The economic implications of the recent US tariffs could potentially provide President Donald Trump with greater leverage regarding oil sanctions on countries such as Iran, Russia, and Venezuela. However, analysts caution that these tariffs might hinder international cooperation with US foreign policy objectives. Fernando Ferreira, the director of geopolitical risk services at Rapidan Energy Group, notes that the heavy impact of the tariffs on stock markets and oil prices may create breathing room for a more aggressive foreign policy stance.
While the tariffs have led to expectations that China would reduce imports from US-sanctioned nations like Iran, Ferreira argues that they actually incentivize China to bypass these sanctions. The new tariffs imposed on April 2 have raised China’s tariff rate to 54%, while Trump has also instituted a 25% tariff on countries purchasing Venezuelan crude. According to Ferreira, this tariff could ultimately harm most countries more than any gains they would gain from Venezuelan oil.
Rachel Ziemba, a senior advisor at Horizon Engage, echoes this sentiment, stating that the fear surrounding broader tariffs could exacerbate the impact of proposed tariffs on those engaging with Venezuelan crude. The overall effects of tariffs and geopolitical developments are expected to reshape relationships with longstanding allies, leading many nations to focus inward and causing a decline in international collaboration on important issues, including energy contracts. If the global economy slows and oil prices drop significantly, the US might have more room to pressure oil producers.
Nevertheless, a decline in US oil production could also limit market flexibility, with Russian production being particularly challenging to replace. Should the geopolitical climate demand it, Trump has hinted at imposing steep tariffs on countries that import Russian oil following ongoing tensions in Ukraine. Analysts like Ellen Wald suggest that while sanctioned nations may face increased economic challenges that could encourage negotiations, historical evidence shows that leaders in countries like Iran and Venezuela remain steadfast in their political stances despite dire conditions.
In Russia’s case, significant revenue from oil transportation complicates the potential impact of dropping oil prices on its geopolitical influence.