Trump tariff threats are pushing Canada’s largest oil producer to break its dependence on the U.S.

HOUSTON — The deeply integrated North American oil and gas market stands at crossroads, with Canada’s largest oil producer warning that it will diversify its exports away from the United States if President Donald Trump‘s tariff threats do not end.

Alberta Premier Danielle Smith on Wednesday presented two possible futures for the continent. In one, Canada and the U.S. reach an agreement to create “Fortress North America,” with new pipeline capacity built to support 2 million barrels per day in additional exports to the U.S. market, Smith said at the CERAWeek energy conference.

This will support Trump’s “energy dominance” agenda, Smith said, allowing the U.S. to increase its exports to the global market by backfilling those barrels with imported oil from a neighbor and close ally. It will maintain low consumer prices in the U.S., she said, which is also part of the agenda Trump campaigned on.

Alberta wants to supply the U.S. with the energy it needs to win the race against China to achieve dominance in artificial intelligence, Smith said. “I don’t think any of us want to see a communist, totalitarian regime become a world, global leader in AI,” the premier said.

In the other future, Trump continues to wage his trade war against Canada and Alberta starts looking for oil and gas customers beyond the U.S., Smith said.

Canada is the fourth largest oil producer in the world and Alberta is the country’s biggest producer. Some 97% of the country’s 4 million bpd of oil exports went to the U.S. in 2023 with several European nations and Hong Kong taking the remainder, according to Canada’s energy regulator. Alberta supplied 87% of the oil exported from Canada to the U.S. in 2023.

“There are at least six or seven projects that are emerging in Canada in the event we’re not able to come to a partnership agreement with the U.S.,” Smith said.

The uncertainty caused by Trump’s tariff threats has already forced Alberta to start “looking at more opportunities to get more barrels off our borders besides the United States,” provincial energy minister Brian Jean said Tuesday.

Alberta is in active discussions with South Korea, Japan and European nations about shipping oil exports to those countries, the energy minister said. “The truth is we’re looking in every direction right now except the United States in relation to our priorities,” Jean said.

Trump’s tariffs have roiled financial markets and caused confusion among investors over the past week. The president on Wednesday imposed 25% tariffs on steel and aluminum imports from Canada. He has paused until April 2 penalties on Canadian oil and gas as well as duties on other goods that are compliant with the trade agreement that governs North America.

The Trump administration has not provided clarity on how much of Canada’s energy exports to the U.S. conform to the trade agreement. Oil and gas that is not compliant would face a 10% tariff. U.S. Energy Secretary Chris Wright declined to provide details when asked Monday by CNBC.

Smith said Wednesday that Canadian oil producers are busy filling out paperwork to ensure that their exports to the U.S. are compliant.

“There was a bit of a paperwork issue that our companies had,” Smith said. “There was no reason to register, and so now there is. I would imagine that they’ve all called their lawyers and they’re in compliance. I wouldn’t expect very much of our oil and gas is tariffed at all.”

But it is unclear whether Trump will proceed with tariffs when his pause expires on April 2. Wright said Monday a deal with Canada that avoids tariffs on oil, gas and other energy is “certainly is possible” but “it’s too early to say.”

“We can get to no tariffs or very low tariffs but it’s got to be reciprocal,” Wright said in an interview with CNBC’s Brian Sullivan.

It will take time for Alberta to pivot to markets beyond the U.S. if the tariffs do go into effect. Nearly all the pipelines in Canada run south in the U.S. Canada only has one pipeline stretching from Alberta to the country’s West Coast in British Columbia, providing access to Asian markets. There are no pipelines that run from Alberta to the country’s East Coast.

Smith said Canada is looking at three different pipeline proposals to its West Coast, at least one pipeline into the Northwest Territories, one into Manitoba, one to the Hudson Bay, and one into Eastern Canada.

“Those are conversations we were not having three months ago,” Jean said of the pipelines. But it took 12 years for Canada to expand its Trans Mountain Pipeline that connects to the country’s West Coast.

Alberta is not interested in taking a page from Ontario’s playbook, Jean said Tuesday. Premier Doug Ford imposed a 25% surcharge on electricity exported to the U.S. in response to Trump’s tariffs. He later suspended the penalty after the U.S. agreed to resume talks.

 “We don’t believe that that this is the right way to do it,” Jean said of Alberta’s position. “We want to deescalate the situation.”

Canada has presented the U.S. with several options, the Alberta energy minister said. Jean declined to provide specifics, but he said the Trump administration needs a strong strategic petroleum reserve to achieve its goal of energy dominance.

“It also means that they have to be able to continue to get a good steady supply of product from Canada,” he said.

If the tariffs go do into effect, they will hurt both Canadians and Americans, particularly people who cannot afford a price increase, he said. The price hike will be split “fairly evenly” between U.S. customers and producers in Canada, he said.

“It’s going to be felt by all parties and frankly there’s many people right now […] that can’t afford it,” he said. “We need to think about those people because they’re the less fortunate that truly have no other choice but to buy fuel.”

Jean took a swipe at Trump’s repeated calls for Canada to become the 51st state.

“As long as we’re in charge, we don’t mind,” Jean said. “But the truth is the Republicans would never be elected again.”