Oil Tariffs From Trump Could End Up Costing $10 Billion For Foreign Producers, Says Goldman Sachs

Notably, the US President Donald Trump intends to levy a 25 per cent tariff on Mexican crude and a 10 per cent duty on Canadian crude starting in March. 

The bank estimated that US consumers would have to bear an annual tariff cost of $22 billion, while the revenue generated by the government would be $20 billion.

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The proposed 10 per cent tariff on oil from the US could end up costing foreign producers $10 billion annually, Goldman Sachs noted on Friday. The financial firm said that the tariffs, if implemented, could add on to the burden for international producers as Canadian and Latin American heavy crudes remain dependent on US refiners.

A lack of alternative buyers and processing capabilities makes the producers dependent on the American refiners, reported Reuters. Notably, the US President Donald Trump intends to levy a 25 per cent tariff on Mexican crude and a 10 per cent duty on Canadian crude starting in March. 

Goldman noted that the US is expected to remain the major destination for heavy crude, as advanced refining capabilities and lower prices continue to make American refiners the most competitive buyers.

The financial company estimated that light oil prices would need to jump by 50 cents per barrel as this would make Middle East crude more lucrative for Asian refiners. The US Gulf Coast refiners prioritise domestic light crude over imported medium grades.

The bank estimated that US consumers would have to bear an annual tariff cost of $22 billion, while the revenue generated by the government would be $20 billion. At the same time, refiners and traders could enjoy benefits worth $12 billion by linking discounted US light crude and foreign heavy crude to premium coastal markets.

Canada is expected to witness pipeline exports of 3.8 million barrels per day (bpd) continue, with discount in prices to manage the impact of tariffs. Similarly, 1.2 million bpd of seaborne heavy crude imports from Canada and Latin American countries would also attract discounts which could offset the levy, helping continue flows into the US.

Goldman Sachs highlighted that Canadian producers would be forced to take in much of the tariff burden via price discounts so that they can continue to be competitive in the US market.