Trump's Oil Tariff Threat Roils Markets, Raises Trade Uncertainty
Amidst the market's unease ahead of President Trump's February 1 deadline for imposing tariffs, the spotlight turned to the oil and gas sectors on Friday. The president's acknowledgment of potential issues with including energy staples in his tariff plans raised further questions.
Reuters reported that Trump is considering delaying the implementation of tariffs by a month to March 1, with possible exceptions granted but likely to be limited. However, the implications for the oil industry remain uncertain, given Canada's status as the US's largest oil exporter.
Oil markets reacted negatively to the news on Friday, fueling uncertainty ahead of the impending tariffs. Trump's mixed signals have added to the confusion, with the president initially stating that "oil has nothing to do with it" but later hedging his stance.
"This is a sign that the message is getting through to him," said Josh Zive, a tariff expert at Bracewell. "There's a real tension between this administration's tariff and energy policies."
Canada exported over $160 billion worth of crude and refined petroleum in 2022, with the US accounting for the majority of recipients. The inclusion of oil in tariffs could have significant consequences, as the US imports approximately 4 million barrels a day from Canada.
West Texas Intermediate prices fell amid the uncertainty, trading below $72 a barrel at one point. Canadian energy stocks saw mixed results, with Phillips 66 (PSX) recovering some losses after an initial drop.
"It's starting to hit because we don't have all the oil we need," noted Fernando Valle, Hedgeye Energy Analyst. "We rely on Canadian heavy crude to balance our refineries."
Zive emphasized the potential destabilizing effects of oil tariffs on the US, highlighting the importance of American consumer sensitivity to gas prices.
However, the sector and broader economy remain in suspense as Trump considers his options. Henrietta Treyz, director of economic policy research at Veda Partners, anticipates that oil and gas products will be exempted from widespread tariffs due to the significant energy trade between the US and Canada.