How Global Oil and Gas Companies Are Responding to Trump’s Tariffs and U.S. Trade Uncertainty
The re-election of Donald Trump and the subsequent escalation of his tariff policies have sent shockwaves through the global oil and gas industry. Trump’s aggressive trade agenda, characterized by sweeping tariffs on imports from major trading partners like Canada, Mexico, China, and the European Union, has introduced unprecedented uncertainty into global markets. These policies, aimed at reducing the U.S. trade deficit and bolstering domestic manufacturing, have disrupted long-standing supply chains, increased costs, and prompted oil and gas companies worldwide to adopt a range of strategies to mitigate risks and adapt to the new trade environment. This article explores the multifaceted measures taken by oil and gas companies in Canada, Europe, China, and other regions, including trade diversification, reduced reliance on U.S. markets, project cancellations, supply chain reconfigurations, and other innovative responses to navigate the volatile trade landscape.
The Context: Trump’s Tariff Regime and Its Impact on Oil and Gas
Since taking office in 2025, President Trump has implemented a series of tariffs under the banner of his “America First” trade policy. These include a 25% tariff on most goods from Canada and Mexico (with a 10% rate on Canadian energy products), a 10% tariff on Chinese imports, and expanded tariffs on steel and aluminum, which are critical inputs for the oil and gas industry. Additionally, Trump has imposed a 25% tariff on imports from countries purchasing oil or gas from Venezuela, alongside threats of reciprocal tariffs ranging from 1% to 40% on nations with trade surpluses with the U.S. These measures, often justified by invoking national security concerns under the International Emergency Economic Powers Act (IEEPA), have led to retaliatory tariffs from trading partners, further complicating global trade dynamics.
The oil and gas sector, heavily reliant on integrated supply chains and global trade, faces unique challenges. Steel tariffs increase the cost of essential components like casing, tubing, and pipelines, while energy-specific tariffs disrupt the flow of crude oil and refined products. For instance, Canada, which supplies 80% of its oil exports to the U.S., faces significant pressure, as do U.S. refiners reliant on Canadian and Mexican crude. The broader economic uncertainty, coupled with fears of a global recession, has driven oil prices down—Brent crude fell 6% and West Texas Intermediate dropped 6.6% on a single day in April 2025—while simultaneously raising input costs, squeezing margins for producers and refiners alike.
Canada – Diversifying Markets and Scaling Back Investments
Canada’s oil and gas industry, deeply integrated with the U.S. market, has been hit hard by Trump’s tariffs, particularly the 25% levy on non-USMCA-compliant goods and the 10% tariff on energy products. Canadian oil producers, such as Suncor Energy and Canadian Natural Resources, are exploring strategies to reduce their dependence on the U.S. market, which accounts for the vast majority of their exports. One prominent response is the pursuit of alternative export markets. Industry leaders are increasingly looking to Asia, particularly China and India, to diversify their customer base. For example, discussions have emerged about redirecting oil exports to China, which has shown interest in securing stable energy supplies amid its own trade tensions with the U.S. These talks, while preliminary, reflect a growing recognition that reliance on the U.S. market is increasingly risky.
To facilitate this shift, Canadian companies are investing in infrastructure to support exports to Asia. The Trans Mountain Expansion pipeline, completed in 2024, has become a focal point, enabling greater access to Pacific markets. Companies like Enbridge are also exploring enhancements to export terminals on Canada’s west coast to handle increased shipments to Asia. However, these efforts face challenges, including higher transportation costs and the need for long-term contracts to justify infrastructure investments.
In response to rising costs and market uncertainty, some Canadian firms have postponed or scaled back upstream projects. Smaller producers, particularly in Alberta’s oil sands, are delaying expansion plans due to the increased cost of steel-intensive equipment and fears of reduced U.S. demand. For instance, a 25% tariff on steel imports has driven up the cost of casing and tubing by an estimated 25%, prompting companies like MEG Energy to reassess drilling programs. Industry analysts warn that prolonged trade friction could dampen investment in Canada’s oil patch, with smaller firms potentially pulling back entirely if breakeven costs rise above market prices.
Canada has also retaliated with its own tariffs, imposing a 25% duty on U.S.-made automobiles and auto parts, and threatening additional measures like export taxes on electricity. These retaliatory actions, while aimed at pressuring the U.S., add further complexity to North American energy trade, as U.S. refiners in the Midwest rely heavily on Canadian crude. The suspension of a proposed 25% tax on electricity exports from Ontario to the U.S. reflects a delicate balancing act, as Canada seeks to maintain leverage without triggering a full-scale trade war.
