US-Canada tariffs spare oil, gas and electricity amid deep energy interdependence
The 50% tariffs imposed by the United States and Canada in mid-2026 left oil, natural gas and electricity untouched because the two nations’ energy markets are tightly linked, with Canada supplying half of US petroleum imports and major electricity flows.
In July 2026 the United States introduced 50% tariffs on Canadian imports, and a month later Canada responded with matching duties, yet both measures omitted oil, natural gas and electricity, which remain subject only to a 10% tariff from 2025. The exemption stems from the extensive integration of the two economies’ energy sectors: Canada supplies roughly 50% of US petroleum imports and is the only foreign source of electricity, delivering power through 34 cross-border transmission points.
Over the past half-century Canada has expanded production primarily for the US market, with 84% of its oil and 76% of its electricity exported south in 2024. This linkage dates back to 19th-century hydro-electric projects and wartime cooperation, later reinforced by the 1965 Auto Pact and the 1989 free-trade agreement, culminating in a shared grid that feeds New England, New York, the Midwest, the South and California.
More than 40 pipelines also connect the two countries, creating a trade deficit for the US that relies on Canadian energy. Regional impacts are clear: Maine obtains about 30% of its power from Canada, with utilities owned by New Brunswick Power Corp., ENMAX, Versant Power and Iberdrola, while Hydro-Quebec secured a 2025 deal to route clean electricity through Maine to Massachusetts. Untangling this network would be costly and take decades, explaining why energy was exempt from the latest tariffs.
Why it matters
Energy ties make tariff shocks disastrous for both economies, so the exemption safeguards North American power and fuel supplies.
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