The US energy industry may feel relieved after President Donald Trump spared oil and other energy commodities from the punitive taxes he announced on nearly all US trading partners on 2 April. But global economic fallout from a drastic protectionist measure will affect the energy industry indirectly, and countries looking for ways to retaliate against Trump's trade actions may follow China's lead in targeting the US' oil, LNG and LPG exports.
Trump on 2 April imposed a minimum 10pc tax on all foreign imports from 5 April, with the tariff as high as 34pc for China and 20pc for the EU after 9 April. Trump's executive order exempts all energy commodities and many metals and critical minerals. The 2 April tariffs will not apply to steel and aluminum, cars, trucks and auto parts, as these are already subject to separate tariffs. A 25pc tariff on all imported cars and trucks came into force on 3 April, while a 25pc tax on auto parts will take effect on 3 May.
Trump calls his new tariffs "reciprocal", suggesting that foreign countries —which he alleges have high tariffs on US products — will be forced to negotiate to lower their barriers to trade. But Trump and his key allies in Congress have left little doubt that the tariffs are here to stay. The projected tariff revenue, which Trump's administration claims will be as high as $600bn/yr, is a key metric as Congress is advancing a bill to extend tax cuts and other economic priorities, Senate Republican majority leader John Thune says.
Consultancy Oxford Economics is likely to lower its 2025 global economic growth forecast by 0.6 percentage points in the wake of the tariffs. But the Trump administration has dismissed the negative reaction from stock markets as a short-term adjustment. "The gravy train is over for the globalist elites, who have profited on the backs of hard-working Americans, looting us of our industries and hollowing out our heartlands," government agency Small Business Administration head Kelly Loeffler says. Loeffler's pre-Trump administration credentials include senior positions at financial firms with global reach, including the Ice exchange.
Negotiate or fight back?
China is the biggest casualty of Trump's protectionist turn. Including tariffs Trump imposed in February-March, all US imports from China will now be subject to a 54pc tariff, with some products taxed even higher — electric vehicles face a 154pc tax. The previous bout of Trump's trade war saw some of the bilateral trade shift to other east Asian economies, especially Vietnam — but US imports from that country will now be subject to a 46pc tariff.
Conflicting messages — Trump said on 3 April he could make a deal over tariffs if it is "phenomenal", even though his White House is inputting tariff revenue in planned budgetary process — have led many key US trading partners to hope that a major trade war could be averted. The EU is preparing countermeasures, including punitive taxes on US technology giants, but European officials are also weighing concessions before the 20pc tariff starts on 9 April. The UK, which is subject to a 10pc import tax, is hoping to strike an "economic prosperity deal" with Trump, prime minister Keir Starmer says.
Beijing on 4 April announced a 34pc retaliatory tax on all US imports, with no exemptions, even though Chinese petrochemicals firms have no ready alternative sources for US LPG supply. Ottawa's similarly strong retaliation seems to have worked — Trump spared Canada and Mexico from additional penalties on 2 April and did not revive the tariffs, imposed briefly last month, that were set to upend a highly integrated North American energy market.
