Entering text into the input field will update the search result below

What If Steel And Aluminum Import Tariffs Are Extended To The Oil Industry?

Mar. 05, 2018 2:01 PM ETSLX, JJU-OLD, FOIL, CLR, PSX, VLO4 Comments
OILytics profile picture


  • This week President Trump’s announcement of a 25% tariff on steel imports and a 10% tariff on aluminum imports caught the market by surprise.
  • Crude oil is as strategic (if not more) to the US as steel and aluminum are and this further move cannot be completely ruled out.
  • U.S. crude oil imports are rapidly decreasing every year and even more so from outside the NAFTA region.
  • Any tariff on crude oil imports would spark a rally in WTI prices and move it significantly higher than Brent which would hurt US refineries and benefit oil producing companies.
  • A 10% tariff on crude oil imports can make the WTI-Brent Arb go above +$5 while a 25% tariff can make it go above +$10.

This week President Trump’s announcement of a 25% tariff on steel imports and 10% imports on aluminum caught the market by surprise. It was widely criticised in the international media and leaders from Canada and the European Union (EU) threatened to retaliate. EU’s Jean Claude-Junker told German television "We will put tariffs on Harley-Davidson, on bourbon and on blue jeans — Levi's,".

(Source: EU threatens Trump with Harley-Davidson, bourbon and Levi's tariffs)

Since this topic is just a few days old, we don’t know the full extent and depth of how far these trade wars can go. U.S. tariffs on the steel sector is not new. President George W. Bush had implemented them in March 2002. The tariffs were lifted in December 2003 as research showed it caused adverse effect on U.S. employment and growth. (Source: 2002 United States steel tariff - Wikipedia)

The tariff then excluded NAFTA nations such as Canada and Mexico as it would have violated the rules of that organization.

This time around, we are unsure of whether NAFTA countries will be excluded. The impact of these tariffs would significantly harm Canada as it exports 90% of its steel to the U.S. (Source: Trump's steel and aluminum tariffs last thing 'kicked when down' Canadian economy needed now).

The proposed tariffs on steel and aluminum imports have already rattled the U.S. Energy industry. Executives worry that the cost of producing and moving oil will only increase if these tariffs get approved. If these tariffs do eventually get approved, it will lift the cost of oil production in the U.S. and reduce the oil production growth forecast for shale oil producers.

(Source: U.S. energy industry slams Trump's 'job-killing' steel tariffs)

With President Trump, anything is possible and there is no point looking at historical comparisons. If these trade tariffs are

This article was written by

OILytics profile picture
OILytics provides a free newsletter on the oil markets. We are an independent research consultancy focused on fundamental analysis covering the global oil markets. OILytics was previously known as Oil Unhedged and wrote 7 articles for Seeking Alpha.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (4)


Oil tariffs would do no good; that is why they will not be proposed. The function of tariffs is to protect a high-cost industry. WTI sells for less than world crude so it needs no price protection. And, as you point out, even with increasing production, we still need to import millions of barrels a day that we cannot produce here in sufficient quantity.

This article is just a silly fulmination by the author based on his own imagination and nothing else.
OILytics profile picture
Hello David,
Thanks for reading the article. Tariffs on oil imports is an unlikely event but should be kept in mind in case the situation gets out of control due to retaliation by other countries. To answer your questions:
1) Yes, they did do that with the steel tariffs in 2002.
2) Not wise, but possible. Saudi imports into US have dwindled in the recent years (0.69mmbd as of latest monthly data). Saudi's major export market is Asia.
3) Will not be popular but can be seen as an alternative to oil consumption tax. Europe heavily taxes consumers on gasoline and diesel. An import tariff would be an alternative tax. There have already been some talks of some kind of gasoline tax to help fund roads/highways.
4) US import less than half of their crude requirements now. But even less so for non-NAFTA.
5) Agree, no good would come out of this. Same thing can be said for steel and aluminum yet here we are.
David de los Ángeles Buendía profile picture
Hello Oil Unhedged,

1) The question is could the United States create tariffs that only apply to non-NAFTA countries?

2) Forgetting the above, think of this as a practical matter, two can play the tariff game. Is it really a wise strategy to enter into a tariff war with Saudi Arabia? They are an important strategic ally in the oil producing regions of the world.

3) Forgetting all of the above, can you really see the United States Congress passing such a tariff, basically increasing the price of petrol in the United States? How popular would that be in an mid-term election year?

4) Forgetting all of the above, the United States still imports the majority of its petroleum. In what way is it a good idea to hinder the import of oil at this time?

5) Forgetting all of the above, what good would it really do?
I just don’t see any compelling reason for tariffs
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.