As the trade war between the US and Canada heats up, Houston is becoming an unlikely centre of tariff talks.
Tariffs have dominated public panels during the CERAWeek by S&P Global energy conference in the Texan city. The event is the first major international energy conference since US President Donald Trump's inauguration, with hundreds of executives waking up each morning to the latest twists in his tariff saga.
“Why would you do this to your best friend?” asked Brian Jean, the Minister of Energy and Minerals for the oil-rich province of Alberta.
“The United States is our friend and ally; actually, in many cases, our family. And that's not the way you treat family or friends,” Mr Jean told reporters before Mr Trump and Ontario Premier Doug Ford backed off their threats on Tuesday afternoon.
On Wednesday, Canada announced plans to place tariffs on $22 billion worth of US goods in retaliation for Mr Trump's 25 per cent tariffs on steel and aluminium came into effect at midnight. China and the EU have also implemented retaliatory tariffs, while levies on most imports from Mexico have been delayed.
Mr Trump has also planned a 10 per cent tariff on Canadian energy products that fall outside the US-Mexico-Canada Agreement he negotiated during his first term. It is unclear how much Canadian energy is compliant.
“By his own ambition, it was the best deal. And we believe that should be the pathway from which we should move goods tariff-free across our economies,” said Stephen Lecce, Minister of Energy and Electrification for Ontario. “We have a very unjust attack on the Canadian economy."
Saskatchewan Premier Scott Moe said: “There's a certain amount of disbelief and shock.”
Canada was the third-largest source of US goods imported last year, at $413 billion, and the top destination for US exports, at $349 billion, according to the US Congressional Research Service.
Canada is the also largest supplier of US energy imports including electricity, natural gas and crude oil, according to the CRS. Canada and Mexico supplied more than 71 per cent of US imports of crude oil in 2023, with Canada accounting for about 60 per cent.
“Tariffs and escalating counter-tariffs … does nothing to benefit the North American family. It increases inflation, makes us less energy secure, makes us less food secure,” Mr Moe said.
Shortly after Ontario announced its retaliatory tariffs, the Bank of Canada reduced its interest rates by 25 basis points to counter the economic effects of the US tariffs. Bank of Canada Governor Tiff Macklem warned they could be severe.
Some analysts are increasing the probabilities of a US recession this year. One JP Morgan analysis increased recession odds from 30 to 40 per cent, according to The Wall Street Journal, while CNBC reported Pimco's managing director of Asia Pacific, Alec Kersman, raised his probability to about 35 per cent.
Economic uncertainty is also dragging down consumer confidence and sentiment, as well as small business sentiment, according to recent economic data. Consumers unexpectedly pulled back their spending last month in anticipation of the tariffs' economic impact.
It has also caused turmoil in markets. In the US, the Nasdaq Composite Index slid further into correction territory after falling more than 10 per cent from its December high. The S&P 500 could soon join it. Meanwhile, the Dow Jones has fallen by more than 6 per cent in the past month.
Mr Trump spent part of his time in Washington on Tuesday trying to calm some of the nation's most powerful chief executives, saying during a business conference that the duties were having “tremendously positive impact”.
US Energy Secretary Chris Wright opened the door to negotiations on Monday. However, he offered few details except that Washington is in “active dialogue” with Canada and Mexico.
Mr Jean said Mr Wright's remarks give reason to believe there is some optimism to remove the tariffs. But he had a brief message on the options to de-escalate the trade war: “Drop your tariffs and let's get back to business.”
