Canada Cutoff The US and Export Oil To Japan at 0% Tariff Days After Deal With China

Canada Cutoff The US and Export Oil To Japan at 0% Tariff Days After Deal With China

Big moves are happening in the global oil market, and Canada just shook the table. In a surprising turn, Canada is ramping up oil exports to Japan while scaling back its reliance on the U.S. But what caused this sudden shift? Is this a strategic economic move or a reaction to mounting trade tensions? Let’s break it all down

For years, Canada has overwhelmingly depended on the United States for its oil exports. In fact, more than 90% of their oil heads south to the U.S., making it Canada’s biggest customer by far. The relationship seemed stable—until now.

The U.S. and Canada have long been each other’s largest trading partners, but Trump’s newly proposed 25% tariffs on Canadian imports have thrown that relationship into turmoil. This decision, which also includes tariffs on Mexico and China, is part of Trump’s broader strategy to push for a renegotiation of the U.S.-Mexico-Canada Agreement. However, many experts warn that this move could hurt both economies, with rising prices, disrupted supply chains, and potential job losses on both sides of the border.

Canada, unwilling to be bullied economically, immediately announced retaliatory tariffs on U.S. goods. The initial retaliation list targets $155 billion in American exports, including agricultural products like corn, wheat, dairy, and beef and also Liquor and beverages like American whiskey, wine, and beer which are of high demand in Canada.

Natural Resources Minister Jonathan Wilkinson also hinted that Canada might impose an export tax on oil, a direct counterstrike aimed at driving up U.S. fuel prices. Given that Canada supplies over 4 million barrels of oil per day to the U.S., this would significantly impact American consumers.

Now enter Japan—one of the world’s biggest energy importers. Japan has long depended on the Middle East for its oil, but with rising geopolitical tensions, it’s looking to diversify. Canada, seeing an opportunity, is now looking to increase oil and liquefied natural gas shipments to Japan.

This move is part of a larger trend as Canada is working on several LNG projects, including LNG Canada, Cedar LNG, and Woodfibre LNG, all located on the Pacific coast. These projects will give Canada direct access to Asian markets, reducing its dependence on U.S. pipelines. For decades, Canadian oil has flowed almost exclusively southward through pipelines, primarily to U.S. refineries that turn it into gasoline, diesel, and other petroleum products. This setup made sense when trade relations were stable, but over the past few years, tensions have been rising.

Increasingly protectionist policies in Washington, combined with disputes over pipelines like Keystone XL, have led Canada to question whether putting all its eggs in the U.S. basket is still a smart move. And then added to the looming tariffs, there’s also the global energy crisis—Russia’s war in Ukraine, Middle Eastern instability, and rising energy demand in Asia have all played a role in reshaping global oil flows. Canada’s government, along with major energy producers, is making it clear that they don’t want to be caught in a vulnerable position.