economy.
I think he’s going to retreat on the energy front because that permeates everything.
Trump sees tariffs as a sort of stick to push another policy agenda. I think tariff rates are still going up because Trump wants to deliver on the tax cuts that he promised. By the end of this year, the administration must put together a bill that would pay for those tax cuts. They will need some money for that, and tariffs will help to a certain extent. So if the tariff rates on average rise to 8%, that will raise about $2.7 trillion over 10 years.
He looks at tariffs as a form of revenue to deliver tax cuts.
Q: What would happen with tariffs if they’re applied to petroleum exports from Canada to the U.S.?
Jerry Nickelsburg
Nickelsburg is a senior economist with the Anderson Forecast at UCLA.
Well, oil prices are set in world markets, so to some extent, that’s going to dampen the impact. But if Canadian oil is coming in at a higher price than it otherwise would, that tends to push up prices in the domestic market, which would be Canada, in this case.
Some of the U.S. supply of natural gas is going to be diverted from the domestic market to the European market, and that means that natural gas prices will go up. So, that affects electricity because there are electrical generation plants that are fueled by natural gas.
The U.S. has a large supply of natural gas, which is priced lower than Europe, which has relatively smaller supplies.
So, natural gas will flow to the higher-priced customer, reducing the amount of gas that is available to the lower-priced customer, which is the American consumer, and that raises the price to the American consumer.
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Q: Do you see economic benefits with the tariffs for the U.S. or Canada?
Monica Morlacco
Morlacco is an economist and international trade expert at USC…
There are instances where it makes sense to enforce tariffs, especially when you want to protect an industry that is very strategic, in its nascent stages and needs protection against foreign competition.
In this case, it’s hard to see what economic benefits can come out of the targets that have been announced on energy imported into the U.S. from Canada. In fact, I think there are none.
It seems that nothing makes sense. Let me just say that if this is a drug crisis, you should not tax energy.
Andrew Campbell
Campbell is executive director of the Energy Institute at Haas School of Business at UC Berkeley. He also helps manage California’s electrical grid operator in Western energy markets.
There’s a lot of uncertainty around these tariffs. The United States, including California, is very integrated with Canada. Oil flows to U.S. refineries, and natural gas flows into the Western United States for the production of electricity and for heating. Electricity also flows back and forth over the borders, depending on the time of the year and season.
I worry most about the impact of tariffs on the natural gas side. That’s kind of where our biggest worries would be because it impacts heating bills and potentially electricity prices.
If the goal is to hurt Canada, yeah, I think energy tariffs will probably hurt Canada. Electricity must be used the moment it is produced, so it can be disrupted in the short run.
If Canadians keep selling just as much natural gas as they were before the tariffs, and they’re just sort of taking the hit themselves, then Americans might not be impacted.
If they start holding back and deciding to not produce so much gas, then heating bills will rise very quickly across the United States because we have an integrated natural gas system.
Here’s what energy trade group executives had to say about the tariffs overall.
Rock Zierman, CEO of the California Independent Petroleum Association: “California’s reliance on foreign oil drives up gasoline prices, since each imported barrel of oil is $5 to $6 more per barrel. Instead of depending on expensive imports, California should focus on producing more oil locally, creating jobs, boosting our economy, and ensuring a more stable energy future.”
Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association: “Free and fair trade across our borders is critical for delivering affordable, reliable energy to U.S. consumers. We will continue to advocate for a path that protects energy affordability for consumers, promotes American jobs and expands the nation’s energy advantage.”
Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers: “Our integrated energy infrastructure delivers the reliable, affordable and secure energy Americans and Canadians need every, single, day. Combined, Canada and the U.S. produce about 30% of the world’s natural gas and about 25% of the world’s oil.
Instead of tariffs, we should be working together to expand our energy trade and grow oil and gas production from both countries, with the goal of exporting more Canadian and American energy to our global allies. More exports from us means our allies are using less oil and less natural gas from non-allied countries like Russia, Iran, and Saudi Arabia.
Working together on expanding energy production and trade means everybody wins.
Rob Nikolewski/San Diego Union-Tribune
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