The trade war that briefly flared up between the United States, Canada, and Mexico has been put on hold. However, tensions with China have escalated. As these confrontations involve the world’s major players, energy markets remain on edge.
On February 1, 2025, the White House published three executive orders: one addressing the situation on the southern border, another aimed at combating the flow of illicit substances across the northern border, allegedly from China, and a third imposing additional tariffs on various goods, including energy resources.
Just two days later, on February 3, the official website posted two statements about “progress in the situation” at both the southern and northern borders. In reality, the newly announced trade war was put on pause. This abruptly ended speculation about how Canada and Mexico’s retaliatory actions might reshape the global energy landscape. Some analysts believed European and Asian refineries would benefit from the standoff, while others predicted rising gasoline prices in Europe and the U.S.
For now, the introduction of tariffs has been postponed—from February 4 to March 4, 2025. And by then, they may be scrapped altogether.
However, having achieved quick results on both fronts with minimal effort, Washington may find it hard to stop—new demands could be made, and pressure could increase. Meanwhile, Canada and Mexico have little room for a strong response. Both countries, particularly in the energy sector, are extremely dependent on the United States.
Canada exports over 190 million tons of oil to the U.S. out of a total production of about 270–280 million tons. Most of this is transported via pipelines. While Canada has reportedly expanded its capacity to divert about 30 million tons toward the Pacific coast, this is far from enough to fully redirect its exports to alternative markets. Moreover, neither port infrastructure nor oil tankers were prepared for such a shift.
Mexico produces about 100 million tons of oil, exporting more than 36 million tons to the U.S. It is the second-largest oil supplier to the U.S., trailing only Canada, which accounts for roughly half of America’s total foreign oil imports.
Given their dominant position in the U.S. oil market, one might assume Canada and Mexico could coordinate efforts to pressure their restless neighbor—hitting American consumers’ wallets hard or even triggering shortages and an energy crisis. We won’t dwell on the fact that the next significant U.S. elections are still far off, meaning Washington can afford a temporary crisis, as it has more resources than Mexico City and Ottawa. Instead, let’s note that oil is just one part of the equation.
For Canada, the U.S. is the only viable buyer of its natural gas, receiving around 80 billion cubic meters annually. At the same time, the U.S. sends gas back to Canada—though in smaller volumes (28 billion cubic meters in 2023). Any Canadian retaliation on the oil front would likely provoke an American response in the gas sector. Having a single buyer is a major vulnerability for any seller.
Mexico’s situation is even worse. The country is the largest importer of American natural gas. Preliminary estimates suggest it purchased about 66 billion cubic meters from the U.S. in 2024, accounting for roughly 31% of total U.S. gas exports. In the medium term, Mexico has no viable alternative suppliers.
Even more critically, Mexico imports over 50 million tons of petroleum products from the U.S. Again, no immediate replacement exists. In other words, while Mexico exports crude oil to the U.S., it is deeply dependent on American refined fuel. Given these conditions, Mexico’s willingness to negotiate with Washington was entirely predictable. The only question is whether the concessions Mexico has already made will be enough for the U.S., or if Washington will push for even more.
Meanwhile, China has imposed retaliatory tariffs on U.S. oil, coal, liquefied natural gas, and other goods.
China and the U.S. have clashed in trade disputes before, most notably from 2018 to February 2020, when they signed an agreement ending the confrontation. However, this did nothing to reduce the anti-China sentiment that has characterized American politics for decades. Even the transition from Trump to Biden did not change this dynamic—Republicans and Democrats continued accusing each other of being soft on Beijing.
Now, with Trump back in power, we seem to be at the start of a new trade war—more precisely, a new major and open trade war, since the “cold” trade war never actually stopped. At its core, this is about tangible, quantifiable interests.
In 2024, the U.S. trade deficit grew by 17% to $918.4 billion, with $295.4 billion of that coming from trade with China. While U.S. imports from China are rising, exports to China are declining. A similar, albeit less severe, pattern exists in trade with Canada and Mexico. If Trump intends to pressure all countries that buy less from the U.S. than they sell to it, then Vietnam and Germany should brace for trouble as well.
In the energy sector, the U.S. has little to offer China—at least nothing Beijing can’t do without. While China does import some U.S. liquefied natural gas (about 6 billion cubic meters in 2024), it’s not a critical volume. During the last trade dispute, U.S. gas exports to China were halted from March 2019 to February 2020. China can replace those 6 billion cubic meters. Russia alone is set to increase its pipeline gas exports to China by about 7 billion cubic meters in 2025 via the “Power of Siberia” pipeline.
Throughout 2024, China imported less than 0.9 million barrels per day of crude oil and petroleum products from the U.S., a decrease from the 0.99 million barrels per day in 2023. About two-thirds of this consisted of liquefied petroleum gases (mainly propane and ethane), which are not yet subject to additional tariffs—but that could change at any moment.
As for coal, trade between the two countries is negligible. Annual U.S. coal exports to China amount to roughly what China produces in half a day. The new 15% tariffs will likely end U.S. coal shipments to China, but those volumes will find buyers elsewhere.
The current conflict isn’t alarming energy markets because of fears of immediate shortages or supply disruptions. The real concern is uncertainty over the long-term outlook for the world’s two largest economies. If the dispute drags on, what happens next?
In the media, negative forecasts about China will inevitably be amplified. Since China is the global driver of hydrocarbon demand growth, pessimistic projections could suggest economic slowdown and reduced energy consumption. This could sustain the illusion of an impending supply glut—something that has been pushed in the media since November 2023. Any predictions about China from global outlets should be met with heightened skepticism.
Beyond the media narrative, there are real risks for both China and the U.S. However, for these risks to escalate into something more serious, the trade conflict would need to intensify further. At its current level, both nations can endure it with relative ease.