It Is Time For Canada To Put An Export Tax On Energy Sales To The US

In hockey parlance, “ taking the gloves off” refers to opposing players dropping their gloves and entering into a fist fight. It is the final straw in the matchup, as both sides give in to their frustration and anger over the score, the game’s conduct, or the opposing side's supposedly unfair play. It does not matter the reason to drop one’s gloves; only the degree of rage against the other side is considered. 

President Trump has already taken off the gloves, pushing Canadians hard with the latest round of tariffs. In June 2025,  Trump slapped Canada with 50%  tariffs on steel, aluminum, copper and lumber.  Earlier this week, Trump extended the range of tariffed goods when he announced a 50% tariff on selected imports of building products, consumer goods, dairy products and household items. Trump has lumped these items under a general category of retaliation against Canadian tariffs on US exports and an outright ban on US wine and liquor instituted by the provinces. We all know who started the trade war; no point arguing that, but where do we go from here?

What if Canada were to introduce export taxes on the major commodities supplied to the US, specifically, on energy and key agricultural commodities? How would this work? We are all familiar with tariffs, but the concept of a ‘reverse‘ tariff needs some further explanation.

Under the Canada-US-Mexico Agreement ( CUSMA), export duties and taxes are prohibited. It is designed to facilitate free trade. Yet, the US has already violated that agreement in several different ways. Earlier this week, Trump announced a 50% tariff on goods, despite the fact that they are given preferential duty-free treatment under CUSMA.  So, once one team drops their gloves, signalling they are ready to fight, then the other side will be forced to engage fully. Canada cannot afford politically to turn the other cheek.

Let's look at how an export tax would work, say in the most important Canadian export, oil and gas. Canadian energy producers will have to pay the Federal government the tax at the border before oil crosses into the US. This would raise the price to the US refinery and ultimately to the US consumers. Canadian oil producers, having absorbed the export tax at the border, could then be reimbursed by the Federal government. Export taxes are not new to international trade, but it has been used to retain commodities within a country for strategic economic or security reasons. In this instance, the export tax could arguably be used to retaliate against US trade measures used expressly against Canada.

The choice of applying the tax to oil exports is based on the fact that the US has no immediate alternative source of oil. Canadian exports are primarily heavy oil, requiring specialized refineries, to the US, accounting for 25% of US  domestic consumption, principally into the western and southern regions. The only alternative source of heavy oil in the world is Venezuelan tar sands. That country is in no position to replace the 4 mbd that the US buys from Canada.

An export tax on potash could operate the same way. Canada is the world’s largest supplier of potash. Canada supplies 80% of US annual consumption. No single country can immediately replace potash imported from Canada. US farmers have had a difficult year and are very vulnerable.

Trump has repeated that the US “doesn't need what Canada is offering”. We beg to differ.