August 30, 2026
Donald Trump's renewed trade war on Canada has revived discussions on where Canada has leverage over its larger neighbour. Energy and natural resource exports, including electricity, oil, gas, thermal coal, potash and other minerals and materials have all been discussed as areas where some form of export restrictions could have large economic impacts on the US.
In fact, the US has telegraphed its own sense of its vulnerabilities through the exceptions it has given from its tariff war on Canada, These have included energy, potash and certain other minerals and materials. There is historical precedent, going back to the original oil crisis of the 1970s, for the imposition of export charges and restrictions on Canadian energy exports to the US in times of crisis. The availability of energy related options was actually reinforced by Trump’s removal of the energy sharing provisions of the original 1988 Canada-US Free Trade Agreement through the 2020 Canada-US-Mexico (CUSMA).
In more specific terms, despite Ontario Premier Doug Ford’s loud threats, Canada’s leverage regarding electricity exports to the US is limited. Among the four exporting provinces, Ontario and BC’s activities are fundamentally transactional, with no firm supply contracts. In the case of Ontario, exports are essential to managing the province’s nuclear heavy electricity system, which produces surplus supply during periods of low demand.
Manitoba and Quebec have held long-term supply contracts to the US based on their large hydro-electric resources. However, their output has fallen dramatically over the past few years as a result of the same climate change induced droughts that have driven wildfires across Canada.
The situation with respect to other export options is also complicated. Canada US trade in fossil gas is increasingly two way, with substantial imports of gas from the US coming into central Canada.
The story with respect to oil is much more one-sided. The US imports nearly four million barrels of oil per day from Canada. An export charge on Canadian oil sold to the US could increase gasoline and other fuel costs in the US. These are already politically sensitive issues in light of the impact of the war that the US and Israel initiated with Iran earlier this year.
Certain minerals and material also represent significant options. Potash exports to the US, which provide the basis for agricultural fertilizers, are perhaps Canada’s strongest card in this regard. Canada provides over 80 per cent of the American supply of potash, The US has no obvious short or medium term alternative source of supply. Other options that have been identified include thermal coal from BC, and supplies of nickel, aluminum and even uranium.
Notwithstanding the objections of the Premiers of Saskatchewan and Alberta to some of these options, particularly around oil and potash exports to the US, there is no question regarding the federal government’s jurisdictional authority to impose export taxes and restrictions on Canadian resources and commodities. That authority would flow from the same jurisdiction over international and interprovincial trade and commerce that enables Ottawa to force pipelines through BC, over that province’s objections, on behalf of Alberta.
In the current circumstances, where the US Administration is increasingly explicit in its threats to Canada sovereignty and autonomy, the federal government could also draw on the ‘emergencies’ branch of its authority to legislate for the “Peace, Order and Good Government” of Canada. Parliament could even use its declaratory power (s.92(10)) to place key facilities or infrastructures under federal jurisdiction.
The challenges with these options is therefore political as opposed to legal or constitutional. Premiers Smith and Moe have rejected the possibility of restrictions or taxes on the export of oil and potash in apocalyptic terms. These responses have significantly weakened Canada's bargaining position with the US by both suggesting divisions on the Canadian side and attempting to take some of Canada's most powerful points of leverage off the table.
The responses were also profoundly overwrought. No one, at this point, is seriously suggesting (Doug Ford's rhetorical statements notwithstanding) a complete, overnight shut down of exports of oil and potash to the US as Premiers Smith and Moe seem to be suggesting. But even talking about the possibility reminds the Americans of their exposure. In reality the option would likely come in some form of export tax. In the absence of any ready substitutes for the affected commodities, the effect would be raise costs for US consumers, but to not fundamentally disrupt supply chains and the affected industries on both sides of the border.
Smith, for her part, is playing off the separatist threat in Alberta, in the context of an increasingly shambolic referendum process. There are serious questions about Elections Alberta's ability to manage the process, and growing suggestions of significant foreign interference, from sources hostile to Canada.
Smith herself has obtained a near complete federal capitulation by energy, environment and climate matters, and support for her long-sought pipeline to the west Coast. Despite this she has indicated her intention to carry through with a full independence referendum in the new year if her initial 'referendum on a referendum' succeeds. That is a step even the separatist Parti Quebecois in Quebec has deferred until at least after the end of Trump administration. .
Although Ontario Premier Doug Ford has at times been vocal on pushing his provincial counterparts to take a harder line in dealing with the US, his statements on electricity exports are not the only ones that actually don't make sense, Ford, for example has called on the federal government to weaken or drop its industrial carbon pricing system in response to the situation in the US. The industrial carbon pricing system is one of the few major elements of Canada's strategy on climate change to (mostly) survive the Trudeau -Carney transition.
There are serious potential problems with that idea. Although the US federal government doesn't care about climate change, the people other than the Americans to whom we want to sell things, like the Europeans and China, still very much do, In the case of the EU, there is actually is a system - the Carbon Border Adjustment Mechanism (CBAM)) - that charges a form of 'carbon tariff' on imports from countries that don't have carbon pricing systems of their own.