Goldman Sachs has warned that former President Donald Trump’s proposed 10% tariff on foreign oil could cost non-U.S. producers an estimated $10 billion per year.
The bank highlights that Canadian and Latin American crude suppliers will bear the brunt of the impact due to their heavy reliance on U.S. refiners, which have advanced processing capabilities and limited alternative buyers.
Trump’s tariff plan, which includes a 25% levy on Mexican crude and a 10% tariff on Canadian crude starting in March, is expected to reshape global oil trade.
However, despite the additional costs, Goldman Sachs believes that the U.S. will remain the most attractive destination for heavy crude. The primary reason? American refiners continue to lead the industry with sophisticated processing technology and lower operational costs.
How the Tariff Could Impact Oil Prices and Refiners
Goldman Sachs predicts that for Middle Eastern medium crude to become more appealing to Asian refiners, global oil prices would need to rise by at least 50 cents per barrel. Meanwhile, U.S. Gulf Coast refiners are expected to prioritize domestic light crude over imported medium crude, further complicating global trade flows.
While foreign oil producers will suffer financial losses, U.S. consumers could also feel the sting. The investment bank estimates that American consumers may face an additional $22 billion in annual costs due to the tariffs. However, the U.S. government stands to gain significantly, with projected revenue from the tariffs reaching $20 billion per year.
Winners and Losers in the Oil Market
Despite the anticipated market disruptions, some players could benefit. Refiners and traders may see up to $12 billion in advantages by linking cheaper U.S. light crude with discounted foreign heavy crude, positioning themselves strategically in premium coastal markets.
For Canada, which exports about 3.8 million barrels per day (bpd) of oil to the U.S., trade is expected to continue despite the tariffs. However, prices will likely be adjusted to compensate for the additional costs. Similarly, Latin American oil exporters, including Mexico and Venezuela, will be forced to discount their oil to remain competitive.
Canadian Producers Face Tough Choices
Goldman Sachs highlights that Canadian oil producers are in a particularly vulnerable position. With few alternative buyers outside the U.S., they are essentially “captured sellers” who must absorb much of the tariff’s financial burden. To stay in the U.S. market, Canadian producers may be forced to offer steep discounts, reducing their profit margins.
Despite the uncertainty surrounding Trump’s tariff policies, the global oil trade is expected to adapt. Whether these tariffs will achieve their intended economic and political goals remains to be seen, but one thing is clear—the energy market is in for a significant shake-up.
