Canada Considers Export Taxes on Uranium and Oil in Response to Potential U.S. Tariffs - Bloomberg

Following reports that the Canadian government is considering implementing export tariffs on several key commodities, including uranium and oil, in response to potential tariffs threatened by the U.S., stocks of uranium companies experienced volatility. This development particularly affected stocks such as Cameco Corp (NYSE:CCJ), Energy Fuels (NYSE:UUUU), and Uranium Energy (NYSE:UEC).

According to a report based on sources familiar with the matter, officials under Prime Minister Justin Trudeau are discussing the possibility of imposing export tariffs on commodities like uranium, oil, and potash as a last resort, in light of indications that the incoming President Donald Trump may impose broad tariffs. Before considering export tariffs that would raise costs for U.S. consumers and businesses, Canada sees it as more likely to implement retaliatory tariffs on U.S.-made goods and introduce export controls on certain products.

The Canadian government may also consider expanding its powers regarding export controls as part of a financial and economic update scheduled for Monday. As the largest foreign oil supplier to the U.S., Canada's export tariffs could significantly impact U.S. refineries in the Midwest, which rely on Canadian crude for nearly half of their production.

Uranium, a significant Canadian export product, is a primary foreign fuel source for U.S. nuclear power plants. The U.S. Department of Defense has also invested in Canadian cobalt and graphite projects to reduce dependency on Chinese supply chains.

While some analysts suggest that Trump could exempt commodities from the proposed 25% tariffs on goods from Mexico and Canada, Canadian officials have indicated that a response would be necessary if other products are targeted while energy is exempted. Such a scenario could lead to Canada imposing export tariffs.

However, the idea of export tariffs has faced opposition within the country. Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe have strongly opposed such measures, emphasizing their preference for diplomatic solutions over tariffs that could increase the cost of living.

The use of export tariffs would also present significant risks for the Canadian economy, as energy products account for approximately 30% of exports to the U.S. Cameco Corp, the second-largest uranium producer in Canada, primarily sells uranium and fuel services to nuclear energy companies in the U.S. Given the minimal domestic production of uranium in the U.S., the reliance on imports is substantial.

Former chief trade negotiator Steve Verheul mentioned the possibility of Canada using export tariffs as a negotiating tool if tariffs are imposed. Finance Minister Chrystia Freeland noted that retaliatory measures concerning commodities are being discussed with provincial premiers.

Despite these discussions, the Trudeau government aims to avoid a trade war with the U.S. and plans to address border security concerns to alleviate worries related to immigration and fentanyl trafficking. According to U.S. government data, Canada is a smaller source of these issues compared to Mexico.