Canada's domination of U.S. oil imports, topping 60% on an annual basis in 2025, matters for several reasons.

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Canada was responsible for a record 60.88% of U.S. oil imports in 2025, the first time it or any other country had accounted for 60% of the total value in the modern era, if ever, according to my analysis of U.S. Census Bureau data.

Canada’s total for 2025 was $85.39 billion; the U.S. total was $140.26 billion. Through February, that percentage is running at 59.04%.

While both import numbers are well off their records, given U.S. domestic production, and while Canada’s overall trade has fallen three straight years, the record in the percentage matters for three reasons.

First, Canada’s importance to the United States as a trade partner – it ranks second only to Mexico – is heightened by the U.S. and Israeli war with Iran. That has led to the subsequent and ongoing blockage of the Strait of Hormuz and the nearly immediate steep increase in gasoline and jet fuel prices.

Americans, as well as people around the world, are feeling the pain at the pump and when making airline reservations. Domestically, that’s a cause for concern to the Republican-led House and Senate as the mid-term Congressional elections approach.

It would not help GOP efforts to keep control of both the House and Senate if U.S. access to Canadian oil, even at higher prices, was in any way stymied.

The second reason, which ties back to an earlier Middle East war in a roundabout way, is that Canadian oil keeps the U.S. trade deficit down, even if just a smidge, while allowing economic growth in the United States.

Stay with me, here.

Canada’s oil is a so-called “heavy” oil, a less-clean oil, which the majority of U.S. refineries were manufactured to handle decades ago. One of the last consequential U.S. facilities was built in Garyville, La., in 1976.

Some three decades later, the shale revolution in Texas and elsewhere changed the game. Domestic oil was abundant, some 13 million barrels per day as of 2024. So abundant that this “light sweet” crude, which is a cleaner oil, was too abundant. The U.S. refineries that could handle it, could not handle it all.

Chevron and Exxon have recently expanded existing refineries to handle a combined 375,000 bpd, or barrels per day, but that’s a drop in the bucket of what’s needed. An attempt to build a much larger facility at the Port of Brownsville in Texas is in progress, its financing helped along by a guarantee of an Indian energy company to buy output for two decades.

In 2015, as the results of hydraulic fracking became clearer and clearer, the United States rescinded what was essentially a ban on U.S. exports. It had been in place since 1975, two years after the Arab Oil Embargo.

That 1973 embargo was led by Saudi Arabia in response to President Richard Nixon’s decision to supply military assistance to Israel. It was under attack from Syria and Egypt, which wanted to reclaim the Sinai Peninsula. Egypt had lost the Sinai in a previous Middle East war, the Six-Day War of 1967.

After 2015, once the United States could export oil, it only had to find markets for its light crude. Turns out, there was a market. Many of the newer refineries being built around the world - with the exception of the United States – could already accommodate the grade of oil the United States could not handle.

The Netherlands, South Korea and, well, Canada, now account for 44% of U.S. oil exports. Prior to the U.S. trade war with China, China briefly accounted for just under 20% of U.S. oil exports. All four countries can handle lighter crude as newer processing plants are better equipped to handle multiple grades.

So, in exchange for exporting U.S.-produced oil that it cannot process because of capacity issues, the United States imports oil from Canada and other countries that it then refines and uses to handle the need for the world’s largest economy.

This ability to export U.S. oil keeps the annual $1 trillion-plus U.S. trade deficit down, even if just a smidge, and helps keep gas prices down. Except in times of war in the Middle East, it appears.

Even though U.S. imports from the largest Middle Eastern nations have been sharply curbed over the years, it appears that does not preclude Americans from feeling the pinch of oil being blocked from departing through the Strait of Hormuz, largely bound for Asia. Canada has been the No. 1 source of U.S. oil imports since 2005, when Venezuela ranked first, but in years prior, it had been Saudi Arabia.

The third reason Canadian oil matters is that it adds a wrinkle to the USMCA review, with July 1 a key date.

If all three countries decide by that date to continue the United States-Mexico-Canada Agreement as is, it remains in place until 2042 and possibly longer, with a similar review in 2032, another six years from now.

That appears unlikely, of course, given the barbs, threats, and moves aimed at each other between President Trump and Canadian Prime Minister Mark Carney as well as recent comments, more recently, from Treasury Secretary Scott Bessent, about the U.S. deficit with Canada.

A big piece of that is, of course, oil, which accounted for 22% of U.S. imports from Canada among the 1,184 categories in which it registered imports in 2025.

While there is little sense that USMCA will be renewed as is, the more likely scenario is either adjustments made to the existing agreement, which would trigger annual reviews, or bilateral agreements, which would scuttle Trump’s USMCA all-together.

The precursor to USMCA, NAFTA, did not have a review process and lasted more than three decades.

Canada’s oil matters, even as overall trade between the two nations has decreased. It keeps U.S. refineries running and gas prices in check, particularly critical now as Middle East conflict squeezes global supply through the Strait of Hormuz. It quietly helps offset the U.S. trade deficit while enabling domestic economic growth. And it adds complexity to the looming USMCA review since oil accounts for 22% of the value of U.S. imports from Canada. Whatever form any renegotiation takes, disrupting the U.S.-Canada energy relationship could carry tangential costs to the U.S. economy.