Commonwealth_ As the possibility of tariffs looms over Canada’s economy, industry leaders argue that expanding the country’s energy sector and diversifying its customer base could provide greater economic security. With Canada sending the majority of its fossil fuel exports to the U.S., concerns are rising about the vulnerability of revenue streams to trade disruptions.
Experts believe that Canada’s over-reliance on a single trade partner has put the economy at risk. A portfolio manager noted that Canadians feel a “sense of betrayal” in response to U.S. threats but stressed that Canada should not have allowed itself to be in a position where a single country’s policies could have such a significant economic impact. By expanding its trading partnerships, Canada could better shield itself from potential U.S. tariffs on energy exports.
Some industry leaders argue that the country would be in a much stronger position had it invested in building additional pipelines over the past decade. They suggest that restrictive policies and environmental concerns have prevented necessary infrastructure development. More pipelines would allow Canada to transport oil both domestically and internationally without relying so heavily on the U.S. market.
U.S. President Donald Trump and Prime Minister Justin Trudeau delayed proposed tariffs on Canadian energy by at least 30 days after their conversation. Trump had threatened a 25 percent tariff on Canadian imports, with an exception for energy, which would have faced a 10 percent tariff. The delay has reignited calls for Canada to develop its energy sector, increase pipeline capacity, and explore alternative markets.
Alberta Premier Danielle Smith has urged policymakers to prioritize building more pipelines. She emphasized the need for Canada to function as a self-sufficient country, supporting every province in developing and exporting its natural resources globally.
The energy sector remains a vital component of Canada’s economy, contributing approximately 10.3 percent to the country’s nominal GDP in 2023. Energy exports totaled around $199.1 billion across 123 countries, with the U.S. accounting for 89 percent. Industry experts point out that U.S. refineries, particularly in the upper Midwest, rely heavily on Canadian oil, making them highly dependent on stable supply chains.
Jean Charest, a member of the prime minister’s council on Canada-U.S. relations, proposed that Canada might eventually perceive Trump’s tariff threats as a warning. He argued that this situation forces Canada to re-evaluate its economic structure, particularly in relation to resource management and trade policies.
Blake Shaffer, an economics professor at the University of Calgary, described Canada as being at a “fork in the road,” with two possible paths forward: further integration with the U.S. or diversification of energy exports. He stressed that expanding access to seaports and increasing global trade partnerships would provide Canada with more leverage in future trade disputes.
Canada’s oil industry has long pushed for greater market access, but many proposed projects have faced strong opposition. The Canadian Association of Petroleum Producers (CAPP) continues to advocate for additional pipelines and improved infrastructure to support economic diversification. Industry leaders argue that expanding energy exports to new international markets would enhance Canada’s energy security and geopolitical influence.
Several pipeline projects have been rejected in recent decades due to environmental concerns and objections from Indigenous groups. These include the Energy East pipeline, which would have carried oil from Alberta to Atlantic Canada, and the Northern Gateway project, intended to facilitate shipments to Asia. However, there is renewed interest in reconsidering some of these projects in light of current trade uncertainties.
Despite industry support for expanding Canada’s energy sector, environmental groups caution against investing heavily in fossil fuel infrastructure. Greenpeace Canada’s senior energy strategist, Keith Stewart, likened the push for new pipelines to “buying a Blockbuster franchise as Netflix is taking off.” He emphasized that the global shift toward renewable energy makes long-term reliance on oil exports a risky strategy.
While some argue for increased investment in pipelines, others question whether this is the most strategic approach for Canada’s long-term economic future. With the potential for peak oil demand in the coming decades, Shaffer suggests that Canada must carefully evaluate whether building new energy infrastructure aligns with future market trends. Amid these debates, Canada faces a crucial decision: double down on its traditional energy sector or embrace economic diversification and investment in renewables. The coming years will determine how the country adapts to shifting global energy demands and trade relationships.
