Goldman Sachs estimates that a proposed 10% U.S. oil tariff could lead to a $10 billion annual loss for foreign producers, posing a significant threat to Canadian and Latin American heavy crude suppliers that depend on U.S. refiners.
What Happened: The proposed tariff stems from the reliance of Canadian and Latin American heavy crude on U.S. refiners, given their limited alternative buyers and processing options.
President Donald Trump is now considering a 25% tariff on Mexican crude and a 10% levy on Canadian crude starting in March, after delaying his initial proposal. Despite this, Goldman Sachs anticipates that the U.S. will remain the dominant market for heavy crude due to its advanced refining infrastructure and cost efficiency.
Analysts also estimate that light oil prices would need to increase by 50 cents per barrel for medium crude from the Middle East to become more appealing to Asian refiners. This shift is driven by U.S. Gulf Coast refiners favoring domestic light crude over imported medium grades.
It projects that U.S. consumers could face an annual tariff burden of $22 billion, while the government stands to generate $20 billion in revenue. Meanwhile, refiners and traders could gain $12 billion by leveraging discounted U.S. light crude and foreign heavy crude in premium coastal markets.
Why It Matters: Trump’s proposed oil tariffs are part of a broader strategy to reshape global trade. Earlier in the week, he announced plans to impose a 25% tariff on auto imports, alongside chips and pharmaceuticals, causing a stir in international trade. This move is expected to take effect in April.
The President also ordered his trade chief to reopen investigations into digital service taxes imposed on U.S. tech firms, a move that could result in new tariffs on affected countries. These actions are part of Trump’s efforts to address what he calls an unfair trade balance with other nations.
Trump’s tariff plans have sparked a debate about their potential impact on the stock market. A recent Benzinga poll showed that 59% of respondents believe that Trump’s tariffs could hurt the stock market.
Meanwhile, the SPDR S&P 500 ETF (NYSE:SPY) and the Dow Jones Industrial Average both tumbled 1.7% on Friday, recording their steepest single-day losses since Dec. 18. At the same time Invesco QQQ Trust (NASDAQ:QQQ) ended 2.07% lower, according to data from Benzinga Pro.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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