MW Trump plans 'secondary tariffs' on buyers of Venezuelan oil. It's a new, untested tactic.
By Victor Reklaitis
China and the U.S. itself have ranked as the No. 1 and No. 2 markets for Venezuelan crude oil
There's an unconventional twist in U.S. President Donald Trump's trade fights this week: He has rolled out what he's calling a "secondary tariff" on countries that import crude oil or petroleum products from Venezuela.
Trump announced the new 25% tariff in a social-media post on Monday, indicating that there were several reasons behind it, but in particular the South American nation's role in the flow of migrants to the U.S., including alleged members of the Tren de Aragua gang.
The tariff is slated to take effect on April 2, the same day that the Trump administration is set to unveil a much-anticipated plan for reciprocal tariffs, and it will amount to a 25% tax on products from countries that have been importing Venezuelan oil or petroleum products.
Experts on global trade are describing this trade action as a truly new approach.
People "should know that it is a really radical idea, that it is untested, and that it will cost people money," said Mary Lovely, an economist and senior fellow at the Peterson Institute for International Economics.
"He's using tariffs in ways that the U.S. usually has not used them in the past," she said.
Trump's secondary tariff is somewhat similar to a secondary sanction, according to Lovely. "For example, if you want to stop Russia from buying things, you put a sanction on Russia working with any banks, but then if a bank violates that, we can say it's a secondary sanction, because we go after the bank. So it's like you're one step removed from the behavior that we're trying to stop," she told MarketWatch.
The biggest user of Venezuela's oil exports has been China, which took in 68% of the country's exports in 2023, followed by the U.S. at 23%, according to data for that year from the U.S. Energy Information Administration. Other key users were Cuba and Spain, each at 4%, with all other nations at 1% or less.
A new 25% U.S. tariff on Chinese products due to the Asian power's reliance on Venezuelan oil would come on top of the 20% tax on Chinese imports that Trump has already imposed this year. The Biden administration and the first Trump administration also were known for slapping duties on Chinese goods amid broad bipartisan support for taking a tough stance against Beijing.
"It's just another tariff on Chinese-made goods, and there is honestly quite a bit of support for the U.S. doing something to reduce its dependence on China," Lovely said. She added, however, that Trump's secondary tariff will "increase the price of things - many things that the U.S. doesn't make. There are no domestic substitutes, and substitutes have been coming on line - for example, clothing from Vietnam, Indonesia - but those kinds of investments take time. And in any case, the president is threatening tariffs on them as well."
While the U.S. itself has been an importer of Venezuelan oil, the Trump administration appears to be working on changing that state of affairs while giving American oil giant Chevron Corp. time to end its operations in Venezuela.
On Monday, Trump's Treasury Department issued an extension for Chevron's $(CVX)$ lease to pump and export Venezuelan oil until May 27, saying it is so the company can wind down certain transactions and that the payment of taxes and royalties to Venezuela's government isn't allowed. That comes as an earlier extension, granted on March 4, was due to expire in early April. Chevron Chief Executive Mike Wirth had been lobbying for an extension beyond the April deadline to gain more time to unwind operations in Venezuela, according to a Wall Street Journal report last week.
Crude-oil futures (CL00) (BRN00) settled higher Monday, with the gain pinned on Trump's move with secondary tariffs. They were pulling back Tuesday.
-Victor Reklaitis
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March 25, 2025 14:32 ET (18:32 GMT)
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