Trump’s 10% oil tariff may value international producers $10 billion yearly, Goldman Sachs says

(Reuters) – Goldman Sachs stated on Friday a proposed 10% U.S. oil tariff may value international producers $10 billion per 12 months, as Canadian and Latin American heavy crudes stay reliant on U.S. refiners attributable to restricted different consumers and processing capabilities.

President Donald Trump plans to impose a 25% tariff on Mexican crude and a ten% levy on Canadian crude beginning in March, a delay from his preliminary proposal.

Regardless of this, Goldman expects the U.S. to stay the first vacation spot for heavy crude, as superior refining capabilities and low prices proceed to make American refiners probably the most aggressive consumers.

Goldman estimates gentle oil costs would wish to rise by 50 cents per barrel to make medium crude from the Center East extra enticing to Asian refiners, as U.S. Gulf Coast refiners prioritize home gentle crude over imported medium grades.

The funding financial institution estimates U.S. customers would face an annual tariff value of $22 billion, whereas the federal government would generate $20 billion in income.

In the meantime, refiners and merchants may see $12 billion in advantages by linking discounted U.S. gentle crude and international heavy crude to premium coastal markets, Goldman stated.

The brokerage famous Canada, the highest exporter of oil to the U.S., is prone to see its 3.8 million barrels per day (bpd) of pipeline exports proceed flowing, with costs discounting to offset the tariff impression.

Equally, 1.2 million bpd of seaborne heavy crude imports from Canada and Latin American nations together with Mexico and Venezuela would see reductions to offset the levy, guaranteeing continued flows into the USA.

Whereas the tariffs may reshape commerce flows, Goldman highlighted that Canadian producers, as “captured sellers” with restricted different consumers, can be compelled to soak up a lot of the tariff burden by worth reductions to stay aggressive within the U.S. market.

(Reporting by Sherin Elizabeth Varghese and Noel John in Bengaluru; Enhancing by Chris Reese)