Playing politics with oil and gas is nothing new in the global arena, but the recently inaugurated US President Donald Trump has taken this to a new level, signing a slew of earthshaking executive orders that have turned America upside down, stimulating everything landsliding government opposition to widespread federal layoffs. Radical new economic policies and trade relations have also become a defining element in this new administration. Powering up his presidential term with stinging tariffs on some of the most influential forces in the oil and gas market, Trump’s economic strategy is one that can be defined by a nationalistic sense of isolationism, seeking to empower the local US economy by increasing trade barriers to jumpstart the potential of local industry. These tariffs are often viewed as potentially harmful to the global oil and gas industry, but understanding their effects requires a closer look at how they may impact trade relations.
Contrary to what many political economists may find unnerving, many experts believe that Trump’s tariff tantrum should not alarm stakeholders that much, with Goldman Sachs’ forecasts from early February proving to be optimistic about the coming two years despite imminent turbulence.
During the coming period, Trump has no plans to pull his punches on other competing oil and gas nations imposing stinging tariffs on America’s neighbors, Canada and Mexico, both of which are OPEC members. Yet, according to Goldman Sachs, the new tariffs implemented by the Trump administration on imports from Canada, Mexico, and China are not expected to significantly alter global oil and gas prices in the short term.
The bank further stated that the potential decrease in US natural gas imports from Canada, resulting from the tariffs, would have a minimal impact on US natural gas prices. Overall, Goldman Sachs maintained their oil price predictions for 2025 and 2026, anticipating little immediate change due to consistent global oil production and consumption. They also factored in the existing Canadian oil tariff, suggesting its impact is already reflected in current market prices.
Trump’s new tariffs on Canada, Mexico, and China have caused Saudi Arabia’s stocks a slight slip, while Qatar’s market saw gains ahead of earnings. The Gulf region faces potential economic risks from these tariffs, including a slowdown in trade, reduced oil exports, and losses in international investments. Though some negative consequences have been predicted, when examining the impact of these tariffs on energy markets in the MENA region, some experts beg to differ, arguing that oil-rich Gulf Cooperation Council (GCC) markets will remain immune from the fallout to a limited extent. This is attributed to the US enjoying a trade surplus with them as well as their minimal value-added tax (VAT).
Some credible forecasts indicate that oil prices will follow a downward trend for the coming period. After maintaining restricted output since 2022 to keep prices high, the OPEC+ alliance, led by Russia and Saudi Arabia, plans to boost daily oil production starting in April. This increase aims to inject 2.2 million additional barrels into the global market by 2026, despite some projections indicating an existing oil surplus. This is because Saudi Arabia has been under consistent pressure from Washington to increase output, a move that will drive oil prices down.
Diving deeper into natural gas, tariffs could drive the global market to unchartered waters, but at the same time create opportunities and new trade relationships between the Middle East and Beijing. China is also an important factor in the brewing trade wars that have begun to flare up, with Beijing issuing its own package of retaliatory tariffs against Washington. The immediate impact of China’s tariffs on US LNG has been minimal, given the low percentage of current contracted sales. Despite being a major LNG exporter, the US was only China’s fourth-largest supplier in 2024, with Australia, Qatar, and Russia leading the market. Experts point to the fact that though it may be a loss for the US it could be a gain for the Middle East as China begins to search for alternative trading partners, particularly for LNG.
Trump’s unorthodox tariffs have raised many eyebrows all over the world, yet many economic indicators show that oil and gas is still set up to perform well in the long term, even with the nail-biting tactics that some may assume could put the future of oil and gas in serious doubt. As highlighted by Goldman Sachs, turbulent times may be ahead, but they will not ultimately define the outlook of energy and hydrocarbon markets, even with the increasing appeal of renewable alternatives. Though political fault lines continue to push a divisive agenda and exacerbate the negative economic fallout on energy markets, it is up to policymakers to have an independent view of sound energy strategies for the future, unfettered by the illusions of political loyalty or affiliation.
