The sweeping tariffs announced by former U.S. President Donald Trump have sent shockwaves across global markets, with the energy sector facing unintended consequences despite exemptions. While energy products were carved out from the new trade measures, oil prices and related stocks have still taken a hit as investors weigh the broader economic impact.
Oil Prices Drop Despite Energy Exemptions
Following the tariff announcement, U.S. crude oil prices dropped by more than 5% on Thursday morning, while Brent crude saw a slightly lesser decline. The sharp fall indicates that traders are anticipating a slowdown in global economic growth, which could curb demand for oil and other energy commodities.
Analysts at ING noted that the scale of Trump’s tariffs could dampen global demand, impacting oil prices in the long run. Yeap Jun Rong, a strategist at IG, highlighted that the focus will now shift to global economic forecasts, which are expected to be revised downward due to the higher-than-expected tariffs.
Stock Market Reaction: Energy Sector Takes a Hit
The XOP exchange-traded fund (ETF), which tracks the U.S. oil and gas exploration and production sector, saw a 5% decline in pre-market trading. The move suggests that investors are concerned about broader economic instability, even if direct tariffs on energy are not in place.
Trump’s Vision vs. Economic Reality
Trump’s tariff plan is aimed at reshaping global trade dynamics, with the expectation that it will boost U.S. industries. His announcement of 10% reciprocal tariffs—with higher rates for China and the European Union—goes against the advice of business leaders, economists, and some Republican officials.
Despite the intention to protect domestic manufacturing, experts warn that the policy could create economic uncertainty and disrupt supply chains, ultimately hurting U.S. businesses and consumers.
Impact on Renewable Energy & Electric Vehicles
The clean energy sector is also bracing for potential repercussions. While the industry has championed domestic manufacturing, it remains heavily reliant on global supply chains, which will now face higher costs.
The American Clean Power Association acknowledged that tariffs can serve as a policy tool but warned that such broad measures could undermine efforts to build a domestic clean energy supply chain and ensure energy security.
Similarly, the Zero Emission Transportation Association (ZETA) pointed out that major trading partners have invested billions of dollars in U.S. EV and battery manufacturing. New tariffs, they argue, introduce risk and uncertainty into an industry that is creating jobs and driving economic growth.
International Backlash & Potential Countermeasures
In response to Trump’s announcement, officials from China, the European Union, and Canada have indicated that they are preparing retaliatory measures. The trade dispute could escalate, leading to broader economic consequences beyond just the energy sector.
The Road Ahead
While it remains too early to fully assess the long-term economic impact, experts agree that the immediate consequences could be severe. Claudio Galimberti, an analyst at Rystad Energy, emphasized that while the effects will take time to unfold, the tariffs will undoubtedly introduce significant market disruptions in the near term.
As the global economy adjusts to these sweeping trade changes, businesses, investors, and policymakers will be closely monitoring the situation to gauge the true cost of Trump’s tariff strategy.
