Oil Prices Fall on Trump's Trade War Threats and Executive Orders
On Tuesday, oil prices declined as President Donald Trump signed executive orders designed to boost US production and hinted at imposing tariffs on Canada and Mexico, escalating concerns about a potential trade war. West Texas Intermediate (CL=F) prices dropped by up to 2%, reaching $76 per barrel, while Brent (BZ=F) prices also fell by over 1%, hovering around $79.
Trump proclaimed a national energy emergency on his first day in office, facilitating the rapid approval of domestic oil and gas leasing, production, transportation, refining, and generation. He also signed an executive order to unlock Alaska's resources by expediting permitting and leasing projects in the state.
Trump further indicated his intention to impose tariffs on Canada and Mexico beginning on February 1, sparking apprehension over a trade war that could harm economic expansion and, consequently, oil demand. "If the White House implements tariffs, US trading partners are likely to retaliate," Goldman Sachs analysts asserted on Tuesday.
Further contributing to the decline in oil prices was Trump's decision to withdraw the US from the Paris climate agreement, a global treaty he had previously withdrawn from during his initial presidential term prior to Biden's reinstatement. Trump also expressed his intention to replenish the Strategic Petroleum Reserve, which was depleted during the Biden administration as prices surged following Russia's invasion of Ukraine in 2022.
Oil prices had initially trended upwards this year due to frigid temperatures in the Northern Hemisphere and recent announcements of expanded US sanctions on Russian energy. WTI prices have increased by more than 6% year-to-date, while Brent crude has climbed by over 5% over the same period.