KEY POINTS
- Trump imposes a 25 percent tariff on nations purchasing Venezuelan oil.
- China remains the largest buyer, importing 55 percent.
- The U.S. sanctions have caused a significant shift in Venezuela’s oil trade.
U.S. President Donald Trump announced a new policy on Monday, stating that countries buying oil or gas from Venezuela will face a 25 percent tariff on any trade with the United States.
This “secondary tariff” will go into effect on April 2, as Trump looks to exert pressure on Venezuela, which he claims has sent “tens of thousands” of people with a “violent nature” to the U.S.
The announcement caused oil futures to surge nearly 1.5 percent as investors reacted to the news of the tariff.
The United States has been increasing its efforts to sanction Venezuela, and this latest move comes amid concerns about the country’s electoral reforms and the treatment of migrants.
China is the largest buyer
China is the largest consumer of Venezuelan oil, and it has long been a major market for the OPEC member’s crude exports.
In February, China received 503,000 barrels per day (bpd) of Venezuelan oil, which made up 55 percent of Venezuela’s total exports.
Despite facing U.S. tariffs, China has continued to buy Venezuelan oil, with state-run company PDVSA offering price discounts to maintain the flow of oil to the market.
According to Reuters, other nations, such as Spain, Italy, and Cuba, also purchase Venezuelan oil, but China remains the largest importer by far.
The new U.S. tariffs could lead to increased pressure on the industry, which already faces challenges due to the country’s sanctions and a declining crude production capacity.
U.S. sanctions and tariffs are affecting the Venezuelan oil trade
Earlier in March, Trump took steps to wind down a 2022 license granted to Chevron, which allowed the U.S. company to operate in Venezuela and export oil.
Trump’s administration accuses President Nicolás Maduro of failing to make progress on electoral reforms and the return of migrants, prompting this recent policy shift.
As of early April, U.S. imports of the oil will cease unless an extension is granted.
While Trump’s sanctions have led to a decrease in oil exports to the U.S., the impact on global oil markets remains uncertain.
Venezuelan oil has been a point of contention for years, and this new tariff is likely to further strain relations with countries like China, which remains committed to Venezuelan oil despite the imposition of tariffs.
