HOUSTON — What do Canada and Mexico have in common?
Apart from the fact that both countries border on absurdity, they’re also among the largest oil exporters to the US.
Now US president Donald Trump’s tariffs has pitted North America’s two largest oil exporters — Canada and Mexico — on diverging paths for oil supremacy. The winner gets the whole enchilada.
But despite pumping smaller volumes north, Mexico has something Canadian oil producers don’t in the escalating trade war with the US: meaningful access to foreign markets.
While Canada’s on-off-again tariff burden is only 10% on oil and energy, Mexico has the luxury of finding new buyers outside the US. All the while Canada remains landlocked to essentially one buyer.
That lack of foreign customers means Canadian producers are forced to sell at discounts that often exceed 10% or even the 25% threshold imposed on its southern neighbour.
In any renegotiation of the USMCA free trade agreement, due in 2026, that may give Mexico the bigger stick in any talks with the self-proclaimed ‘Hombre of the Deal’.
“Canadian oil has nowhere else to go in meaningful volumes,” a Calgary-based energy analyst told Reuters. “Yes, a 10% tariff is better than 25%, but Canadian producers can’t just redirect crude elsewhere the way Mexico can.”
The stakes are high. Oil accounts for about 30% of all Canadian exports to the US, or 4.3 million barrels per day (bpd). That’s more than the entire production of some OPEC countries, amounting to about USD$130 billion per year.
Mexico, which exported just 600,000 bpd to the US last year, is taking a harder hit. That’s why Pemex officials confirmed talks are underway with potential customers in China, India and Europe, where demand for its own heavy crude remains strong.
Unlike Canadian crude, which moves through fixed pipelines, Mexican oil is primarily transported by tanker. This gives Pemex more flexibility to redirect shipments to overseas buyers as it sees fit.
While Mexico has long relied on Gulf Coast refineries optimized for its heavy sour Maya crude, refiners in China and India are increasingly capable of processing similar grades.
Still, it faces challenges. Mexico’s oil production has been in long-term decline and it imports gasoline and diesel — ironically, much of it from the US.
While tariffs have long been a key tool in Trump’s economic playbook, they risk disrupting supply chains and increasing costs for US consumers. Energy experts warn that penalizing Canadian and Mexican crude could backfire, raising gasoline prices and reducing refinery efficiency.
But for Mexico, the 25% tariff is forcing an urgent pivot. If Pemex successfully diversifies buyers, it could reduce dependence on the US over the long term, something Canada is unable to do even if it wanted to.
Without new pipelines or expanded access to global markets, experts say the country’s reliance on the US keeps it vulnerable to future trade disputes and lower pricing.
At a press conference in Medicine Hat on Wednesday, Alberta Premier Danielle Smith refused to get sucked into a ‘tit-for-tat’ energy war with the US despite cutting off purchases of American wine and spirits.
“Cutting off energy entirely would make Canada the bad guy… and we don’t want that,” she said. “We want the Americans to blame their struggles on the actual source of their problems, that being the Trump tariffs.”