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by Maureen McCall
Although it seems like distant history now, U.S. President Donald Trump’s tariff announcements date back to his first term in office when he launched a trade war taking aim at China by putting taxes on most of its goods. China replied with retaliatory tariffs on a range of U.S. products from fruit to automotive imports. Trump also used the threat of tariffs to force Canada and Mexico to renegotiate the North American Free Trade Agreement (NAFTA) renaming it the U.S.- Mexico – Canada Agreement (USMCA/CUSMA) in 2020.
In 2025, Trump implemented more sweeping tariffs with his former Vice President Mike Pence criticizing them saying:
“The Trump Tariff Tax is the largest peacetime tax hike in U.S. history. These Tariffs are nearly 10X the size of those imposed during the Trump-Pence Administration and will cost American families over $3500 per year.” @Mike_Pence
Countries like Canada have been reeling from Trump’s back-and-forth tariff threats and responding with threats of retaliation of their own over the last few months. Even with a lack of tariffs on Canadian energy itself, the tariff of items down the value chain will lead to decreased margins.
The topic of the fiscal impacts of tariffs on Canadian energy is a serious focus in the upcoming 2025 Canadian Federal election.
Jana McDonald, Chief Executive Officer and Founder of Guardyan Conservation and former CDO of Obsidian Engineering suggests the ongoing U.S. tariff threats have led to a growing political consensus that it is time for Canada to acquire new trade partners and reduce its trade reliance on the United States to unlock Canadian economic potential.
The challenge is that Canada will need to improve its ability to attract investment, address skilled labour shortages, and improve its regulatory environment to remain competitive with its G7 peers in a challenging economic climate.
“Premier Smith has stated that Energy won’t be tariffed,” McDonald says. “But as all of the items down the value chain will be, we’re going to see decreased margins for any of our producers and distributors, and probably renegotiations on where that distribution lands. And so even though the direct tariff wasn’t applied, I am still seeing quite a bit of fear in the market right now, and an average of an immediate one-third cut on gratuitous spending as well as a full shelving of particular projects.”
McDonald says this has created a climate of lower risk tolerance, specifically, in groups that are investing in small to midcap companies. Smaller companies need the majority of investment for their first projects due to economies of scale, where they have a much lower internal rate of return (IRR) -basically what that company and the resulting investor would make on that project. For companies that are producing oil and gas, or mining precious minerals or ancillary products, their distribution market is typically not within Canada.
So for whatever percentage tariff is applied to their products or the materials imported to make their products, they are going to see a potentially equivalent decrease in their IRR. The risk is that projects that are currently in discussions with investment groups – either financial institutions or private funding – that haven’t yet closed may see those investors take a step back from the brink of FID as they wait for the waters to calm before they make decisions involving millions, and more likely hundreds of millions of dollars in investment.
McDonald says financing strategies for energy and clean energy projects as well as what monetizing decarbonization looks like are coming into focus as we begin to see the fiscal impact of tariffs. The focus on AI data centres and their role in the new energy economy and the role of transitional fuels in decarbonization as well as Indigenous participation and investment continues to be top of mind.
Strategizing for the reduction of inter-provincial trade barriers and boosting connectivity to support trading outlets in Europe and North America has emerged in importance as tariff talks continue.
“The definition of “energy transformation” differs depending on perspective,” McDonald says. “ But I would say that on a global economic scale, right now we are at a point of transformation. And that inevitably includes our Canadian energy sector. So the time is right to pivot the narrative with a conversation about the transformation that is taking place in the economy, the subsequent impacts on the environment, and the “green economy” and take communicative and collaborative steps forward. Because in Canada, that’s what we do.”
Maureen McCall is an energy professional who writes on issues affecting the energy industry.
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