Oil demand growth to halve in wake of Trump tariffs

• Tripling of tariff rates
• Oil prices drop
• Global economy slowdown

Global growth in demand for oil this year may be as much as 40 percent less than forecast before last week’s announcement by Donald Trump of a near tripling in effective tariff rates on US imports to their highest in a century, S&P and other oil analysts have said.

On average, demand for oil was expected to grow by about 1.2 million barrels per day this year. After President Trump’s April 2 tariff announcement last week, that could fall to as low as 700,000 bpd as stock markets crash and global economic growth slows or even falls into recession, the analysts told AGBI.

“Tariffs are crashing economic growth,” said Dave Ernsberger, co-president at S&P Global Commodity Insights, at a conference in the UAE on Tuesday. S&P expects global GDP growth to slow to around 2.5 percent this year or lower. 

“Certain major economies will see far bigger falls than that,” Ernsberger said.

Washington imposed a 104 percent duty on Chinese imports on Wednesday, following Beijing’s retaliatory tariffs of 34 percent on US goods, intensifying tensions between the world’s two largest economies.

All of Trump tariffs, if not revoked through negotiations, could slow trade and reduce demand for transport and marine fuels, alongside broader industrial activity, Iman Nasseri, managing director at Facts Global Energy (FGE), said.

From 2.5 percent before the US presidential elections in November, effective US tariffs are now estimated at 25 percent.

The US economy is expected to remain “subdued” through 2026, Ernsberger said. Chinese growth will also slow.

China had been projected to contribute roughly half of this year’s global oil demand growth but a slowdown there is now likely to drag it lower.

S&P predicts demand growth for next year at just 600,000 to 800,000 bpd.

Oil prices have dropped almost 20 percent over the past week, touching four-year lows. Brent crude traded at $61.09 a barrel on Wednesday, while WTI fell below $58. Analysts say prices could fall further to $45–$50, though not as low as the 2020 trough of $13.

“Oil prices have crashed as Trump’s announcements have substantially increased the possibility of a US recession in 2025,” Peter McGuire, CEO at Australia-based Trading.com said in a note.

The decision by the Opec+ group of oil producing countries to return 411,000 bpd to the market next month has added to oversupply concerns. FGE estimates this reversal in production quotas could add as much as 12.5 million bpd in the second quarter alone.

With growth in supply potentially outpacing growth in demand, oil inventories are expected to build, capping any price recovery soon.

Analysts have said, however, that Opec+ may still pause or adjust its plans in June. “Then we could see prices again coming back above $70,” Nasseri said.

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“With 50 countries already lining up to negotiate with Trump over tariffs, much can still change,” FGE said. 

“This is the rewiring of global economic activity, with tariffs and sanctions at the heart, not the complete shutdown of trade” said Ernsberger.