WASHINGTON, DC (09/18/2026) – Today, the Institute for Energy Research released a new report finding that the focus on the U.S. trade deficit with Canada misstates the relationship. Most of what America buys from Canada is discounted crude oil, natural gas, potash, and unfinished metals that U.S. workers refine into higher-value products and export at a premium. By updating our trade accounting to grant a domestic designation to raw Canadian inputs that are refined in U.S. facilities, policymakers can scrub tens of billions of dollars from the trade deficit.
Tom Pyle, president of the Institute for Energy Research, issued the following statement:
“Putting America First requires trade metrics that accurately reflect domestic manufacturing, supply chain resilience, and American labor, rather than figures that group discounted raw materials from an ally with finished goods from competitors. For decades, these flawed trade figures have misled economic policy in Washington.
“The U.S. imports low-cost crude, natural gas, potash, and raw minerals, which domestic workers refine and sell at a premium. This process demonstrates energy security and manufacturing strength, not economic loss. Securing discounted Canadian energy reduces reliance on foreign cartels like OPEC. Meanwhile, Canadian potash protects crop yields for U.S. farmers, while critical minerals supply the feedstocks needed to expand domestic refining and nuclear capacity.
“By updating trade rules to classify raw Canadian inputs processed in U.S. facilities as domestic, policymakers can eliminate tens of billions from the trade deficit. Combined with the U.S. surplus in services, this adjustment virtually erases the bilateral trade gap with Canada, allowing Washington to focus on strengthening supply chains, expanding manufacturing, and securing well-paying American jobs.”
Crude Oil
Canada supplies over 60% of U.S. crude imports. Over the past decade, Canadian crude entered at an average discount of 13% to West Texas Intermediate and 16% to OPEC crude, allowing U.S. refiners to process cheaper heavy oil domestically while exporting domestic light crude at a premium. This trade structure supports an average annual U.S. petroleum trade surplus of $21 billion globally. Crude oil is the largest U.S. import from Canada, averaging $93 billion per year over the past five years, roughly one-quarter of total Canadian imports.
Reclassifying all 4.5 million barrels per day of Canadian crude as domestic would eliminate the bilateral trade deficit entirely. Alternatively, a selective designation for Canadian producers operating U.S. refining capacity covers nearly 1 million barrels per day, cutting the trade deficit by over $20 billion annually and reducing the 2025 deficit by 77%.
Natural Gas
From 2021 to 2025, Canadian natural gas imports equaled about 70% of U.S. liquefied natural gas (LNG) exports. By importing cheaper Canadian gas by pipeline, American LNG facilities can export more gas abroad and capture a significant premium over domestic prices. Exported U.S. LNG cost an average of 2.5 times more than imported Canadian gas over five years, generating an average annual trade surplus of $4.7 billion. Granting domestic status to Canadian natural gas would eliminate its $9.4 billion average contribution to the bilateral deficit.
Potash
Corn accounts for 53% of U.S. potash demand, and Canada supplies 85% of total U.S. potash imports. Deeming Canadian potash as domestic supply would reduce the trade deficit by $3 billion per year.
Critical Minerals
The U.S. imports 93% of its civilian reactor uranium, with Canada serving as the largest supplier at 32% by volume. Reclassifying unrefined Canadian nickel, copper, zinc, and uranium as domestic inputs would instantly remove $1.3 billion from the trade deficit, with scope for further reductions as U.S. processing capacity expands.
IER Experts Available For Interview On This Topic:
- Tom J. Pyle, President
- Kenny Stein, Vice President of Policy
- Alex Stevens, Manager of Policy and Communications
Additional Background Resources From IER:
For media inquiries, please contact THOMAS.PYLE@IERDC.ORG
