Crude Oil Curtailment and Collusion: Heterodox Trade War Strategies for Canada

This paper examines two non-traditional retaliation strategies that Canada could employ in response to U.S. import tariffs during a trade war: i) crude oil production curtailment and ii) potential exemptions to Canada’s Competition Act. Unlike traditional retaliatory tariffs or export restrictions, these measures could provide economic benefits to Canada rather than exacerbating the negative impacts of U.S. tariffs.

Both strategies offer advantages over more conventional retaliation methods. Unlike export restrictions, which could depress prices, production curtailment and collusion would help Canadian producers capture higher revenues while shifting the burden of U.S. tariffs onto American consumers. Also, an export tax, while generating government revenues, does not strategically shift the economic burden in Canada’s favour to the same extent.

While this paper does not advocate for any specific course of action, it highlights the need for policymakers to consider innovative and pragmatic responses to U.S. trade aggression. Crude oil curtailment and competition law exemptions present unconventional but potentially effective strategies for mitigating the adverse effects of tariffs while safeguarding Canada’s economic interests. Both strategies are preferred to export restrictions and export taxes. Nonetheless, their success in compelling U.S. policy changes remains uncertain and further analysis is required to fully assess their implications before implementation.