US oil tariffs: Goldman Sachs calculates losses for foreign producers
The introduction of US tariffs on oil imports will cost oil traders dearly (Illustrative photo: Getty Images)
The 10% tariff on oil proposed by Donald Trump in the US could cost foreign producers $10 billion annually. This is due to the reliance of Canadian and Latin American heavy oil on American refineries, according to Reuters.
The agency reminded that in March, US President Donald Trump plans to impose a 25% tariff on Mexican oil and a 10% tariff on Canadian oil, which is a delay from his initial proposal.
Despite this, according to an investment forecast by Goldman, the US will remain the primary destination for heavy oil, as advanced refining capabilities and low costs continue to make US refiners the most competitive buyers.
Goldman estimates that the price of light oil will need to increase by 50 cents per barrel to make Middle Eastern crude more attractive to Asian oil refiners. This is due to US Gulf Coast refiners favoring domestic light oil over imported medium oil.
According to the investment bank, American consumers will face annual tariff costs of $22 billion, while the government will receive $20 billion in revenue.
Meanwhile, Goldman noted that refiners and traders could benefit by $12 billion by linking discounted US light crude with foreign heavy crude to premium coastal markets.
The broker mentioned that Canada, the largest exporter of oil to the US, is likely to continue exporting 3.8 million barrels per day through pipelines. However, prices will drop to offset the impact of tariffs.
At the same time, 1.2 million barrels per day of sea imports of heavy crude oil from Canada and Latin American countries, including Mexico and Venezuela, will be reduced to offset the tariff. This will ensure a continuous flow of oil to the US.
Although tariffs may alter trade flows, Goldman emphasized that Canadian producers, as captured sellers with a limited number of alternative buyers, will have to bear much of the tariff burden through price reductions to remain competitive in the US market.
US trade war
On January 30, Donald Trump announced the introduction of tariffs on imports from Canada and Mexico. He cited the large flow of the fentanyl drug and subsidies that the US provides to neighboring countries through deficits as the reasons.
The decision to impose tariffs on Canadian oil imports will depend on global oil prices.
However, Trump later postponed the implementation of tariffs until March, due to the promise made by the governments of these countries to strengthen border security with the US.
