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President Trump, ever the showman, played his tariff announcement like a master of the slow burn. He understood that a rushed reveal would lack the desired impact. Instead, he stretched out the suspense, mirroring the art of a striptease, where each deliberate removal of a layer amplifies the audience's fixation. He knew, and his audience knew, that patience would be rewarded. This calculated approach, reminiscent of his entertainment background, ensured he held the world's attention, maximizing the economic and political theater.
This is exactly what happened when he delivered his plan of global tariffs on American imports on Wednesday; the world simply held its breath.
For instance, the price of crude oil started falling precipitously since Wednesday. As of 15:30 GMT, the price of WTI and Brent were at $61.26 and $64.84 respectively; it has fallen by about 7% since Wednesday. The price of LNG, liquified natural gas, followed the same trend; it was at $3.94.
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The rate of fall of oil prices accelerated, when China announced that it would retaliate against the tariffs imposed on the country at 34% from April 9. China plans to impose the same on the US goods on April 10, just a day after the US tariffs come into effect.
Tariffs, reciprocal or not, are going to slow down global economic growth: it increases the cost of goods; it leads to reduced economic and trading activities. The speed at which China announced the tariff's in return, clearly shows that there are no passive observers, when it comes to real international trading.
A slow global economic growth translates to a subdued demand due to less energy consumption by both industries and consumers. In this context, President Trump's tariffs have weighed heavily on crude oil prices while increasing the downward pressure.
In addition, the tariffs have led to increased uncertainty that in turn has led to voltatity in the energy markets; investors and traders have become more cautious in the presence of shifting forecasts and evolving geopolitical fallouts.
Emmanuel Macron, president of France, for instance, is urging French investors not to invest in the US; he calls for the suspension of upcoming investments and wants to extend the move at European level.
"Why invest billions in the US while they hit us?" said Mr Macron while branding the tariffs as brutal and unfounded.As far as oil industry is concerned, the imposition of reciprocal tariffs is not the factor that pushes the oil prices down: the OPEC+ is planning to increase the production of crude oil substantially, despite falling oil prices. Just after his inauguration on January 20, President Trump urged the cartel to raise the production in order to bring down the inflation. It looks like the OPEC+ took heed of the advice and decided to raise the production; Saudi Arabia, the de facto leader of the OPEC+, has decided to go a step further by reducing the price of oil for Asia.
In short, ample crude oil supply suggests continued downward pressure on prices for the foreseeable future.
Debt-to-GDP % : source: IMF
Economists worldwide are questioning the new US administration's decision to impose taxes on all nations, allies and non-allies alike, just three months into its term. One prominent theory suggests this move is aimed at reducing the substantial US government debt, which the IMF currently ranks as the second-highest Debt-to-GDP ratio globally, after Japan.
Even during the first term, President Trump highlighted the ballooning US national debt, but failed to address it, perhaps on account of Covid-19 outbreak across the globe.
Ultimately, escalating trade tariffs and retaliatory measures will likely deter much-needed investment in the energy sector, potentially halting progress and increasing investor caution.
