Trump Excludes Oil from 25% Tariffs on Mexico and Canada: “Oil Will Have Nothing to Do With It” -

KEY POINTS

U.S. President Donald Trump announced on Thursday that he would proceed with the long-threatened import tariffs on goods from Canada and Mexico.
The president indicated that a decision on including oil imports in the policy had not been made yet, stating it would depend on how the two nations “treat us properly.”
Both Canada and Mexico have previously committed to retaliating with their own measures in response to the tariffs.

Donald Trump Confirms 25% Tariffs on Imports from Mexico and Canada Starting February

U.S. President Donald Trump has officially confirmed that he will impose 25% tariffs on imports from Mexico and Canada, effective from February 1. This move follows through on threats made by the president in recent weeks, as he seeks to address trade imbalances and demand better treatment from the neighboring countries.

The blanket tariffs will apply to a wide range of products from both nations, marking a significant escalation in trade tensions. The U.S. president emphasized that the decision to include oil imports in the tariff policy remains under consideration, contingent on how Mexico and Canada “treat us properly.”

In response, both Canada and Mexico have previously pledged to take retaliatory measures in response to the U.S. tariffs, further escalating the potential for a trade conflict in the coming months. The imposition of these tariffs represents a major shift in U.S. trade policy under Trump’s administration.

However, during a discussion with reporters in the Oval Office on Thursday evening, President Trump clarified that his administration had not yet decided whether oil imports would be included in the 25% tariffs. He stated that the decision would hinge on whether Mexico and Canada “treat us properly” and whether “the oil is properly priced.”

“Oil is going to have nothing to do with it as far as I’m concerned,” Trump said. “We’re going to make that determination probably tonight on oil. Because they send us oil, we’ll see – it depends on what their price is.” This indicates that while oil may not initially be part of the tariff policy, the final decision will be influenced by pricing and trade dynamics with the two countries.

As of 8:06 a.m. London time, March contracts for Brent crude — the global benchmark for oil prices — were slightly higher, trading at around $76.92 per barrel.

President Trump explained that the upcoming tariffs were being introduced for “a number of reasons” and could potentially increase over time. He outlined three key factors behind the decision:

Immigration: Trump pointed to the significant influx of people into the United States, referring to it as a major issue.
Drug Trafficking: He also cited the illegal flow of drugs, particularly fentanyl, as another critical concern.
Trade Deficits: Trump highlighted the substantial subsidies the U.S. was providing to both Canada and Mexico through ongoing trade deficits.

These factors, according to Trump, were pivotal in justifying the imposition of the tariffs.

“I’ll be putting the tariff of 25% on Canada and separately 25% on Mexico, and we’ll really have to do that because we have very big deficits with those countries,” President Trump added. This statement underscores his rationale for the tariffs, emphasizing the ongoing trade imbalances with both Canada and Mexico as a key factor driving the decision.

Threats to respond in kind

Representatives for the Mexican and Canadian governments were not immediately available for comment when contacted by CNBC. However, both countries have previously pledged to respond to the tariffs with retaliatory measures.

Mexican President Claudia Sheinbaum commented last week, according to Reuters, stating, “If there are U.S. tariffs, Mexico would also raise tariffs.” She emphasized that such a move would lead to price increases for American consumers, highlighting the potential economic consequences of the tariff dispute.

Speaking to CNBC’s Squawk on the Street earlier this month, Canada’s Minister of International Trade, Mary Ng, stated that “everything is on the table” in terms of responding to U.S. tariffs, including the possibility of imposing export taxes on energy exports to the United States.

She added, “If you’re going to put tariffs on Canada, what it actually will do is make things more expensive for Americans,” emphasizing that the tariff imposition would have a direct impact on U.S. consumers.

Meanwhile, there are concerns that the tariffs could also hurt consumers in Canada and Mexico. Earlier this week, policymakers at the Bank of Canada expressed worries that such U.S. measures could lead to sustained inflation in Canada, highlighting the broader economic risks posed by the potential trade conflict.

On Friday morning, both the Mexican peso and the Canadian dollar saw modest gains against the U.S. dollar, recovering from overnight losses.

At 8:18 a.m. London time, the Mexican peso was up by 0.3%, while the Canadian dollar gained 0.2% against the U.S. dollar. These movements reflect a slight rebound in the currencies of both Mexico and Canada, amid ongoing concerns about the potential impact of tariffs and broader trade tensions with the United States.