On Monday, former President Trump took a decisive step by signing an executive order aimed at countries purchasing Venezuelan oil, threatening them with tariffs on goods shipped to the United States. His rationale? Venezuela, according to Trump, has been deliberately sending criminals and murderers into America.
Delving into the order, Trump accused Nicolás Maduro’s government in Venezuela and the notorious Tren de Aragua criminal syndicate of posing threats to U.S. national security and foreign policy. Beginning April 2, nations importing Venezuelan oil could face a hefty 25% tariff on any goods they send Stateside, whether that oil comes directly or through intermediaries.
A group of key figures, including the Secretaries of State, Treasury, Commerce, and Homeland Security, along with the trade representative, were tasked with determining these tariffs. The plan was that the tariffs would cease a year after the final Venezuelan oil shipment, though they could be revoked sooner at the administration’s discretion.
This unexpected application of tariffs might shake the global oil market, as countries reliant on Venezuelan oil scramble for alternatives. Rystad Energy, a consultancy firm, pointed out that the U.S. and China have been leading in purchasing Venezuelan oil recently, with India and Spain also making small acquisitions. However, for China, Venezuelan oil comprises only a minor fraction of its imports, leading Rystad analyst Jorge León to suggest that China might look elsewhere, if higher tariffs loom.
The U.S.’s Venezuelan oil imports seem set to decline as the Trump administration plans to revoke a Chevron license that permitted them to operate there. Chevron, being the second-largest U.S. oil company, received a brief extension on Monday, lasting an additional two months to continue its Venezuelan operations, initially required to wind down by April 3.
The U.S. and Venezuela have also been at odds over deportation plans, with Venezuela recently agreeing to accept deportation flights from the U.S., carrying migrants who were residing illegally.
“The hostility from Venezuela toward the U.S. and our cherished Freedoms is undeniable,” Trump wrote. On April 2, he intends to introduce “reciprocal tariffs,” aiming to match the tariffs of other nations and address trade-impacting factors like taxes and currency manipulation. Trump terms this initiative “liberation day.”
He also referred to these new tariffs on Venezuelan oil buyers as “secondary tariffs,” likening them to “secondary sanctions,” which typically affect countries dealing with sanctioned states. Some experts, however, question the enforceability of such tariffs, given the challenges faced with existing secondary sanctions on nations like Russia and Iran.
Daniel Tannebaum, a partner at Oliver Wyman and an Atlantic Council senior fellow, expressed skepticism, citing difficulties in enforcing analogous sanctions previously. Nevertheless, some experts argue that tariffs could be a strategic substitute for direct financial sanctions on foreign banks, potentially avoiding risks to financial stability while demonstrating firm action.
Traditional secondary sanctions usually prevent the purchase of sanctioned goods, like oil, from blacklisted countries, or else subject companies to U.S. sanctions. Yet Trump and his advisors have raised concerns that overreliance on sanctions might push countries away from using the U.S. dollar, suggesting tariffs as a safer alternative.
In his confirmation hearing, Treasury Secretary Scott Bessent suggested that tariffs might not only redirect supply chains but could also serve as a revenue-generating replacement for traditional financial sanctions. He noted, “President Trump believes we might have overextended our reliance on sanctions, potentially pushing countries away from the U.S. dollar. Tariffs could serve as a viable option instead.”
