Oil prices dropped on Wednesday following U.S. President Donald Trump’s threats to impose tariffs on China, sparking fears of escalating trade wars on multiple fronts. Trump also hinted at steep tariffs on Canada and Mexico, further unsettling markets, according to Bloomberg.
Crude market trends
Brent crude hovered near $79 per barrel after several days of declines, while West Texas Intermediate (WTI) slipped below $76. Trump announced plans for a potential 10% tariff on China, citing concerns over fentanyl exports from the country. Meanwhile, Canada has ramped up crude exports to the U.S. in a bid to preempt any trade restrictions.
On his first day in office, Trump issued sweeping executive orders, reshaping U.S. energy policy and threatening tariffs of up to 25% on Canadian and Mexican imports. Both nations are significant suppliers of goods to the U.S., including crude oil processed in American refineries.
Canada’s push to avoid tariffs
Canadian suppliers are "flooding the market with crude” to mitigate potential fallout from tariffs expected as early as Feb. 1, according to Rystad Energy. Goldman Sachs warned that these tariffs could drive up gasoline costs for American consumers, amplifying economic pressures.
Shifting market focus
Crude markets, which began the year strong amid U.S. sanctions on Russia, are now turning their attention to trade tensions. “The focus is shifting from the risks of Russian sanctions to the real threat of escalating trade disputes,” Warren Patterson, head of commodities strategy at ING Group, told Bloomberg. He also noted that the tariff threats are strengthening the U.S. dollar, adding another layer of complexity for oil prices.
Trump also signaled the possibility of additional sanctions on Russia if President Vladimir Putin does not engage in negotiations over Ukraine, keeping geopolitical risks in play. The evolving situation underscores the fragile balance in global energy markets.
