Goldman Sachs has projected that a proposed 10% U.S. tariff on oil imports could cost foreign producers approximately $10 billion annually.
The tariff, expected to take effect in March, will primarily affect Canadian and Latin American heavy crude exports, which rely on U.S. refiners due to limited alternative markets.
President Donald Trump originally proposed a 25% tariff on Mexican crude and a 10% levy on Canadian crude but later delayed implementation. Despite these tariffs, Goldman Sachs expects the U.S. to remain the primary buyer of heavy crude because of its advanced refining infrastructure and cost efficiency.
Impact on Prices and Trade Flows
According to Goldman’s estimates, light oil prices would need to rise by at least 50 cents per barrel to make Middle Eastern medium crude more appealing to Asian refiners. Meanwhile, U.S. consumers could face an estimated $22 billion in annual costs due to the tariffs, while the government could collect $20 billion in revenue.
Refiners and traders stand to benefit, potentially gaining $12 billion by linking discounted U.S. light crude and foreign heavy crude to premium coastal markets.
Despite the tariffs, Canada’s 3.8 million barrels per day (bpd) of pipeline exports are expected to continue flowing, with price discounts offsetting the impact. Similarly, 1.2 million bpd of heavy crude from Canada, Mexico, and Venezuela will likely remain competitive due to necessary price adjustments.
Canadian Producers Face Pressure
Goldman Sachs highlighted that Canadian producers, who have limited alternative buyers, will bear much of the tariff burden. Lacking flexibility in export destinations, they will likely have to offer significant price discounts to remain competitive in the U.S. market.
While the tariffs could disrupt trade flows, they reinforce the U.S. refining sector’s dominance in processing heavy crude, maintaining the country’s role as a critical market for global oil producers.