Canada is weighing its options for retaliating against incoming U.S. President Donald Trump’s proposed tariffs—potentially by restricting the flow of Canadian oil south of the border. Some have likened this strategy to a “nuclear option” because of its sweeping impact, though it’s clear the costs could be steep for both sides.
Prime Minister Justin Trudeau has acknowledged that imposing tariffs on American goods could hurt some U.S. sectors, but the economic size and population of the United States dilute that impact. By contrast, withholding or taxing Canadian exports—especially oil and electricity—could hit the U.S. more broadly, causing political pain. However, that move comes with significant risk to Canada, which depends heavily on revenues from energy exports.
Even mentioning a potential energy blockade has revealed splits in Canada, with Alberta Premier Danielle Smith taking a different view from Trudeau and other provincial leaders. Observers, like Simon Fraser University’s Sanjay Jeram, say Smith’s position might embolden Trump to exploit divisions in Canada’s political front.
Still, some experts believe withholding energy is one of the strongest cards Canada holds. Oil is at the center of that conversation: while the U.S. now produces more oil than it consumes overall, its refineries are set up to handle the heavier crude Canada provides. That alignment dates back decades to when U.S. refineries were built or modified to process heavy oil from places like Venezuela. When Venezuelan production fell under the Chávez regime, Canadian producers stepped in, constructing pipelines and networks to feed U.S. refineries, especially in the Midwest and Rocky Mountain regions.
Restricting Canadian energy could drive up gas prices at the pumps—long considered a key political pressure point in the U.S. According to a Stanford study, a 10-cent rise in a gallon of gas can shave 0.6% off a president’s approval rating. Despite the U.S. producing ample amounts of lighter shale oil, retooling its refineries to handle that output would be an expensive, time-consuming process, leaving many dependent on Canada’s heavier grade.
Some have suggested that Canada might also threaten to withhold electricity exports—particularly from Ontario—on which many northern U.S. states rely. Yet any sanctions or trade wars come with significant regional and political risks for Canada, too. If the conflict drags on, Canadian producers might be forced to discount prices or lose revenue due to limited pipeline routes and few alternative buyers.
While U.S. refiners could look to heavy oil from Russia, Iraq, or even a fully open Venezuela, each scenario poses steep logistical and political hurdles. For now, many Canadian voices say the mere threat of an energy cutoff could serve as a strong bargaining chip. Others warn that any such move demands broad, united political will to avoid undermining Canada’s position and unity.
Ultimately, the “nuclear option” remains on the table. Whether Canada will actually use it might depend on how aggressively the Trump administration pursues tariffs—and how ready Canada is to accept the domestic fallout from pulling the lever on its most powerful trade weapon.
