Key Takeaways
President Trump announced 25% tariffs on goods from countries purchasing oil and gas from Venezuela, effective April 2, as punishment for releasing the foreign terrorist gang, Tren de Aragua, into the United States.
The tariff will be added on top of existing tariffs and would fall most heavily upon China, the largest purchaser of Venezuelan oil.
China is expected to replace Venezuelan oil with Russian oil rather than pay the additional tariffs.
Venezuela has the largest proven reserves of oil in the world, but decades of socialism have led to a serious decline in its output owing to a lack of investment in its oil infrastructure and personnel.
Trump has also announced the end of an agreement allowing Chevron to continue producing oil in Venezuela, which will take place at the end of May.
President Donald Trump has authorized a 25% tariff on goods from countries purchasing oil and gas from Venezuela, which would affect China and other countries. Trump’s order will take effect on April 2 and will enact a secondary tariff in addition to current or planned levies on some countries. Trump claims that Venezuela has ‘purposefully and deceitfully’ sent criminals and murderers into America. In the order, Trump said the government of Nicolás Maduro, president of Venezuela, and the Tren de Aragua gang, a transnational criminal organization designated a Foreign Terrorist Organization by President Trump, posed a threat to the national security and foreign policy of the United States. The tariff would be imposed on all goods imported into the United States from any country that imports Venezuelan oil directly or indirectly through third parties. The secretaries of State, Treasury, Commerce, and Homeland Security, and the U.S. trade representative, would determine what tariffs to impose. The tariffs would expire one year after the last date the Venezuelan oil was imported, or earlier if Trump officials chose to do so.
The Trump administration has already levied universal 20% tariffs on imports from China to crack down on fentanyl coming into the United States from there. The 25% import tax would be on top of that. China, however, would be unlikely to risk additional tariffs to access Venezuelan heavy oil when it can buy oil from Russia, which would benefit that country in its war with Ukraine. Reciprocal tariffs are also expected to go into effect on April 2 for roughly 15% of countries where there are trade imbalances with the United States. Trump has also increased his 2018 tariffs on steel and aluminum to 25% for all imports of those commodities and may impose additional tariffs on autos, pharmaceutical drugs, lumber, computer chips, and copper.
Venezuela has the world’s largest proven oil reserves with approximately 303 billion barrels, accounting for about 17% of global reserves. In 2023, Venezuela produced 742,000 barrels per day of oil, 0.8% of total global oil. In 2024, it produced 921,000 barrels of oil per day, after President Biden lifted sanctions in return for promises of fair elections, which Venezuela breached. Most of Venezuela’s proven oil reserves are extra-heavy oil from the Orinoco Belt. Venezuela’s oil production and exports have been increasing due to President Biden’s easing of sanctions imposed by President Trump in his first term. In 2024, Venezuela’s oil exports increased by 10.5%. China accounted for 68% of Venezuela’s oil exports, followed by the United States at 23%, Spain and Cuba at 4% each, and Singapore, Malaysia, and Russia each at less than 1% in 2023. In 2024, China shipped 351,000 barrels of oil per day, and the United States shipped 228,000 barrels per day.
Prior to the United States imposing sanctions on Venezuela, the United States was the largest importer of Venezuela’s oil, as its heavy oil is well-suited for U.S. refineries, particularly those along the Gulf Coast. A significant portion of Venezuela’s exports have been supplied to China as part of its oil-for-loans arrangements, in which China has loaned close to $50 billion to Venezuela in exchange for oil deliveries over the last decade. Exports to China and some other countries were also part of sanctions evasions prior to 2023.
In January, the United States imported 8.6 million barrels of oil from Venezuela, out of roughly 202 million barrels that month. In February, Trump announced an end to the Chevron-Venezuela relationship. Recently, the Treasury Department issued an extension for U.S.-based Chevron Corp.’s lease to pump and export Venezuelan oil until May 27 to provide time for it to exit the South American country where it has been operating and exporting oil to the United States. The extension, known as a general license, exempts the country from economic sanctions and allows it to continue to pump oil. In 2022, President Biden provided Chevron with a permit to pump and export Venezuelan oil to increase supply and bring oil prices down before the U.S. midterm election. In return, Venezuelan President Maduro promised a free and fair election. While an election did take place, it was not deemed free and fair and condemned by the Organization of American States.
Conclusion
President Trump announced a 25% tariff on goods from countries buying oil from Venezuela, which principally affects China, effective April 2. The 25% tariff is on top of any tariffs the United States already has on the importing countries and would be on top of the 20% tariff that Trump has already placed on imports from China. China is unlikely to buy oil from Venezuela due to the tariff when it can purchase oil from Russia, despite sanctions on that country for its invasion of Ukraine. China is the largest importer of Venezuelan oil, and the United States is the second largest, with several other countries importing smaller shares of its oil. Chevron has received an extension of its permit from the U.S. Treasury Department to pump oil in Venezuela until May 27, when it must exit the country, as President Trump has announced an end to the Chevron-Venezuela relationship. Venezuela was the wealthiest country in South America in the 1970s and 1980s, but during 15 years of socialism and the neglect of its oil wealth, it has become an economic and human rights basket case.
