Goldman Sachs estimates a proposed 10% U.S. oil tariff could cost foreign producers $10 billion per year, while the government would generate $20 billion in revenue.
With Canadian and Latin American heavy crude producers heavily reliant on U.S. refiners due to limited alternative buyers and processing capabilities, Oilprice noted.
President Donald Trump plans to impose a 25% tariff on Mexican crude and a 10% levy on Canadian crude starting in March.
However, Goldman Sachs has predicted that the U.S. will remain the primary destination for heavy crude thanks to advanced refining capabilities and low costs.
According to Bloomberg, a potential US tariff on oil imports would hand consumers a $22 billion bill as higher costs get passed on, while doing little to stimulate domestic crude production, according to Goldman Sachs Group Inc.
The possible levy — which has been floated by the Trump administration, including on flows from Canada and Mexico — would mean a cost equivalent to $170 per household, Bloomberg quoted.
Tariffs on Mexican and Canadian imports are "on time and on schedule," Trump said Monday, ahead of the March 4 deadline.
The renewed worries about tariffs highlight uncertainties facing global markets, where many investors had hoped initial delays signaled Trump's threats were primarily a negotiation tactic, according to Reuters.
Last week, China announced retaliatory tariffs on American energy imports and an antitrust investigation into Google, minutes after a sweeping levy on Chinese products imposed by Trump took effect.
Beijing said it would implement a 15% tariff on coal and liquefied natural gas (LNG) products, as well as a 10% tariff on crude oil, agricultural machinery, and large-engine cars.
The tariffs took effect on Feb. 10, marking the beginning of another trade war between the world’s biggest economies. Analysts at Standard Chartered have delved into the potential effects of the tariffs on the U.S. energy sector.
The bank noted that China first levied a 10% tariff on U.S. LNG imports in September 2018, later increasing it to 25% in June 2019.
Some imports continued at the 10% rate, but there were none at the higher rate. Beijing then granted tariff waivers for LNG in February 2020 as part of a trade war de-escalation, with the first U.S. cargo arriving in April 2020 after 11 months of zero flows.
Since then, there have been cargoes in all but three months, with the relationship between U.S. producers and Chinese LNG buyers deepening through the signing of long-term contracts. No long-term LNG contracts between the two countries were signed prior to 2021.
However, the potential negative effects of the latest tariffs on LNG are likely to be limited. The U.S. currently provides less than 6% of China's LNG imports, while China accounts for just 6% of U.S. exports.
With Europe’s demand for U.S. LNG likely to remain robust, Standard Chartered predicted that displaced flows are unlikely to become distressed.
The bank sees the tariffs cutting the flow of spot cargoes to China dramatically, with some flows under longer-term contracts likely to continue, depending on the nature of re-export clauses.
Analysts warned the biggest threat of these tariffs is the economics of future long-term contracts, including contracts amounting to at least 15 million tonnes per annum (mtpa) already signed.
Emerging markets stocks and currencies lost ground Tuesday as concerns about growing U.S. tariff risks and potential new investment curbs on China continued to weigh on risk sentiment.
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