President Donald Trump has just thrown down the gauntlet. First, he wants to slap a 25% tariff on all U.S. imports from all countries that continue to purchase oil from Venezuela. Most importantly, the Trump administration has indicated its desire to terminate exemptions for the U.S. oil company Chevron. This decision follows weeks of Chevron having been granted permission to purchase oil from the South American country in spite of sweeping economic sanctions. In response to this pushback, the administration has decided to revise its executive order. Chevron now has until May 27 to wind down its operations in Venezuela — a two-month extension over the prior deadline.
Now Chevron’s exemptions have turned the U.S. into Venezuela’s largest buyer of oil. That’s exactly the point—that the new tariffs are intended to punish Venezuela for doing so “for a variety of reasons,” as President Trump told reporters. One of those reasons is certainly the spurious charges that Venezuela is “deliberately” sending gang members to the U.S. These tariffs are quite literally called “secondary” and for good reason. They are a central component of Trump’s overall strategy to use tariffs to settle scores in other fights.
Trump’s Ongoing Use of Tariffs as a Strategic Weapon
Tariffs are Trump’s go-to strategic weapon in any trade scuffle. Take, for instance, the products he has previously threatened to levy tariffs on, including cars, lumber, and computer chips. This announcement comes on the heels of his recent ramping up of tariffs on Chinese imports to at least 20% since February. Last year, China imported more than 11 mbd of oil. Nevertheless, Venezuela has made a small contribution as a crude oil supplier for China.
The move created almost instant market ripple effects. Oil prices shot up over 1% after hearing about these possible tariffs. Further, broader share measures in the U.S. rose on Monday when Trump’s comments were leaked.
Author’s Opinion
While tariffs have been a key component of President Trump’s approach to international relations, their broad and often unpredictable consequences make them a risky tool. The proposed tariffs on Venezuelan oil imports, though strategically aimed at pressuring the Venezuelan government, could have wider economic ramifications, including increased oil prices and strained relations with other nations. Nonetheless, as a strategic weapon, tariffs can be effective in sending strong messages, but they need to be used carefully to avoid unintended economic fallout.
Featured image credit: PromoVeritas
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