Top economist predicts what impact Trump's tariffs will have on Americans

New York (CNN) — The tariff on products imported from Canada will cost Americans 15 cents a gallon or more at the gas pump relatively soon. That’s not as much of a price hike as we could have seen.

Tariffs on US imports from Canada and Mexico were announced Saturday by the Trump administration and are set to take effect on goods arriving here Tuesday, as President Donald Trump followed through on a campaign promise by taking action against America’s two biggest trading partners. But then on Monday he put the Mexican tariffs on hold. The tariffs, a tax on goods crossing the border, will affect the price Americans will pay for all manner of imports from the countries, including cars, lumber and agricultural products. But gasoline and other energy products could be among the first to see the expected price increases.

One factor limiting the price increase is the tariffs on energy products is only 10%, not the 25% tariff announced on other products from Canada. A Trump administration official told reporters on Saturday that a lower tariff on energy was done to spare Americans from from having to pay even more for gasoline and heating oil, even though President Donald Trump has long insisted, incorrectly, that it is the foreign nation, not Americans, who pay the cost of any tariffs that are imposed.

“We took this step simply because… a 10% rate on energy will minimize any disruptive effects we might have on gasoline and home heating oil prices,” said the administration official, who spoke on condition he not be identified.

Wholesale gasoline prices were up 8 cents a gallon on trading markets early Monday, said analyst Andy Lipow of Lipow Oil Associates. And the price at the pump could go up even more as the cost of the tariffs are added on top of the increase in market prices. The average price of a gallon of gas stood at about $3.10 a gallon as of Monday, according to AAA, unchanged from Sunday’s price reading.

Diesel prices were trading up 10 cents a gallon. Higher prices for diesel could lead to a fuel surcharge by trucking companies, which could bleed through to the price of goods, since virtually every item in Americans’ homes were on a truck at some point. And it could also raise the price of heating oil, which is the same basic product as diesel fuel.

Market prices for wholesale gasoline are up because traders are expecting some of the crude oil and gasoline now being imported from both Canada and Mexico will end up being diverted to other markets, causing some shortages in the United States. Oil futures are up 2% to 3% in Monday morning trading. One reason that they’re not up more is that futures contracts are for purchases of oil to be made in the next few months, and some investors are betting that the tariffs will end up being short-lived.

But that doesn’t mean there won’t be some short-term price increases at the pump.

“What you are seeing is a great reshuffling of oil about to begin,” Lipow told CNN Monday. Higher prices might not happen overnight, he said, but, “You’ll see something at the pump in the next five to seven days. Depending on where you are in the country, it could be up to another 15 cents a gallon.”

Mexico also source of oil, gasoline imports

Since Canada is the largest source of imported oil and gasoline into the US market, it’s been getting much of the attention. But Mexico is also a major exporter of both oil and gasoline to the United States.

Monday morning, however Trump announced the tariffs on imports from Mexico would be on hold for a month after a call he had with Mexican President Claudia Sheinbaum.

If the tariffs go into effect on Mexican goods, it could have its own impact on gas, diesel and oil prices, even if Mexican has only a fraction of the petroleum exports to the United States as sent here from Canada.

Unlike a lot of Canadian petroleum products that arrive here via pipeline and is difficult to divert to another market, Mexican oil and gasoline arrives primarily via ship, so it can easily be sold elsewhere. Oil exports to the United States via ship from either country are likely to be quickly sent to other markets once tariffs are in place. according to an analysis from Goldman Sachs on Sunday.

“Expect the bulk of the previously seaborne Canadian and Mexican exports to the US to be rerouted,” it said in its Sunday note, ahead of the news about Mexican tariffs being put on hold.

But the good news for American consumers is that many oil producers in Western Canada have little alternative for their oil other than sending it to US refineries via existing pipelines. That could make it difficult for those producers to pass on the full cost of the tariffs to their US customers, said the note from Goldman Sachs. But some of that cost of tariffs will be borne by US customers.

“We expect Canadian oil producers to eventually bear most of the burden of the tariff with a $3 to $4 a barrel wider-than-normal discount on Canadian crude given limited alternative export markets, with US consumers of refined products bearing the remaining $2 to $3 a barrel burden.

One factor limiting the price shock at the pump is the time of year. Gas prices are typically near a low for the year in February due to weak demand, said said Tom Kloza, global head of energy analysis for OPIS. The current seasonal weakness in energy prices could limit the bite at the pump.

If the tariffs stay in place through summer, the impact will be greater, he said, causing not just pain in people’s wallets on a small scale, but inflation on a larger level.

“It’s inflationary, but not as inflationary as it would be in April, May or June,” Kloza told CNN late Saturday. “We are using about 1 million barrels a day less gasoline on February 1 than on July 1.”

The impact will not be felt equally nationwide, because most Canadian oil is shipped to Midwest refineries via pipeline, Kloza said. The states served by those refineries are Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Ohio, North Dakota, South Dakota, Pennsylvania and Wisconsin.

“Interestingly, 12 of those 16 states begin February with an average retail gasoline price under $3 a gallon,” he said. “That probably won’t last.”

New England gets a lot of gasoline from a refinery run by Irving Oil in Saint John, New Brunswick. That also can be shipped elsewhere, so the diversion of that gasoline could send gas prices in New England up 20 cents a gallon, said Lipow.

– CNN’s Matt Egan and Elisabeth Buchwald contributed to this report

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