WASHINGTON — U.S. President Donald Trump said he would “absolutely” impose tariffs on oil imports if Russia and Saudi Arabia can not reach an agreement to cut crude oil production.
“If they don’t get along, I would do that. Very substantial tariffs. I would absolutely do that,” Trump said April 5 during a press conference, adding he wanted to protect the U.S. oil industry, the world’s largest by production.
Tariffs would hurt Saudi Arabia and Russia, who are among the largest exporters of oil to the United States.
Global oil demand has fallen by about 20 million barrels a day, or one-fifth, due the coronavirus pandemic, sending oil prices to their lowest in nearly 20 years. The sharp price decline threatens to bankrupt higher-cost U.S. oil producers and wipe away thousands of American jobs tied to the industry, officials and analysts have said.
Trump has been seeking to broker a production cut agreement between Saudi Arabia and Russia, the second- and third-largest oil producers, following their fallout last month.
Riyadh announced March 7 that it would ramp up oil production by about a fifth to slightly more than 12 million barrels a day after Moscow rejected its offer to have OPEC+ cut output by 1.5 million barrels a day. OPEC+, an alliance of 23 oil production nations, is led by Saudi Arabia and Moscow.
The price war between Russia and Saudi Arabia added to pressure on the oil market caused by the unprecedented destruction in global demand resulting from nations around the world imposing quarantines.
Trump tweeted April 2 following calls with the leaders of Russia and Saudi Arabia that the two nations would cut production by at least 10 million barrels a day. Trump was likely referring to cuts by OPEC+, not just the two nations, analysts have said.
Shortly after Trump‘s tweet, Saudi Arabia called for an extraordinary meeting of OPEC+ members for April 6. However, after Riyadh and Moscow exchanged barbs over who caused the price war, the meeting was pushed back to April 9.
Russia has said it is willing to cut 1 million barrels a day as part of a global production cut agreement that includes the United States.
Unlike Russia and Saudi Arabia, whose oil industries are largely state-owned, the U.S. industry is comprised of private companies and Washington has little power over output.
However, the glut is threatening infrastructure as storage capacity in the United States quickly fills up. Texas, which accounts for 40 percent of U.S. production, will hold a hearing about possible output cuts on April 14 to deal with the crisis in the state.