Good morning. Tariffs are on all of our minds here at the Report on Business lately. Bay Street, industry, government officials and businesses large and small are watching closely, as Donald Trump’s March 4 deadline draws closer.
Covering energy in Canada often comes with surprises and compelling stories, but my beat has taken a particularly dramatic turn since Trump stepped into the White House. More on that below, but first:
In the news
Couche-Tard eyes friendly talks around its own US$47-billion takeover offer with Seven & i after white knight bid derailed
Canada’s biggest banks beat expectations, but executives warn tariffs could further put pressure on the country’s slowing economic growth
Preconstruction homebuyers in Ontario want out of their contracts, finding the market has dried up for selling their units before taking possession
The fertility industry is adopting artificial intelligence to help assess patients’ chances of success as physicians try to establish a new standard of care
On the radar
- Today we’ll see data on Canada’s GDP. Meanwhile, in the U.S., data will be released on personal spending and income.
- Earnings include: Laurentian Bank of Canada and Boralex Inc.
The Haisla First Nation's Kitimaat Village is seen in an aerial view along the Douglas Channel near Kitimat, B.C.DARRYL DYCK/The Canadian Press
In focus
Energy flows
I’m usually in Calgary, but this week I’ve been in British Columbia, and you’ll never guess what’s top of mind in the beautiful legislature building … dare I say even more of a hot topic than the first buds of spring in the fancy gardens.
That’s right – tariffs.
Oil isn’t the only industry that stands to take a hit from Trump’s threatened tariffs, of course, but the reality is that Canada and the U.S. have by far the largest bilateral oil-trading relationship in the world.
Roughly 95 per cent of crude exported from Canada heads south of the border. Last year, barrels from our neck of the woods accounted for 60 per cent of U.S. crude imports, hitting a record of 4.3 million a day.
About 40 per cent of U.S. refineries are specifically tooled for heavy crude – the kind produced in Canada, predominantly from the oil sands. And Canadian crude accounted for about 24 per cent of U.S. refinery output in 2023. That’s about 3.9 million barrels a day.
Alberta’s Premier Danielle Smith has spent a lot of time in the United States recently to make the case of just how much the U.S. and Canadian oil sectors rely on each other, and how tariffs therefore make zero economic sense; she even cornered Donald Trump at his resort in Florida.
Canada’s federal energy minister Jonathan Wilkinson has made the same argument south of the border, too.
This shift in the trade landscape is the bane of the Canadian oil and gas industry right now. Not an earnings call has passed by this quarter without at least one analyst asking how hard a company will be hit by the Trump levies and what they intend to do about it.
The Boy Scout adage “Be prepared” seems to be the response – and governments are following suit, if recent budgets are anything to go by.
In its budget for the 2025 fiscal year, released yesterday, Alberta forecast a massive $4.4-billion hit to its fossil fuel revenues over the next year, compared with its 2024 fiscal forecast.
The oil sands are expected to bring in $12.8-billion in royalties in the 2025 fiscal year, $4-billion less than the previous year’s forecast. Conventional oil royalties are estimated at $2.5-billion in fiscal 2025, a decrease of $400-million from a year earlier.
The province is forecasting GDP growth to slow to 1.8 per cent in 2025, and then further to 1.7 per cent in 2026 when it feels the full effects of the tariffs.
Next door, B.C. has already scaled back some of its fiscal plans in the face of a potential trade war with the U.S.
In its Speech from the Throne last week, the government said it was reviewing programs and spending as it adjusts to a new trade landscape. It also promised a concerted effort to reduce the province’s reliance on the U.S. for trade.
“When someone says they want to make you the 51st state, I think you should listen to them,” the province’s Energy Minister, Adrian Dix, told me during an interview in his office this week.
There are numerous pieces of that puzzle, including approving projects (or saying “no”) far more quickly, and reducing interprovincial trade barriers to make it easier for goods, services, industries and workers to traverse provincial markets.
B.C. Minister of Energy and Climate Solutions and Minister Responsible for Francophone Affairs Adrian Dix on January 24, 2025.DARRYL DYCK/The Canadian Press
While the BC NDP and the United Conservative Party government in Alberta are hardly natural bedfellows, they are nonetheless working together on a range of issues in the energy space, including the establishment of common industry regulations and standards to help reduce administrative costs and maximize the value of natural resources.
Dix points to Peace Country – a natural gas-producing region that straddles northeast B.C. and northwest Alberta. He says it’s illogical for both provinces to compete for business there when there is a far greater threat looming south of our border.
“I would argue it’s what the people of Canada expect and want to see right now – less posturing, more working together.”
Trump says he is moving ahead with the 25 per cent tariffs because he alleges drugs are “still pouring into” the United States. But a recent investigation by The Globe found that the Trump administration is misrepresenting the data to justify its tariffs against Canada.
Public Safety Minister David McGuinty, Immigration Minister Marc Miller and Ottawa’s new fentanyl czar Kevin Brosseau have been in Washington for several days of meetings, as Canada tries to persuade Trump’s administration to change course on the March 4 introduction of the tariffs.
The U.S. also announced an additional 25-per-cent tariff on global imports of steel and aluminum that will follow on March 12, which means Canadian shipments could see a combined total of 50 per cent tariffs.
So as the clock ticks down, Canada faces a stark new reality – the United States is no longer the solid, stable trading partner it once was, even when it comes to crude, a product both of them rely on.
Stay tuned for more updates from The Globe as Trump’s tariff deadline nears.
Charted
A bad track record
Ontario’s Progressive Conservative Leader, Doug Ford, won a third majority government last night, in an election he called more than a year early to mount a campaign that focused on his vows to fight U.S. President Donald Trump’s threatened tariffs. His opposition had prioritized health care, housing and the rising cost of living.
Getting to a voting station was maybe a challenge for some cities still under mountains of snow. It would be nice if this election could end Ontario’s declining voter turnout. In 2022, just 44 per cent of voters cast their ballots, a historic low for the province. Perhaps giving voters the option to cast their ballots online has the potential to boost turnout in the future.
Bookmarked
On our reading list
Rita Trichur says: Trade enforcement is crucial to Canada’s fight against fentanyl and guns flowing in from the U.S.
Down she goes: The loonie sunk to three-week low, as tariff reprieve hopes fade. It was the fifth straight day of declines for the currency.
Sorry about that: Meta fixes error that flooded Instagram Reels with violent and graphic videos worldwide.
Morning update
Global stocks skidded as the prospect of higher U.S. tariffs sent jitters through markets and investors focused on data pointing to a cooling U.S. economy. Wall Street futures were in positive territory ahead of key inflation data, while TSX futures pointed lower as commodity prices declined.
Overseas, the pan-European STOXX 600 was down 0.28 per cent in morning trading. Britain’s FTSE 100 advanced 0.29 per cent, Germany’s DAX declined 0.35 per cent and France’s CAC 40 gave back 0.29 per cent.
In Asia, Japan’s Nikkei closed 2.88 per cent lower, while Hong Kong’s Hang Seng fell 3.28 per cent.
The Canadian dollar traded at 69.27 U.S. cents.