Goldman Sachs Predicts $10 Billion Annual Cost for Foreign Oil Producers Due to U.S. Tariffs

Goldman Sachs has estimated that a proposed 10% U.S. oil tariff could result in a $10 billion annual cost for foreign producers, particularly affecting Canadian and Latin American heavy crudes. This is due to the limited alternative buyers and processing capabilities for these crudes, making U.S. refiners the primary destination.

President Donald Trump’s plan to impose a 25% tariff on Mexican crude and a 10% levy on Canadian crude, set to begin in March, has been delayed from the initial proposal. Despite this, Goldman Sachs expects the U.S. to continue as the main market for heavy crude, thanks to advanced refining capabilities and lower costs that make American refiners the most competitive buyers.

The investment bank estimates that light oil prices would need to increase by 50 cents per barrel to make medium crude from the Middle East more attractive to Asian refiners. U.S. Gulf Coast refiners are prioritizing domestic light crude over imported medium grades.

Goldman Sachs also estimates that U.S. consumers would face an annual tariff cost of $22 billion, while the government would generate $20 billion in revenue. Refiners and traders could see $12 billion in benefits by linking discounted U.S. light crude and foreign heavy crude to premium coastal markets.

Canada, the top exporter of oil to the U.S., is likely to see its 3.8 million barrels per day (bpd) of pipeline exports continue flowing, with prices discounting to offset the tariff impact. Similarly, 1.2 million bpd of seaborne heavy crude imports from Canada and Latin American countries including Mexico and Venezuela would see discounts to offset the levy, ensuring continued flows into the United States.

While the tariffs could reshape trade flows, Goldman Sachs highlighted that Canadian producers, as “captured sellers” with limited alternative buyers, would be forced to absorb much of the tariff burden through price discounts to remain competitive in the U.S. market.