Monday, April 7, 2025

Trump's tariffs have already been carved out in a significant way. Russell: Oil and gas

April 2, 2025

Energy commodities were excluded from the new tariffs announced by U.S. president Donald Trump.

White House announced on Wednesday that the baseline of 10% for all imports into the United States and even higher for major trading partners will not apply to crude oil and natural gas, or refined products.

The exemption of energy imports is an obvious tactic that will limit the pain Americans feel as a result of tariffs. It also fits in with Trump's larger goal to keep energy costs low.

The rest of the world will also be faced with a dilemma in how to respond to Trump's disruption of the global trade system.

The energy that many countries buy or could buy from the United States is a great bargaining chip to use in response to U.S. tariffs.

The United States ranks as the fourth largest exporter of crude oil, coal and liquefied gas.

Some countries are trying to avoid tariffs by buying more energy in the United States.

The tariffs of 10% on all goods and services, plus the additional 20% for the European Union and China, and the 24% for Japan and India, make it difficult to believe that these measures have been successful.

All of these countries and regions are either major energy importers from the United States, have been or are likely to be in the future.

Will these countries put U.S. imports of energy on the table as a response to Trump's Tariffs?

Trump's actions on tariffs can be compared to the bullying of a child.

You have three options to deal with an aggressive person.

If you fight, you could take multiple body blows and be injured, or even defeated. You will gain respect, and you may even benefit in the future.

You can also try to negotiate, plead and duck and weave and hope that you don't get hurt. You will usually lose both your respect and your lunch money.

Thirdly, you can run and hide in the hope that your bully will leave you alone. It may work for some time, but it only delays the inevitable.

Faced with Choices

China has chosen to fight and stand its ground when it comes to buying energy from the United States. It has imposed tariffs on U.S. coal, LNG, and crude oil imports.

The trade of these products has been effectively stopped between the two largest economies in the world.

It hasn't made a big difference in the global market prices, mostly because China is able source alternative energy sources without disrupting global flow.

The situation is different in Europe, where more than half its LNG comes from the United States and it's difficult to replace this with other suppliers.

Europe is a major consumer of U.S. crude oil and refined products. It would be difficult to find alternatives to LNG without disrupting global prices and flows.

Europe is not a large buyer of U.S. coal, so it could drop the product without causing too many problems.

In negotiations with the Trump Administration, Japan and India will likely use their energy purchases in the United States to negotiate exemptions or an exception from tariffs.

This tactic may work, but it's highly uncertain at the moment.

As different countries and regional groups, such as the European Union, work out their responses to the current situation, a common thread is likely to emerge: they will all seek to reduce their dependence on the United States while building trade relationships with other nations.

Tariffs will have the ultimate effect of making the United States the last-resort trading partner, as countries will only buy what they can't get anywhere else.

These are the views of the columnist, an author for.

(source: Reuters)

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