By Avi Salzman
The White House said Friday the U.S. will impose 25% tariffs on Canada and Mexico on Saturday, and there were already signs of anxiety in uranium and oil markets.
Both oil and uranium are major exports from Canada to the U.S., and those markets were reacting to the news, said Paul Dotson, equity trading managing director at TD Securities.
Trading volumes of the iShares S&P/TSX Capped Energy Index ETF, a Canadian energy ETF, have been down from normal levels, Dotson said. By contrast, the Energy Select Sector SPDR Fund, a U.S.-centric index, has been seeing higher-than-usual volume.
"Canadians are trading with more trepidation," Dotson said.
The Canadian index was down 1.6% on Friday, and is off 0.4% this year. Canadian Natural Resources, the largest of the Canadian names, is down 2.5% this year. The Energy Select Sector SPDR Fund is up 1.3% this year.
The exact products that the tariffs will cover will be made available on Saturday, so it wasn't yet clear what industries might get hit. President Donald Trump said this week that Canadian oil might be exempted, but he had not announced a decision yet.
Analysts say tariffs on oil could cause U.S. gasoline prices to rise, because several U.S. refineries rely on processing Canadian oil. If those refineries have less access to supplies from Canada, or if those supplies become more expensive, the price might be paid by consumers.
If the tariffs were passed completely along to consumers, it could raise gasoline prices 35 cents per gallon in parts of the country, according to Tom Kloza, the global head of energy analysis at Oil Price Information Service. Assuming oil companies share the pain with consumers, the price hike could end up being more like 15 to 20 cents.
It could also hurt Canadian producers, who might have to sell their oil at a wider-than-usual discount to American crude. West Texas Intermediate crude, the U.S. benchmark, was selling for $14 more than Western Canadian Select, the Canadian benchmark, as of Thursday. But the spread could grow to $27 if a full tariff goes through, Citi projects.
Canada is also a major exporter of uranium to the U.S. The uranium market isn't as liquid or transparent as the oil market, so it can be harder to see trading patterns. But Dotson said the traders he talks to are noticing that Canadian uranium is trading at a discount to U.S. uranium on the spot market -- a rarity.
A tariff on uranium could hurt Canadian producers such as Cameco, while potentially benefiting U.S. producers like UEC.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 31, 2025 15:49 ET (20:49 GMT)
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