The Trade Zone

Will Washington flinch if Canada sells more oil to Asia?

By Shaz Merwat, Director, Energy Policy

Ottawa’s trade diversification push, laid out in part in the Federal Budget this week, could redraw North America’s energy map—and test its most important economic relationship.

Why it matters

• The 2025 federal budget sets an explicit goal: double Canada’s non-U.S. goods exports to about $600 billion by 2035.

• Mark Carney’s ASEAN tour last week reinforced that ambition, courting Asian partners and positioning Canada’s growth story squarely in the East.

• Together, these moves turn oil and growing LNG exports into instruments of economic diversification and strengthening multilateralism within trade.

• A removal of the oil and gas emissions cap opens the door to greater oil exports to Asia.

By the numbers

• Roughly 75% of Canada’s exports flow to the United States.

• In 2024, Canadian energy exports totaled $197 billion, with crude oil alone accounting for $147 billion.

• About 91% of Canada’s crude exports remained U.S.-bound through the first seven months of 2025. Canada’s remaining crude exports–about 450,000 barrels a day, about 1% of Asian demand–ends up in Asia.

• Asia’s oil-import demand i.e., India, China, Japan, and South Korea has climbed by more than 25% since 2015 to about 22 mb/d, driven primarily by China and India’s rapid industrial growth.

The bigger picture

• Heavy crude’s staying power: Electrification is largely displacing gasoline – a light barrel – but not diesel, jet fuel or petrochemical feedstocks. That longevity gives heavy barrels strategic value.

• Asia’s heavy-oil hub: China is sharply pivoting into petrochemicals, aiming to take Japanese and Korean market share. India, too, is expected to see oil imports grow 1.5 million bpd by 2035 as both countries seek steady supplies of heavy and sour crude. Today, that supply originates from the Middle East, Russia and Venezuela, creating an opening for a stable, Western entrant.

• Investment and offtake matter: Canada’s oil expansion will come from oil sands growth. Long-term commitments–both investment and offtake – will be essential to anchor any future West Coast capacity. With CNOOC, Sinopec and PetroChina already in Canada, and better ties with India envisioned, how would renewed Asian capital be welcomed in Ottawa…and Washington?

• Carbon and shipping constraints: Industrial carbon pricing, expectations for progress on progression on the Pathways carbon capture and storage project, a federal Tanker Ban and tighter International Maritime Organization (IMO) shipping regulations all hang in the balance, unanswered.

Bottom line

Canada’s bid to expand exports through a multilateral trade system could sit awkwardly beside Washington’s more bilateral instincts. For decades, U.S. policy has treated Canadian energy as a secure extension of its own supply chain. As Ottawa builds eastward links and asserts greater agency in global oil markets, it’s not only testing the flexibility of the North American partnership—it’s testing whether America will allow that independence to take shape.

The week that was

• The Liberal government’s federal budget earmarked billions of dollars in funding in response to the Trump Administration’s tariffs.

  • As part of the shift from “reliance to resilience,” the budget pledged $5 billion over seven years to create the Trade Diversification Corridors Fund.

  • And an additional billion dollars for an Arctic Infrastructure Fund with a stated goal, in part, of linking the Canada’s North to global markets.

  • The introduction of a $2 billion critical minerals sovereign fund, that would make equity investments, loan guarantees and offtake agreements with mining companies.

• The Supreme Court case pertaining to President Trump’s use of the International Emergency Economic Powers Act to impose tariffs, including the fentanyl tariffs on Canada, kicked off. Even members on the bench from the conservative majority questioned the U.S. President unilaterally setting tariffs on imports. A decision is likely months away.

• By approving measures to protect farmers, the European Union moved a step closer to the Mercosur trade deal, a massive agreement with South American nations that’s been a quarter century in the making.

• Despite pressure from U.S. tariffs, Ontario projected a smaller deficit than expected in its fiscal update. The economic statement also promised a balancing of the books in 2027-28.

• The U.S. Department of the Interior added silver and copper to its list of critical minerals paving the way for both to be included in future tariff policies.

Final word(s)

“The U.S. footprint in global trade will be smaller. The world needs to adjust to that. It will be a bigger adjustment for us.”
–Bank of Canada Governor Tiff Macklem, speaking at The Logic’s Summit this week.