Europe – Supply Chain Reconfiguration and Renewable Energy Acceleration
European oil and gas companies, such as Shell, BP, and TotalEnergies, face a different set of challenges stemming from Trump’s tariffs, particularly the threat of a 50% levy on EU goods if trade imbalances are not addressed. The EU, which has responded with retaliatory tariffs on U.S. industrial and agricultural products, is a significant player in the global energy market, and its companies are adapting by reconfiguring supply chains and accelerating the transition to renewables.
One key strategy is reducing reliance on U.S. markets for both exports and imports. European firms are diversifying their supply chains by sourcing steel and equipment from alternative markets, such as Turkey and South Korea, to mitigate the impact of U.S. steel tariffs. For instance, TotalEnergies has reportedly increased procurement from Asian suppliers for subsea hardware and valves, which were previously sourced from China but are now subject to U.S. tariffs. This shift, while costly in the short term, aims to insulate European operations from U.S. trade volatility.
The tariffs have also prompted European companies to double down on renewable energy investments as a hedge against fossil fuel market instability. The EU’s push to reduce reliance on fossil fuels, driven by climate commitments, has gained urgency amid fears that retaliatory tariffs could target U.S. oil and gas exports. BP, for example, has accelerated its offshore wind projects in the North Sea, while Shell is expanding its solar and hydrogen portfolios. These moves not only align with Europe’s green agenda but also reduce exposure to U.S.-centric trade disruptions.
Project cancellations and delays are also evident in Europe. Offshore oil and gas projects in the North Sea, which rely heavily on steel-intensive platforms, are facing cost increases of 2-5% due to tariffs. Smaller operators, such as Equinor’s partners in Norway, have postponed exploration activities in marginal fields, citing uncertainty over global oil demand and rising input costs. The broader economic impact of tariffs, including a projected 0.5% reduction in global GDP by 2026, further dampens investment appetite in capital-intensive projects.
China – Strategic Trade Agreements and Supply Chain Resilience
China, facing cumulative tariffs of up to 245% on its exports to the U.S., has adopted a multifaceted approach to counter the impact on its oil and gas sector. State-owned giants like CNPC and Sinopec are leveraging China’s position as the world’s second-largest economy to forge new trade agreements and bolster domestic resilience. A key measure is the expansion of trade with non-U.S. partners, particularly in Asia, Africa, and Latin America. China has intensified its imports of Venezuelan oil, which accounted for 68% of Venezuela’s oil exports in 2023, despite U.S. tariffs targeting countries purchasing Venezuelan crude. To circumvent these restrictions, China is exploring trade deals with intermediaries like Malaysia and Singapore to reroute oil flows.
China has also retaliated with its own tariffs, imposing 15% duties on U.S. coal and liquefied natural gas and 10% on crude oil, while suspending exports of critical minerals like rare earths. These measures aim to pressure U.S. industries while strengthening China’s domestic energy market. For instance, CNPC is ramping up domestic shale gas production and investing in refining capacity to reduce reliance on imported refined products, many of which originate from U.S. Gulf Coast refineries.
To mitigate supply chain disruptions, Chinese companies are diversifying their equipment suppliers. The 10% U.S. tariff on Chinese imports has increased costs for subsea hardware and fittings, prompting firms like CNOOC to source from domestic manufacturers or alternative markets like South Korea. Additionally, China’s hosting of the China International Import Expo and expansion of free trade zones signal a broader strategy to open its market to non-U.S. suppliers, fostering resilience against U.S. trade restrictions.
However, China’s reduced dependence on U.S. trade—imports and exports now account for only 37% of its GDP, down from over 60% in the early 2000s—has cushioned the impact of tariffs. A weakened yuan further softens the blow, making Chinese exports more competitive globally. This resilience allows companies like Sinopec to maintain production levels while exploring new markets in Southeast Asia and the Middle East.
