On 15 January 2025, Canada's First Ministers convened in Ottawa to address the potential imposition of 25% tariffs on Canadian imports by U.S. President-elect Donald Trump, who will be inaugurated on 20 January 2025. The leaders emphasized the importance of a unified response to protect Canadian families, workers, and businesses from the anticipated economic repercussions. This comes against the backdrop of Trump’s controversial remarks regarding potential economic force to annex Canada, while referring to Trudeau as “governor” and Canada as the “51st state”, adding to the urgency for a coordinated national strategy.
The political tensions and transitions in government in Canada have undermined confidence in carbon pricing programs. The longevity of certain programs and the future of industrial carbon pricing remains uncertain. Participants may take a cautious approach until there is more clarity on the future of carbon pricing.
At the First Ministers meeting, the federal government announced plans to strengthen border security through investments in advanced technology and enhanced law enforcement, aimed at addressing illicit substance flows and migration—key issues Trump has emphasized. The government also explored measures to support workers and businesses in the event of a trade conflict with Canada’s largest trading partner. Twelve premiers and Prime Minister Trudeau agreed on the importance of prioritizing nationwide interests over regional differences, emphasizing solidarity in the face of external challenges.
Alberta’s Premier Danielle Smith declined to endorse the joint statement, citing concerns about potential impacts on Alberta’s oil and gas sector. Smith opposed measures such as restricting energy exports to the U.S. or imposing retaliatory tariffs on Albertan energy, emphasizing the importance of protecting jobs and Alberta’s key industry. Smith’s stance has been in opposition to the federal fuel charge and climate policies, as evidenced by recent discontent and legal action against the oil and gas sector greenhouse gas pollution cap and the exemption of home-heating oil from the federal fuel charge, which primarily benefits Atlantic Canada.
Smith’s agenda is to promote and grow Alberta’s energy industry, underscored by her recent announcement with Enbridge Inc. chief executive Greg Ebel on the joint intention to increase transport capacity to the U.S. and guarantee a large volume of oil and gas to flow through this expanded network. This recent dissent at the First Minister's meeting highlights deeper divisions with regard to provincial autonomy and carbon pricing. This comes at a delicate time as Canada prepares to navigate the challenges posed by the incoming U.S. administration, just as unity is most needed.
Ahead of the First Ministers meeting, Smith met with Trump at his Mar-a-Lago residence to discuss Alberta’s role in North American energy security. She described the conversation as “friendly and constructive,” however she stated that she “got no indication that Trump is rethinking to slap tariffs on Canadian goods”. Smith also announced plans to attend Trump’s inauguration to advocate for Alberta as a critical energy partner. Smith believes that Canada is not in a position to restrict energy exports to the U.S.
Trudeau openly criticized Smith’s lack of cooperation on Thursday, pointing toward Ottawa’s support in 2018 by purchasing the Trans Mountain pipeline. Trudeau also pointed to Premier Doug Ford of Ontario, who has supported retaliatory measures despite Trump’s focus on tariffs targeting the auto industry, a key sector for Ontario. Ford has publicly stated his willingness to withhold Ontario’s energy exports to the U.S. Ontario has also released the “Fortress Am-Can” plan for a strategic alliance between Canada and the U.S. to strengthen economic and resource security.
Premier Ford has been increasingly in the spotlight as a representative for Canada, evidenced by his recent appearance on Fox News where he told viewers that Canada was “not for sale.” The upcoming leadership transition in Canada has emphasized the role of Premiers to represent a country that is poised and prepared against a Trump administration.
If Trump proceeds with the tariffs, Canada is set to reveal a retaliation plan following Trump’s inauguration. At the time of writing, Trump’s inauguration has not yet occurred however we may expect to see some remarks on this circulate his oath ceremony. With regards to cuts to Canadian energy, Trump has stated “We don’t need their fuel, we don’t need their energy, we don’t need their oil and gas. We don’t need anything that they have.”
In the near term, carbon pricing in Canada faces uncertainty due to political and election dynamics. Although the current programs continue to operate as designed, stakeholders may adopt a “wait and see” approach over the months ahead. This uncertainty creates challenges for investors who seek clarity and consistency in the policies that underscore returns on specific projects. Many U.S. refineries depend heavily on imported crude oil from Canada, and any disruptions or alterations to this supply chain could affect the American economy.
ClearBlue will continue to monitor this closely and will keep clients informed.