US President Donald Trump’s latest tariff threats against Mexico and Canada have left the financial markets scrambling, and he only paused them just days later. However, there has been speculations whether these moves are just trade disputes or something more. Experts said that Trump plans to control the North American energy supplies in the US, which will ensure a reliable and uninterrupted flow of oil from both countries. At the same time, it will strengthen the security in the region.
Donald Trump announced sweeping tariffs on Saturday on two of the country’s closest neighbors, China, and mentioned their failure to curb illegal drug trafficking. Reports suggest, by Monday, he agreed to a one-month suspension of duties as Mexico and Canada requested to develop border security. Besides, a 10% levy on Chinese imports went into effect as well.
🇺🇸 Trump’s tariffs on Canada and Mexico lasted just 48 hours—paused after financial markets pushed back. But the episode offers key lessons for Europe, which will soon be in the spotlight.
🔗 Read @TGehrke_ & Herman Quarles van Ufford’s latest 👇 https://t.co/13pon28sWZ
— ECFR (@ecfr) February 7, 2025
This sudden incident has given enough reasons to people for raising eyebrows. Further confusion came up when Trump Europe imposed tariffs, too, and then later walked back on the duties for low-cost Chinese imports. Analysts have been wondering what’s going on? A note from Yardeni Research reads that energy and national security are the keys to understanding Trump’s approach.
“For Trump to secure the US’s energy future, he needs the Western Hemisphere to function as a coherent energy bloc,” market veteran Ed Yardeni wrote. “This means both a reliable, unimpeded flow of oil and natural resources from Canada and a safer Mexico. And that means both countries are under the US’s thumb.”
United States has been the top oil producer worldwide and of course, the credit goes to the shale boom; it still depends on its neighbors, Mexico and Canada, for crude. The Midwest is a significant consumer of Canadian oil, and Mexico, on the other hand, supplies Gulf Coast refineries. Canada is comparatively more critical. The reason? It exports 3.9 million barrels of oil daily to the US. Mexico, on the other hand, does only 397,000 barrels.
Tomorrow, Donald Trump will announce a massive tax on Americans through tariffs on Canada, Mexico, and China.
Canada is the largest source of U.S energy imports.
We are risking a full blown cost of living crisis.
— Skyler Johnson (@SkylerforNY) January 31, 2025
Yardeni suggests Trump’s tariff threats against Canada may be more than economic pressure. That’s an indication that they may be a strategic move to tighten US control over its northern neighbor’s energy sector. “Posturing aside, a North American security zone appears to be taking shape,” he noted.
Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau seem to be recognizing the stakes. They have agreed to Trump’s border security demands concerning their economic fallout and to avoid trade penalties. Trump has been giving clues towards the plan of integrating with Canada. He even jokingly said to make it the 51st state. But according to Yardeni, that idea may not be as far-fetched as it seems when it comes to energy control.
Experts also opine that the Heritage Foundation’s Project 2025 has influenced Trump’s approach because it aligns closely with this conservative blueprint that is advocating the shift of manufacturing away from China and that ensures the independence of North American energy. By this initiative, more muscular US control could be attained, especially over the regional energy resources. That would mean, eventually the reliance on overseas fossil fuel supplies could be reduced.
As mentioned, Donald Trump has temporarily paused the tariffs; however, analysts warn that greater economic disruptions could still be in pipeline. Paul Ashworth, chief North American economist at Capital Economics, warned of a “rolling tariff threat” in which Trump could repeatedly extend deadlines while continuing negotiations.
“Even allowing for Trump’s U-turn, we’ve become more concerned that more countries could soon be targeted for specific tariffs,” Ashworth noted. For now, the United States has imposed a 10% universal tariff, with China facing duties as high as 60%. However, the real question is: Will Trump negotiate a broader energy and trade deal, or will the uncertainty continue to impact global markets?
