We’re now around 100 hours from Donald Trump imposing 25% tariffs on everything from Canadian and Mexico.

Now, it’s worth thinking about the consequences of the Canadian tariff on the US economy:

The most important thing to understand is that the Canadian trade surplus with the US is entirely oil & gas. Their total trade surplus is $41bn. And oil and gas exports to the US were $152bn.

So oil and gas accounts for 350% of the surplus.

Which is weird if you don't know the oil and gas industry, because the US is self sufficient in oil and gas... and yet imports $152bn worth of the stuff from Canada.

This is because the real world is complex.

The gulf coast refinery system is almost entirely set up to deal with heavy crude.

Historically, the US imported this from Venezuela. But then the Keystone pipeline came along, and instead Canada provided heavy oil rather than Venezuela. So, the US imports heavy crude from Canada... while exporting lighter crude oil, NGLs, and middle distillate from the Permian basin to the UK and Europe.

The Gulf coast refining complex is not going to be refitted to process light crudes, because (a) it would take 18 months to refit refineries, during which time they would be making zero dollars, and (b) the margins on that are terrible compared to heavy crudes.

So what will happen is that the US will now import Venezuelan and other heavy crudes rather than Canadian crude. The consequence will be - therefore - that the US's trade deficit with Canada will disappear, but a new one with other producers of heavy crude will appear.

And because Venezuelan crude will be slightly more expensive than Canadian crude, the overall US trade deficit will worsen. (And petrol in the South of the US will be slightly more expensive.)