Adaptive Strategies in a Fractured Market
Beyond Canada, Europe, and China, oil and gas companies in regions like the Middle East, Africa, and Latin America are also adapting to Trump’s tariffs. In the Gulf, Saudi Aramco and ADNOC (UAE) are navigating disruptions in construction and automotive sectors, which rely on imported components now subject to higher costs. These companies are deepening trade ties with Asia, particularly China and India, to offset potential declines in U.S. demand. Saudi Arabia, for instance, has warmed to Trump’s administration, hosting talks on unrelated geopolitical issues, but remains cautious about retaliatory tariffs on its oil exports.
In Africa, South Africa’s Petra Diamonds postponed gem sales due to tariff-related uncertainty, a signal of broader caution in the region’s energy sector. Sasol, a South African energy and chemicals company, is exploring export diversification to Asia and Europe, while negotiating a deal to import U.S. liquefied natural gas in exchange for duty-free exports of vehicles and metals. This pragmatic approach reflects a broader trend among emerging markets to balance U.S. relations with alternative partnerships.
In Latin America, Mexico’s Pemex faces significant challenges due to the 25% U.S. tariff on non-USMCA-compliant goods. Mexico, which sends 60% of its petroleum exports to the U.S., is exploring trade agreements with Brazil and the EU to diversify its markets. Pemex has also delayed refinery upgrades, citing higher steel costs and uncertainty over U.S. demand. Meanwhile, Vietnam, under pressure to reduce reliance on Chinese industrial goods, has secured a trade deal with the U.S. to avoid a 46% tariff, allowing greater access for U.S. energy products while committing to source fewer components from China.
Innovative Responses
In addition to trade diversification and project adjustments, oil and gas companies are adopting innovative strategies to navigate the tariff storm. One emerging trend is the use of scenario planning to manage uncertainty. Companies like Chevron and ExxonMobil are employing advanced analytics to model multiple trade scenarios, enabling them to adjust sourcing, production, and investment decisions dynamically. This approach helps mitigate risks from fluctuating tariff rates and retaliatory measures.
Another response is the acceleration of digital transformation. To offset rising costs, companies are investing in automation and AI to optimize operations. For example, BP is deploying AI-driven predictive maintenance in its U.S. Gulf of Mexico operations to reduce downtime and offset tariff-related cost increases. Similarly, Shell is using digital twins to simulate supply chain disruptions and identify cost-effective sourcing alternatives.
Some companies are also exploring financial hedging strategies to manage price volatility. With oil prices falling due to recession fears, firms like TotalEnergies are using futures contracts to lock in prices, ensuring revenue stability despite market fluctuations. Others are renegotiating contracts with suppliers to include tariff-sharing clauses, spreading the cost burden across the supply chain.
Economic and Strategic Shifts
The measures taken by global oil and gas companies reflect a broader shift in the energy landscape. The tariffs have accelerated a move away from U.S.-centric trade, with countries like Canada and China strengthening ties with Asia and other regions. This realignment could reduce U.S. influence in global energy markets, particularly as China and the EU expand their roles in Africa and Latin America. The push toward renewables in Europe, driven partly by tariff uncertainty, may further erode demand for fossil fuels, challenging oil and gas companies to diversify their portfolios.
Economically, the tariffs are projected to reduce U.S. GDP by 1% and global GDP by 0.5% through 2026, with the oil and gas sector facing higher costs and reduced demand. In the U.S., smaller producers like those in the Illinois Basin are delaying projects, while majors like ExxonMobil are leveraging their scale to absorb costs. However, the broader economic slowdown risks dampening global oil demand, with UBS analysts warning of an oversupplied market if supply adjustments lag.
Strategically, the tariffs have strained U.S. alliances, particularly with Canada and the EU, while emboldening competitors like China to expand their global trade networks. The suspension of China’s rare earth exports, for instance, underscores the potential for trade wars to disrupt critical supply chains beyond oil and gas, affecting industries like automotive and renewables.
Trump’s tariffs and the resulting trade uncertainty have forced global oil and gas companies to rethink their strategies in a rapidly changing environment. From Canada’s push to diversify export markets to Europe’s accelerated renewable energy investments, and from China’s trade agreements to innovative financial and digital strategies, the industry is demonstrating resilience and adaptability. However, the challenges are significant—rising costs, project delays, and economic uncertainty threaten profitability and growth. As companies navigate this new normal, their ability to balance short-term survival with long-term strategic shifts will determine their success in an increasingly fragmented global market. The oil and gas industry, long a pillar of global trade, is at a crossroads, with Trump’s tariffs serving as both a disruptor and a catalyst for transformation.