Trump Imposes "Secondary Tariffs" on Venezuelan Oil

Venezuela’s flow hits a foe

President Trump announced a new type of tariff for April 2nd. This time, directed at Venezuela. Labeling the measure as ‘secondary tariffs”, the president will now target any country that buys Venezuelan oil and gas with 25% levies on all products it trades with the U.S.

Although the President cited accusations that Caracas sends organized criminal groups into the United States, the measure appears intended to damage the Maduro regime for who the oil and gas industry is a vital lifeline while indirectly hindering American rival, China.

According to a BP 2022 survey, the South American country has the world’s largest proven oil reserves at 304 billion barrels (with Saudi Arabia owning 298 billion barrels of reserves, and the United States only possessing 69 billion barrels).

Beijing and Washington

China is the largest importer of Venezuelan oil and will be impacted most by the measure. Venezuela owes billions of dollars in debt to China and exports large sums of oil through the trading arm of a Chinese state-owned defense company, as well as independent ‘teapot’ refineries (of which many are officially branded as ‘Malaysian’).

Beijing is already facing 20% blanket tariffs on all goods exported to the U.S. plus an extra 25% on steel and aluminum. If China continues to purchase energy from Caracas, it will see an accumulated 45% blanket tariff and a massive 70% on steel and aluminum.

However, this disruption should not be overstated. China’s energy imports are heavily diversified, and Beijing is far less dependent on Venezuelan oil than Maduro is on exports to China. In theory, Beijing should not face major problems shifting to different oil suppliers.

The United States themselves are currently the second biggest importer of Venezuelan crude. Following an oil transaction agreement dating back to November 2022, the U.S. imported oil through a joint-venture license granted to Chevron that allowed operations within Venezuela regardless of any U.S. sanctions.

This agreement was first scrapped by President Trump in late February, citing Nicolas Maduro’s failure to institute electoral reforms and migrant returns. However, after a meeting between Trump and Chevron CEO Mike Wirth, the company’s license was extended until May 27.

Impact on Oil prices

The tariffs against Venezuelan trade partners come one week after the U.S. increased sanctions against Iranian oil exports and adds to the expectations that global supplies will continue to tighten. As of March 25, oil prices have risen for a fifth consecutive day, despite OPEC+ plans to increase output for a second month in May.