President Trump is expected to announce new tariffs, this time targeting aluminum and steel imports into the United States. This comes after he previously announced tariffs on China, Mexico and Canada, though the latter two are currently on hold.
These moves are expected to have economic ripple effects across many industries. Matt Smith, energy analyst for Kpler, spoke with the Texas Standard’s Laura Rice about how tariffs and sanctions could shape the energy industry.
This transcript has been edited lightly for clarity:
Texas Standard: Let’s talk about tariffs and sanctions, starting with tariffs on Mexico and Canada. The tariffs were delayed by about 30 days. Are they the same for both countries when it comes to energy? And do you expect them to take effect in early March?
Matt Smith: They were 25% on both Mexico and Canada, except on energy for Canada it was just 10%. And the reason they’ve done that is because the U.S. imports over 4 million barrels per day from Canada. And so all that crude, you know, it would be catastrophic and would have massive ramifications if they were going to put a 25% tariff on it.
That said, it doesn’t seem that likely that these tariffs are going to be applied in 30 days. Essentially, by them being delayed by almost a month here, it essentially gives us time – or the president time, and the administration – to negotiate with Mexico and Canada. And so we don’t actually expect the tariffs to get applied at all between these two.
Now, what about the Chinese tariffs? What’s being applied there? And how has China responded?
This is different, actually. There’s 10% been applied on China. But the rhetoric has been very different from from Mexico and Canada. And so while the president seems to be willing to negotiate with Mexico and Canada, he doesn’t with China. And actually, China has applied its own tariffs back: 10% on US energy.
That said, that that’s a little bit toothless just because the U.S. only sends under 200,000 barrels per day to China, which is about 2% of their total crude imports on a waterborne basis. And so that’s not really a big deal. But we should expect the Chinese tariffs definitely to be in place there going forward.
» MORE: What could tariffs on Mexico and Canada mean for Texas’ economy and consumers?
Well, switching from tariffs to sanctions, how are energy flows being affected by the Russian sanctions? These actually were put in effect by President Biden just before he left office.
Yeah, exactly. And so we have seen a widespread number of tankers been applied with sanctions on them. But what we’ve seen over the last three years is that Russia is able to circumnavigate the sanctions. And so that’s the expectation this time as well.
So they will use non-sanctioned vessels, or the crude will get pushed below the price cap. And so there’s a way for this crude to still move. And that’s exactly what we’re seeing in the data. We’re actually not seeing those exports dropping here.
Now, what about sanctions on Iran? Where are we on that front?
Oh, gosh. So the president is talking about maximum pressure on Iran. And so it’s our expectation that we’ll see perhaps half a million barrels a day of Iranian crude come off the market mid-year just because there’s tighter sanctions on moving this crude. You know, we saw this happen in the first administration from Trump.
And so the challenge here, though, is he’s walking a fine line because he doesn’t want to take too much oil off the market, because if that happens, we’ll see prices spiral higher, and prices at the pump will shoot up. And that’s the last thing that he wants.
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I feel like when we’ve talked, we’ve said, you know, the U.S. is producing more oil and gas than ever – but we are still importing, right? We’re getting some from Iran. We’re getting some from Canada. So that’s still part of the equation?
We don’t get any from Iran, but we get from Canada and all manner of different countries – Saudi Arabia, the North Sea, everywhere, West Africa, etc. And so, yes, the U.S. is by no means independent, even though it is the leading producer of crude in the world.
Now, all this flurry of potential tariffs and sanctions, what’s your guess: Are we done now, or do you think we should expect more of them in the weeks ahead?
I think we should expect more just this weekend. As you mentioned at the top of the segment, we’ve got steel and aluminum being hit. The EU is likely to get hit with tariffs as well. And so this isn’t the end of it by any means here.
Does steel and aluminum affect the oil and gas industry directly or more indirectly?
It will do, but we’re importing a lot of steel and aluminum from Canada, Mexico, Germany and Asian exporters as well. So those are the ones that are going to feel the pain.
