CNN
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A senior Canadian official has warned that Canada may retaliate for tariffs threatened by President-elect Donald Trump by shutting down energy flows to the United States.
Doug Ford, Premier of Ontario, Canada's largest province, threatened on Wednesday evening, saying: “We will go so far as to cut off their power, down to Michigan, down to New York State, and then up to Wisconsin.”
Ford warned that Canada must use “every tool in our toolbox” if Trump follows through on his threat to impose a 25% tariff on Canadian imports on his first day in office.
Since Ontario is not a major producer of crude oil, Ford's threat appears to apply specifically to electricity that the United States imports from Canada.
“Canadians are hurting, but I can assure you one thing: Americans will feel the pain too, isn't that unfortunate,” Ford said.
Trump's proposed tariffs could plunge the Canadian economy into a painful recession. The threat from Ford shows how some in Canada are pushing for a strong response that could temporarily knock out power and fuel for some Americans.
Ford's comments also raise the specter of broader retaliation against Canada that somehow disrupts the flow of imported oil into the United States, although analysts say such a move seems unlikely at this point.
An all-out trade war between the United States and Canada could ultimately damage the economies of both countries, hurting consumers and businesses on both sides of the border.
“This is a threat that should not be ignored. Canada does not want to put up with this,” said Patrick de Haan, head of petroleum analysis at GasBuddy.
Experts said any retaliation from Canada, including from the provinces, would need approval from the federal government in Ottawa.
The United States regularly imports hydroelectric power from Ontario, Quebec, and British Columbia. Canada is the main source of imported electricity to the United States, although it represents a relatively small piece of the overall consumption pie.
Last year, the United States imported 38.9 million megawatt hours of electricity, according to the US Energy Information Administration. The vast majority of that – 33.2 million megawatt-hours – came from Canada.
However, that represents less than 1% of annual electricity consumption in the United States, according to the Energy Information Administration.
However, the United States and Canada have long relied on each other to meet energy demand during periods of peak demand or poor supply.
For example, Canada imports electricity from the United States when hydropower generation is low, such as during droughts.
“Trading is important for grid balancing — continually matching electricity consumption with electricity production — and helping support electricity supplies,” the EIA said in a recent report.
The United States bought nearly $3.2 billion in energy from Canada last year, down about 30% from 2022.
“The energy transmission lines connecting the United States and Canada are part of a complex and highly interconnected energy system, with connections extending from New England to the Pacific Northwest,” the EIA said.
A sudden change in that close relationship could create a headache for US states along the border with Canada that sometimes depend on electricity imports.
However, these problems are likely to be only temporary, according to RJ Johnston, research director at Columbia University's Center on Global Energy Policy.
“I don't see much weakness for the United States,” Johnston said.
He pointed to the abundance of electricity resources in the United States and the possibility of transferring energy to areas that need it.
“Even in the event of a prolonged blackout, the United States has the potential to add more generating capacity in a relatively short period of time,” Johnston said.
Instead of electricity, Johnston said Canada could have a greater influence on America in areas that are difficult for U.S. officials to offset, including aluminum and nickel.
Canada is also a major source of US foreign oil.
Last year, the United States imported 1.4 million barrels of Canadian crude per day, making up more than half of the total 2.4 million barrels of US oil imports.
GasBuddy analyst De Haan warned that some refineries in the Midwest and Great Lakes regions rely on Canadian crude to produce gasoline, diesel and jet fuel. He said the loss of Canadian oil could push up prices, at least temporarily, and make it difficult for some gas stations to find fuel.
“I would be more concerned about the supply than the price,” he said.
However, analysts doubt that Canada would fire this bullet in a trade war because its economy relies heavily on oil production and on the United States to buy that crude.
Blocking the flow of oil to its largest customer – the United States – would set its economy on fire.
“Do I think this will ever happen? No, because it would hurt everyone involved,” said Robert Yawger, vice president of energy futures at Mizuho Securities.
However, the opening of the Trans Mountain Pipeline from Alberta to the Pacific leaves open the possibility that Canada could eventually begin selling significant amounts of oil to Japan, South Korea, China and other Asian countries.
“That's why they built this pipeline: to have a backup plan,” Yawger said.
It is not clear how much the loss of Canadian oil will hurt the United States.
US oil production has risen dramatically over the past two decades due to the shale revolution. Domestic oil production is so high that the United States is now a major oil exporter.
Analysts say some of this oil being shipped overseas today could be diverted to stay in the United States if there is a loss of Canadian barrels.
While Ontario's premier has floated the idea of cutting electricity exports to America, it is not clear whether the major oil-producing provinces would be willing to do the same when it comes to vital oil resources.
“Wake me up when the mayor of Calgary or the premier of Alberta starts making threats like this,” Yawger said.
Alberta Premier Danielle Smith made clear Thursday there was little appetite for such a move, saying she preferred a diplomatic approach.
“Under no circumstances will Alberta agree to stop oil and gas exports,” Smith said.
