Trump tariffs on Canadian and Mexican imports set to drive up refined product costs in Latin America

Market sources are anticipating a potential rise in the cost of refined products in Latin America due to the 25% tariffs on imports from Canada and Mexico announced by US President Donald Trump, set to take effect on Feb. 1. This development could significantly impact crude oil prices in the region, with Colombia's heavy grades, Vasconia and Castilla, positioned to benefit amid heightened market volatility and uncertainty.

According to S&P Global Commodities at Sea(opens in a new tab) data, Canada and Mexico are the top two main exporters of oil to the US, with 167.6 million barrels of Mexican crude and 120.8 million barrels of Canadian crude having entered the US in the last 12 months. Other Latin American exporters of crude to the US include Brazil, Venezuela, and Argentina.

"There is a lot of Canadian oil that has no outlet to the sea and only land access to the US, specifically to PADD 2 and PADD 4," said a market source. "The Canadians need to sell that crude oil, and the midcontinent refineries need to buy it."

Market sources said this could lead to an increase in the price of crude oil for Latin America. "It is expected that there will be an increase in the price of crude oil, which will have repercussions on the supply chain, making refined products more expensive."

The same market source noted that Brazil could be a beneficiary of the tariffs. "Brazil could benefit from the crude oil aspect and bring more to the US; however, I see it as a more expensive alternative."

However, market sources are unsure of what will happen in the market, and added only time will tell. "In the beginning, there will be a lot of volatility and uncertainty," said a second market source.

According to CAS, the last time Mexico exported clean products to the US was 293,200 barrels of naphtha in September 2024.

When asked if tariffs on competing Canadian and Mexican grades could support higher prices of Colombian grades, a trading source in Colombia responded, "Yes, totally!"

Colombia's heavy Vasconia and Castilla grades benefited greatly as tariff announcements against their competitors were made recently, and some buyers of these grades on the US Gulf Coast have reacted inversely, knowing that the impact of tariffs will only drive the price of the grades further up.

"God, I hope not!" one buyer exclaimed when asked a similar question.

Platts assessed Vasconia at a discount of $2/b to the 30- to 60-day forward Latin American Dated Brent strip and Castilla at a discount of $5.05/b to the strip on Jan. 31.

Another trader said that what the Trump administration does about imports from Venezuela in the future could also significantly impact market dynamics in the region.

In the meantime, many Latin American crude oil market participants are waiting to see whether oil will be excluded from the tariffs.

Platts is part of S&P Global Commodity Insights.