Goldman Sachs estimates that a proposed 10% U.S. oil tariff could cost foreign producers $10 billion per year, particularly impacting Canadian and Latin American crude exporters reliant on U.S. refiners.
President Donald Trump plans to impose a 25% tariff on Mexican crude and a 10% levy on Canadian crude starting in March. Despite this, Goldman predicts the U.S. will remain the primary destination for heavy crude due to its advanced refining capabilities and cost efficiency.
According to Goldman, light oil prices would need to rise by 50 cents per barrel for Middle Eastern medium crude to become competitive in Asian markets. U.S. refiners prioritize domestic light crude over imported medium grades, maintaining demand for heavy crude imports.
The investment bank projects U.S. consumers could face an annual tariff cost of $22 billion, while the government could collect $20 billion in revenue. Meanwhile, refiners and traders may benefit by $12 billion by linking discounted U.S. light crude and foreign heavy crude to premium coastal markets.
Canada, the largest oil exporter to the U.S., is expected to continue exporting 3.8 million barrels per day (bpd) via pipelines, with price discounts mitigating tariff impacts. Similarly, 1.2 million bpd of seaborne heavy crude imports from Canada, Mexico, and Venezuela are likely to remain competitive through pricing adjustments.
Goldman highlighted that Canadian producers, facing limited alternative buyers, may absorb much of the tariff burden through price discounts to maintain access to the U.S. market. While the tariffs may reshape trade flows, U.S. refiners’ reliance on heavy crude ensures continued imports, albeit at adjusted pricing.