Reliance on a single customer for our energy exports has left Canada with no leverage against U.S. trade threats
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A single Truth Social post from U.S. President-elect Donald Trump has thrown Canada’s export-driven economy into peril, leaving political leaders scrambling for answers and action. The threat of 25 per cent across-the-board tariffs on Canadian goods poses a real and present danger to businesses across the country.
The reason is simple: the United States is Canada’s largest – and, in some cases, only – customer for nearly every product we export.
This reliance is particularly pronounced in the energy sector, where oil and natural gas account for one-quarter of all Canadian exports. Each year, Canada sells approximately $150 billion worth of oil, natural gas and petroleum products to the U.S. For decades, we have depended on the U.S. as both our largest customer and primary gateway to international markets. However, this heavy reliance leaves Canada vulnerable to sudden policy changes south of the border and limits our negotiating power.
While the expanded Trans Mountain pipeline has added a critical export route, it increases capacity by only about 10 per cent of the oil volumes leaving Western Canada. LNG Canada, the country’s first liquefied natural gas export facility, will bring some market diversification, but even with its launch, 99 per cent of our natural gas exports will still head to the U.S.
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Canada holds some of the world’s largest oil and natural gas reserves – larger than those of the United States. Yet, despite this abundance, we produce only about half as much oil and gas as our southern neighbour, highlighting how far we are operating below our production potential. The lack of diversification in our energy markets is a significant obstacle to realizing this potential.
Countries such as Germany, Japan and Taiwan are urgently seeking secure and reliable energy partners, and many have turned to Canada for solutions. However, our inability to access global markets has hampered our ability to meet this demand. Over the past decade, Canada’s energy sector has suffered significant setbacks due to the cancellation of major infrastructure projects.
The Northern Gateway pipeline, which would have exported more than half a million barrels of oil daily to Asian markets, was cancelled by the federal government. Similarly, the Energy East pipeline, designed to carry 1.1 million barrels per day to Canadian refineries and European markets, was abandoned by TC Energy due to regulatory uncertainty and mounting challenges. Even the Energy Saguenay LNG project, which had Germany lined up as a buyer for 10.5 million tonnes of liquefied natural gas annually for up to 50 years, was cancelled after nearly eight years of review.
Meanwhile, Canada has struggled to approve and build a single LNG export facility, while the U.S. has constructed seven and become the world’s largest LNG exporter. This stark contrast underscores the urgent need for Canada to adopt a more proactive and efficient approach to infrastructure development.
To build a tariff-proof economy, Canada must fundamentally change its approach to major export projects. Policymakers should prioritize tidewater market access by fast-tracking pipelines, LNG facilities, transportation routes and port expansions. Reducing our dependence on a single customer is not just an economic necessity; it is a strategic imperative.
In addition, Canada must address domestic policies that hinder growth in the energy sector. The Impact Assessment Act (IAA), deemed unconstitutional by the Supreme Court, has proven to be a significant roadblock. Since its introduction in 2019, only one major project has successfully navigated its lengthy and complex review process. Alberta has already signalled its intent to challenge the amended version of the IAA in court, arguing it still infringes on provincial jurisdiction.
Another critical issue is the federal government’s emissions cap on oil and gas, which has driven investment away from Canada and reduced production capacity. Removing this cap would signal to investors that Canada’s resource sector is open for business and ready to compete globally.
The stakes are clear: New projects and customers mean new jobs, increased economic stability, and a higher standard of living for Canadians. The tariff threat from our largest trading partner should be the wake-up call we need to take bold action.
If this isn’t enough to spur change, what will?
Lisa Baiton is the president & CEO of the Canadian Association of Petroleum Producers.
Explore more on Canadian economy, Canada U.S. relations, Trade, Trudeau government, Energy sector
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