Global Crude Oil Prices Drop 1% as Trump Delays Import Tariffs on Canada and Mexico

Global crude oil prices declined by up to 1 percent on Tuesday (March 4) after U.S. President Donald Trump agreed to postpone the implementation of high import tariffs on products from Mexico and Canada. These two neighboring countries are among the largest foreign oil suppliers to the U.S.

Brent crude futures fell by 41 cents, or 0.5 percent, to USD 75.55 per barrel. Meanwhile, West Texas Intermediate (WTI) crude dropped 75 cents, or 1 percent, to USD 72.41 per barrel.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum stated that they had reached an agreement with the U.S. to strengthen border law enforcement.

This commitment comes in response to Trump’s demand for stricter measures against illegal immigration and drug smuggling into the U.S. As part of the agreement, Trump’s planned high tariffs on both countries have been postponed for 30 days.

Previously, Trump imposed a 25 percent tariff on Canadian imports and an additional 10 percent levy on oil.

Alongside the tariff suspension on Canada, Trump also delayed import tariffs on Mexican goods following talks with Mexican President Claudia Sheinbaum.

Analysts from ING noted that Canada remains vulnerable to trade wars unless it expands its oil export options beyond the U.S. by developing more pipeline networks from oil fields to ports.

"It will take several years to build this infrastructure, but it will provide Canadian producers with greater flexibility and open more export destinations for Canadian oil," ING analysts stated, as quoted by Reuters.

Meanwhile, Trump is set to hold discussions with Chinese President Xi Jinping this week. The White House confirmed that the two leaders will address the 10 percent import tariff on all Chinese goods, which is scheduled to take effect next Tuesday.

Trump’s trade tariff plans come with inflation risks. Three officials from the U.S. Federal Reserve (The Fed) warned that uncertainties regarding price outlooks could slow down the planned interest rate cuts.

Lower interest rates typically stimulate economic growth and increase oil demand.

At the same time, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have also discussed Trump’s request to ramp up oil production. Saudi Arabia and its fellow members have decided to proceed with their plan to gradually increase output starting in April 2025.

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