OIL: US Oil Inventories Down Again

The US is going ahead with 25% tariffs on Canada and Mexico and 10% on China. As expected there has been a response with Canada announcing C$155bn in retaliatory measures, China to introduce “corresponding countermeasures” and a lawsuit with the WTO, and Mexico to announce its response today. But with Canada’s exports to the US in 2024 accounting for over 75% of the total and Mexico over 80% compared with 17% and 16% respectively for US exports, the power lies with the US. 

• China is a lot more diversified than Canada and Mexico with only 13.3% of its 2024 goods exports going to the US down from 14.8% in 2023. They were worth 2.8% of GDP in 2023. 6.9% of US exports went to China in 2024.
• In 2024, over 28% of US merchandise imports came from Canada and Mexico and thus a 25% tariff is likely to result in higher prices certainly in the short- to- medium terms. 

US imports by source % total

• Oil is a major Canadian export to the US, ranked 1 and 2. Midwestern refineries are geared to process heavy sour Canadian crude and over half of US oil imports come from Canada. Thus with the significant risk that a 25% tariff on oil imports would push US fuel prices up, imports of Canadian oil, natural gas and electricity will be taxed at 10%.
• In 2023, Canadian exports to the US accounted for over 20% of GDP, while Mexico was less exposed with them worth 6.8%.
• Canada will impose a 25% tariff on C$30bn of US merchandise from Tuesday including cosmetics, appliances, pulp & paper, tyres and plastics. Another C$125bn will face the tax in a few weeks. 

Exports to the US 2023 %

Source: MNI - Market News/Refinitiv